Table of Contents
Synopsis
This article published in the editorial section of the Hindu newspaper talks about the hearing which is scheduled in the coming weeks by the seven-judge bench of the supreme court of India. The upcoming hearing will listen to arguments related to the money bill. This hearing stems from from a verdict in November 2019 in the case of Rojer Mathew vs. South Indian Bank Ltd. In this case, the Finance Act of 2017 was challenged. The Act was passed after being certified as a Money Bill and significantly changed the authority and jurisdiction of 26 different tribunals. It abolished some tribunals, merged others, set qualifications for appointing members, and imposed various conditions of service.
The case is significant as at deeper note, it challenges the federal structure of India, as a money bill is a bill which unlike other bills can be passed without the interference of the Rajya Sabha which is also known as the upper house of the parliament.
Background Information
What is a money bill?
A Money Bill is a type of bill in India that deals exclusively with national taxation or government spending. It is considered a Money Bill if it contains provisions related to the imposition, abolition, remission, alteration, regulation of any tax, regulation of borrowing of money, custody of the Consolidated Fund or the Contingency Fund of India, appropriation of money out of the Consolidated Fund of India, declaration of expenditure to be expenditure charged on the Consolidated Fund of India, receipt of money on account of the Consolidated Fund of India or the public account of India, or the custody or issue of such money.
A Money Bill can only be introduced in the Lok Sabha (lower house of Parliament) on the recommendation of the President. The Speaker of the Lok Sabha certifies whether a bill is a Money Bill. Once passed, the bill is sent to the Rajya Sabha (upper house), which can suggest amendments but cannot reject the bill. The Rajya Sabha must return the bill with its recommendations within 14 days, or the bill is deemed to have been passed by both houses in the form originally passed by the Lok Sabha.
The Finance Act of 2017
The Finance Act of 2017 is a significant Indian legislation enacted on March 31, 2017, aimed at improving tax compliance, transparency, and ease of doing business in the country. Key provisions include income tax reductions, the introduction of electoral bonds for political donations, and the merger of several tribunals to streamline operations. The Act also mandates the linking of Aadhaar numbers with Permanent Account Numbers (PAN) and requires quotes when applying for a PAN or filing income tax returns. Cash transactions exceeding INR 2 lakh are prohibited to curb black money and promote digital transactions. The Act also reintroduces the tax on long-term capital gains exceeding INR 1 lakh, which had been exempt earlier.
The Act’s impact and criticisms include the mandatory Aadhaar linkage, which raised concerns about privacy and data security, and the potential for electoral bonds to allow for anonymous donations to political parties, potentially leading to undisclosed funding. Despite these criticisms, the Finance Act of 2017 introduced several significant changes aimed at improving tax compliance, transparency, and the ease of doing business in India.
Finance Act 2017 as a money bill.
The Finance Act of 2017 was classified as a Money Bill in India due to its financial content, which allows for a streamlined legislative process. A Money Bill, as defined by Article 110 of the Indian Constitution, deals with taxation, borrowing, government financial obligations, custody of the Consolidated Fund, appropriation of funds from the Consolidated Fund, and receipt and custody of money on behalf of the Government of India.
The Finance Act of 2017 contained provisions related to taxation, government expenditure, and financial regulations, fitting the criteria of a Money Bill. Key elements included amendments to income tax rates and slabs, the introduction of electoral bonds for political donations, prohibitions on cash transactions above a certain limit, requirements for linking Aadhaar with PAN for tax filings, and various other fiscal measures affecting government revenue and expenditure.
The legislative process for Money Bills involves an introduction in the Lok Sabha, approval by the Rajya Sabha, and a time frame for the Rajya Sabha to return the bill with its recommendations within 14 days. If the bill is not returned within this period, it is deemed to have been passed by both houses in its original form.
However, the classification of the Finance Act of 2017 as a Money Bill was controversial, as critics argued that certain provisions, particularly those related to the merger of tribunals and the introduction of electoral bonds, did not strictly pertain to the financial matters listed in Article 110. This led to concerns about circumventing the Rajya Sabha’s role in scrutinizing legislation and impacting the system of checks and balances in the legislative process.
Article Explanation
A seven-judge bench of the Supreme Court of India is set to hear arguments on the definition and scope of a Money Bill, which could impact laws passed in recent years without the approval of the Rajya Sabha. This case is crucial as it affects India’s federal structure and the balance of power outlined in the Constitution.
The reference to the seven-judge bench comes from the November 2019 verdict in Rojer Mathew vs. South Indian Bank Ltd, which challenged the Finance Act of 2017, which was certified as a Money Bill and significantly changed the authority and jurisdiction of 26 different tribunals. The Supreme Court’s ruling will clarify what qualifies as a Money Bill and how it can be used, affecting many laws passed in recent years. The decision will also influence the division of powers between the central government and the states as outlined in the Indian Constitution.
The Rojer Mathew case involved petitioners arguing that the Finance Act, of 2017, which introduced extensive changes to tribunals and gave broad powers to the executive, went beyond what a Money Bill should encompass according to Article 110(1). They argued that such sweeping changes required the approval of both Houses of Parliament and should not have been passed as a Money Bill.
The case involved several arguments and constitutional provisions, including the need for follicular approval, the exception of a Money Bill, the definition of a Money Bill, the use of “only” in Article 110(1), significant changes to the functioning of tribunals, and the encroachment on the judiciary. The Rajya Sabha could suggest changes, but the Lok Sabha is not obligated to accept them.
The Finance Act, of 2017, made significant changes to the functioning of tribunals, including abolishing some and merging others, setting qualifications for tribunal members, and giving the Union Executive wide powers to regulate the administration of tribunals. These changes were argued to extend beyond the scope of a Money Bill, as defined in Article 110(1).
In conclusion, the petitioners argued that the Finance Act, of 2017, by making extensive changes to tribunals and giving broad powers to the executive, went beyond what a Money Bill should encompass according to Article 110(1).
The Rojer Mathew case involved the Supreme Court of India interpreting the Finance Act, 2017, which made significant changes to the terms of office for tribunal members, conferred excessive regulatory powers to the executive, and established qualifications for appointments through a Money Bill. This misuse of the Money Bill mechanism was seen as an improper use of legislative power, subverting the intent of the Constitution.
The Money Bill, as per Article 110(1) of the Indian Constitution, should contain only provisions related to taxes, borrowing, and other financial matters. The Speaker of the Lok Sabha has the final say on whether a Bill is a Money Bill, but the Supreme Court has the authority to review this decision. The earlier case of K.S. Puttaswamy vs. Union of India (2018) upheld the Aadhaar Act as a Money Bill but did not sufficiently address other extensive provisions in the Aadhaar Act that went beyond the narrow scope of a Money Bill.
The decision will have significant consequences, as similar methods were used in other instances, such as the Finance Act, 2019, which amended the Prevention of Money Laundering Act (PMLA). Although the Supreme Court upheld many of these changes in Vijay Madanlal Choudhary vs. Union of India (2022), it left open the question of whether such amendments could be made through a Money Bill.
In summary, the Supreme Court’s interpretation of what qualifies as a Money Bill, particularly the exclusive nature implied by “only,” is crucial. The decision will impact how extensively the executive can use the Money Bill mechanism to pass significant legislative changes without full parliamentary scrutiny.
The seven-judge Bench’s ruling on the Finance Act, 2017 will have significant implications for India’s democracy and federal structure. The Rajya Sabha represents the diverse interests of India’s states and regions, reflecting the nation’s pluralism. It serves as a check on the legislative powers of the government, ensuring that the interests of various states and regions are considered. Ignoring the Rajya Sabha undermines this balance and weakens the federal structure.
The Money Bill mechanism allows the government to access funds for basic administration without being hindered by the Rajya Sabha. However, using the Money Bill route to bypass the Rajya Sabha’s legislative scrutiny is seen as a misuse of this provision. Justice Chandrachud argued that the Speaker’s decision to certify a Bill as a Money Bill should not be immune from judicial review, as ensuring judicial oversight is crucial to prevent misuse and maintain the integrity of the legislative process.
Using Money Bills to circumvent the Rajya Sabha’s role is described as a constitutional ruse that undermines the Constitution and could threaten the democratic foundations of the country. The court’s decision will determine how the balance of power between the two Houses of Parliament is maintained, establish clear guidelines for judicial review of the Speaker’s certification of Money Bills, impact the functioning of India’s federal system, and influence the overall health and integrity of India’s democracy.
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