From Shell Parties to Black Money Laundering: SC Notice on Petition for Overhaul of Political Party Regulation

Moneylife Digital Team 12 September 2025

Economy & Nation

The Supreme Court on Friday issued notice on a public interest litigation (PIL) seeking comprehensive regulation of political parties to curb the misuse of black money, corruption, and criminalisation in politics.

The petition, filed by advocate Ashwini Kumar Upadhyay, urges the Court to direct the Election Commission of India (ECI) to frame rules for registration and regulation of political parties, and to mandate reforms addressing transparency, inner-party democracy, and accountability.

A bench of justice Surya Kant and justice Joymalya Bagchi agreed to examine the plea and asked adv Upadhyay to implead all recognised national political parties as respondents. “We will issue notice, no problem. But there is a problem. You have not included political parties. They will say you are asking something to regulate them and they are not here,” justice Kant observed.

The Court suggested that including national parties would ensure the proceedings are not challenged later.

The plea cites recent raids by income tax (I-T) department to highlight how bogus political outfits are allegedly being used as conduits for laundering unaccounted funds. According to reports annexed to the petition, raids in July 2025 uncovered nearly Rs500 crore at the offices of Indian Social Party and Yuva Bharat Atma Nirbhar Dal. Another raid in August exposed the National Sarva Samaj Party, allegedly involved in converting black money into white, with Rs271 crore in unaccounted funds seized.

The petitioner contends that around 90% of registered parties never contest elections, instead existing to route illicit funds. These entities allegedly appoint office bearers with criminal records—including involvement in drug trafficking, land mafia operations, and serious crimes such as rape and contract killings—who then misuse political recognition to secure police protection and public legitimacy.

The PIL argues that while political parties hold constitutional status and wield enormous powers under the 10th Schedule, there is no comprehensive law regulating their internal functioning, funding transparency, or accountability. In contrast, entities such as companies, cooperatives, and religious trusts are all governed by regulatory frameworks.

The petitioner recalls that both the Law Commission of India (justice Jeevan Reddy-led) and the National Commission to Review the Working of the Constitution (headed by justice MN Venkatachaliah) had flagged this gap decades ago. A draft law—the Political Parties (Registration and Regulation of Affairs) Bill, 2011—was even prepared but never enacted.

Political parties, the petition notes, enjoy extensive state-conferred benefits including free airtime on Doordarshan and All India Radio, tax exemptions under Section 13A of the Income Tax Act, subsidised accommodation, and access to electoral rolls. “Despite being substantially funded by the State and performing crucial public functions, political parties escape accountability,” the plea states.

Issuing notice, the apex court asked the petitioner to implead national parties and make them part of the proceedings. The matter will now be taken up after responses are received from the ECI, the Union government, and other parties.

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