Dangerous Trends in Law Making in India

Dangerous Trends in Law Making in India Abstract Dangerous legislative trends are emerging that threaten the effective protection of the rule of law. In India, the role of parliamentarians is being diluted in a number of ways. The role of the Upper House of Indian Parliament (Rajya sabha) in law making, is diluted, by inclusion of non-tax laws in the Finance Bill, and by labeling apparently a non-money bill as a money bill. It seems that in order to get its key legislative proposals enacted as law the government rushed through many amendments in non-tax laws through the route of Finance bill. It also succeeded in getting enacted Aadhar Act as a money bill though apparently Aadhar Act falls in the category of a financial bill. The Constitution of India and parliamentary procedure allows Rajya Sabha to effectively debate and vote on a financial bill. A Money Bill can be introduced only in the Lok Sabha. A Money Bill after being passed by the Lok Sabha is transmitted to the Rajya Sabha. It is the discretion of the Lok Sabha to accept or reject the amendments made by the Rajya Sabha to a money bill. The Aadhar Act, 2016 could have been introduced as a financial bill as its predecessor the National Identification Authority of India bill, 2010 was rightly treated a financial bill. INTRODUCTION Dangerous legislative trends are emerging that threaten the effective protection of the rule of law. Daniel Greenberg, a former parliamentary counsel highlights in his writings1 a number of recent developments in legislation and the legislative process which can be seen to have concentrated power in the hands of the Executive and to have diluted the role of Parliamentarians in United Kingdom. In India too, the role of parliamentarians is being diluted in a number of ways. Henry VIII Clause (power to remove difficulties) is not only included in every ordinary legislation but also in some of the constitution amendment bill.2 The dilution of the role of Upper House of Indian Parliament (Rajya sabha) in law making, by inclusion of non-tax laws in the Finance Bill, and enactment of the Aadhar Act, 2016 apparently a non-money bill as a money bill, sets dangerous trends in law-making in India. Indian Parliament is bicameral. It comprises of two Houses—lower house (Lok Sabha) and upper house (Rajya Sabha) and the President of India. The basic function of Parliament is to make laws. All legislative proposals emanate in the form of a Bill. A Bill cannot become law unless it has received the approval of both the Houses of Parliament and the assent of the President of India. A Money Bill can be introduced only in the Lok Sabha. A Money Bill after being passed by the Lok Sabha is transmitted to the Rajya Sabha. The Rajya Sabha can pass the bill within 14 days or return it to the Lok Sabha with its proposals for some changes in the bill. It is the discretion of the Lok Sabha to accept or reject the amendments made by the Rajya Sabha to a money bill. In the 16th Lok Sabha, the ruling party at the centre (NDA-II) has absolute majority but it lacks majority in Rajya Sabha. Because of opposition in Rajya Sabha, the government had to take the Ordinance route for important bills like Land Bill and Insurance Bill. The government rushed through many amendments in non-tax laws through the route of Finance bill and also enacted the Aadhar Act, 2016 as a money bill. The passing of a law may be politically desirable, but dilution of the role of Rajya Sabha in law making has the potential to diminish significantly effectiveness of Parliamentary democracy. FINANCE BILL A Finance bill is a money bill and ordinarily it determines the rates of income tax and of other taxes. These other taxes include excise duty, customs duty, and occasionally postal rates and rates of stamp duty. Under the Indian Constitution, no tax shall be levied and collected except by the authority of law and the legislative practice in the initial years after independence has been to introduce a new tax law after consultation with the Law Commission of India3 and to get it passed after its scrutiny by the Select Committee of Parliament. In 1950s, Nicholas Kaldor was invited from Cambridge to work on Indian Tax Reform. Based on the Nicholas Kaldor Committee Report in 1956, separate legislations were introduced in the Parliament for the levy of tax on wealth, gift, and expenditure. At that time, the practice was to introduce the new taxes through an ordinary legislation. The practice of introducing new tax laws as part of the Finance Bill started from early 80s when tax on inland travel and tax on foreign travel and afterwards the Banking transaction Tax and the Securities Transaction Tax were introduced. Interestingly, these taxes were discontinued by the Finance Acts of subsequent years. A typical instance of a new tax introduced through the Finance Act, 1994 is that of the Service tax. The Service tax was introduced by the Finance Act, 1994 and is continuously being amended each year by the Finance Acts only. This practice deprives Parliament its power of making detailed scrutiny of a tax legislation. Other than tax laws it has been the consistent practice not to amend the Prevention of Money Laundering Act or the Foreign Exchange Management Act as part of Finance Bill prior to 2015. The Prevention of money Laundering Act enacted in 2002 was amended in the years 2005, 2009, and 2012 by an amendment bill in Parliament and not through the Finance Acts. The past practice of confining Finance Bill to taxation proposals only was, however, departed as the Finance Act, 2015 and the Finance Act, 2016 amended non-tax laws such as the Reserve Bank of India Act, 1934, the Foreign Exchange Management Act, 1999, the Prevention of Money Laundering Act, 2002 and the Foreign Contribution Regulation Act, 2010. Amendment of a Non-Tax Legislation as Part of the Finance Bill Whether a Good Practice? Amendment of a non-tax legislation as part of the finance bill raises many isssues. First, the drafting of Finance Bill is given top priority as being part of the budget of a particular year. It means that immediately after the budget speech of the Finance minister is over, the Finance bill is to be introduced in Lok Sabha. For its drafting legislative draftsperson from the legislative department of the Ministry of Law and Justice work with officers of the department of revenue, Ministry of Finance, Government of India and more often adequate time for its drafting is not provided to the draftsperson. This results in the withdrawal of some of the provisions of the Finance bill through government amendments. Secondly, the policy of a Finance bill as reflected in the statement of objects and reasons is to give effect to the the financial proposals of the Central Government for that particular financial year. Whether inclusion of Acts mentioned above, that is Reserve Bank of India Act, Money Laundering Act, Foreign Exchange Management Act, and Foreign Contribution Regulation Act conforms to the statement of objects and reasons appended to the Finance Act, 2016. The obvious answer is no. However, one may argue that the statement of objects and reasons appended to a bill may be of use only in case of ambiguity and the statement of objects and reasons appended to the Finance Bill, 2016 is not relevant for questioning the inclusion of Reserve Bank of India Act, Money Laundering Act, Foreign Exchange Management Act, and Foreign Contribution Regulation Act as part of the Finance Bill, 2016. Be it may, but definitely inclusion of the amendment of the Reserve Bank of India Act, Money Laundering Act, Foreign Exchange Management Act, and Foreign Contribution Regulation Act cannot be a good practice as the Parliamentary Standing Committees cannot scrutinize the provisions of the Finance Bill which amend a non-tax legislation. Why Other Acts are Amended by a Finance Bill? Another significant point which often goes unnoticed is the effect of a colonial legislation, that is, the Provisional Collection of Taxes Act, 1931 on the passing of the Finance Bill. The Provisional Collection of Taxes Act, 1936 is the only legislation where under immediate effect is given to certain provisions of a Bill without its being formally enacted by the Parliament. These provisions relate to clauses of the Finance Bill which concerns with the levy of excise duty. The levy of excise duty becomes effective from the date of the introduction of the Finance Bill. But the levy shall continue only if the Finance bill is passed within 75 days of its introduction. Precisely, for this reason every year the Finance bill is passed and assented to by the President before the expiry of 75 days from the date of its introduction A declaration under the Provisional Collection of Taxes Act, 1931 is also to be made in the Finance Bill. Thus, Finance bill usually contains a declaration as under ‘It is hereby declared that it is expedient in the public interest that the provisions of clauses 138(i), 142(i), 143(i), 159, 231 and 232 of this Bill shall have immediate effect under the Provisional Collection of Taxes Act, 1931(Finance bill2016).’ As the clauses which are to be given immediate effect under the Provisional collection of Tax Act, 1931 cannot be segregated from other clauses of the Finance bill, therefore, amendment of a non-tax legislation also gets approval of Parliament within 75 days of its introduction It means the type of scrutiny required for the passing of a non-tax legislation is bye passed because of their inclusion as part of the Finance bill. Further for the tax law, the basic architecture is contained in Article 265 of the Constitution and the procedure for its passing is contained in Articles 107–118 of the Constitution. As the principles and procedure for enactment of tax laws and non-tax laws are different, therefore, though it may be politically advisable to include non-tax legislation as part of the Finance bill but is against the principles of rule of law. The principles of rule of law are not codified but denote those values which are essential for growth of democracy. For instance, retrospective tax laws though constitutionally permissible but are against the principle of rule of law.4 In the aftermath of Vodafone tax dispute, the new government at the centre assured the foreign investors that it will not resort to retrospective lawmaking of tax laws. However, by the inclusion of non-tax laws in the Finance Act, 2015 and the Finance Act, 2016 the government at the centre signals a dangerous trend in law making in India. Money Bill and Aadhar Act, 2016 The media failed to notice the amendment of non-tax legislation through the Finance Act, 2015 and the Finance Act, 2016. However, furore erupted inside and outside Parliament on the passing of the Aadhar Bill as a money bill. Before we discuss what a money bill is, it is necessary to understand the Aadhar scheme. What is the Aadhar Scheme? The previous UPA-II government started a scheme to deliver subsidy directly in the accounts of the beneficiaries. The Aadhaar scheme assigns each Indian resident a unique 12-digit number based on their photographs, fingerprints, and scans of their irises. The Unique Identity Number (Aadhar) is issued by the Unique Identification Authority of India to deliver State subsidies directly into the hands of beneficiaries. The Unique Identification Authority of India was established as a non-statutory authority in the year 2009 and to give it statutory status a bill namely the National Identification Authority of India Bill, 2010 was introduced in in Rajya Sabha on 3 December, 2010 and was referred to the Standing Committee of Parliament on 10 December, 2010. The Standing Committee of Parliament presented its report on 13 December, 2011.5 The Committee found many lacunae in the scheme and referred to the global practice as under “It has been brought to the notice of the Standing Committee on Finance that on the basis of the findings of London School of Economics (LSE) report, the Government of United Kingdom has abandoned its ID project (repealed its Identity Cards Act, 2006) citing a range of reasons, which includes high cost, unsafe, untested and unreliable technology, and the changing relationship between the state and the citizen etc. To a specific issue of relevance of any of the above mentioned factors in the Indian context, it has been informed by the Ministry as follows: ‘There are significant differences between the UK’s ID card project and the UID project and to equate the two would not be appropriate. The differences are as follows: a) The UK system involved issuing a card which stored the information of the individual including their biometrics on the card. UID scheme involves issuing a number. No card containing the biometric information is being issued. UK already has the National insurance number which is used often as a means to verify the identity of the individual. b) The statutory framework envisaged made it mandatory to have the UK ID card. Aadhaar number is not mandatory. c) The data fields were large and required the individual to provide accurate information of all other ID numbers such as drivers license, national insurance number and other such details thereby linking the UK ID card database to all other databases on which the individual was registered. UID Scheme collects limited information and the database is not linked to other databases. d) In UK, the legislative framework and structure approached it from a security perspective. The context and need in India is different. The UID scheme is envisaged as a mean to enhance the delivery of welfare benefits and services’. The UID scheme as envisaged by UPA-II was adopted by the new government at the centre which assumed office in May, 2014. On 3 March 2016, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Bill, (hereinafter referred to as Aadhar Bii) was introduced in the Parliament. The Aadhar Bill though titled as a bill targeted to ensure delivery of subsidies and benefits to the poorest of the poor but regulates in all important aspects the life of billions of Indians and is not confined to targeted delivery of subsidies and other welfare benefits. Unlike the National Identification Authority of India Bill, 2010 which was introduced in Rajya Sabha as an ordinary bill, the Aadhar Bill was introduced in the Lok Sabha as a money bill. The reason for treating Aadhar Bill as money bill is best summed up in the statement given by the sponsor of the Aadhar Bill (Shri Arun Jaitley, Finance Minister of India) on 11th March, 2016 in the Lok Sabha. The statement, inter alia, reads as under ‘…Though the institution remains the same that you will have an Aadhar Enrollment, but there are two or three distinct differences that it has with the earlier idea. The earlier Bill which was conceived by the UPA, I am not saying that it was a wrong Bill or anything. At that stage, that was the kind of thinking in the society which was on that every individual in India, every resident in India must have a Unique Identity; that Unique Identity can be used in crime detection; that Unique Identity can be used by various institutions and, therefore, a lot of benefit could accrue to the society as a result of this. Now, that went into a side debate relating to privacy of individuals and it becoming public, and we became wiser by this because a lot of people collectively feel that the right of individual’s privacy that is an inherent part of his own liberty is also to be protected. But then we have a second set of problems before the society. We have a lot of weaker sections in India, both socially and economically. We have a large number of people who are still below the poverty line. One of the issues which has been confronting both the Central and the State Governments, and the local bodies, has been that there is a large part of our national resource which is earmarked for these weaker sections and this resource must be targeted. Therefore, in the last one or two years, a discussion has started in the society as to who are the people who are entitled to the benefit of this resource. This Bill deals with only one primary focus and that primary focus is that whoever gets a benefit from the Consolidated Fund of India in terms of subsidies, in terms of any form of resource, either from the Centre or the State Government, or from any other State institution, this person is entitled to have an Aadhar Card. …Therefore, if you see the prime focus of this Bill, the focus entirely is about the usage of money belonging to the Consolidated Fund of India whether of the Centre or the State Governments. In order to spend that money by way of a subsidy and in order to make sure that it is targeted, production of this card is necessary. The rest, how the card is to be issued itself, is incidental provision. That is why it squarely comes within the language of Article 110, sub-clause (c) to be particular, which defines the Money Bill. Therefore, the procedure with regard to the Money Bill itself should be followed.’ TYPES OF BILLS? Indian Parliament can make and unmakes laws. It has power to amend the Constitution, subject to the limitations of basic structure. A constitution amendment can be introduced in either House of Parliament. Other than the constitution amendment bill there are ordinary bills, financial bills, and money bills. An elaborate procedure has been outlined in the constitutional provisions and in the rules of business of the Lok Sabha and Rajya Sabha as to the introduction, consideration and passing of all bills including the Constitution amendment bills. There is a fine distinction between a money bill and a financial bill both as to its contents as well as its procedure. A financial bill may be introduced in any House of Parliament but not a money bill. A money Bill can be introduced only in Lok Sabha. A special procedure has been provided in the constitution regarding the passing of a Money Bill but not of a financial bill. Both Financial bill and money bill require recommendations of the President at the stage of introduction as well at the stage of its passing. In this regard, legislative procedure of Parliament is contained in Articles 107–111, the procedure in financial matters is contained in Articles 112–117 and procedure generally in Articles 118–122 of the Constitution. What is Money Bill? Article 110 of the Constitution defines Money Bill, as under ‘110. Definition of Money Bill (1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely (a) the imposition, abolition, remission, alteration, or regulation of any tax; (b) the regulation of the borrowing of money or the giving of any guarantee by the Government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India; (c) the custody of the consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund; (d) the appropriation of moneys out of the consolidated Fund of India; (e) the declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure; (f) the 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 or the audit of the accounts of the Union or of a State; or (g) any matter incidental to any of the matters specified in sub clause (a) to (f).’ Out of 7 clauses of Article 110 of the Constitution four clauses mention in one form or other the reference of the Consolidated Fund of India. The Consolidated fund of India is a fund in which all revenues received by the Government of India, all loans raised by that Government by the issue of treasury bills, loans, or ways and means advances and all moneys received by that Government in repayment of loans shall be credited. It has been further provided that no moneys out of the Consolidated Fund of India or the Consolidated Fund of a State shall be appropriated except in accordance with law and for the purposes and in the manner provided in this Constitution. Therefore, for appropriation out of the consolidated fund of India the approval of the Parliament is necessary. Procedure with Regard to Money Bill The Procedure with regard to the Money Bills in Rajya Sabha is not the same as in case of other Bills transmitted by Lok Sabha. The difference is that in case of other Bills the amendments, if any, moved in Rajya Sabha are adopted and the last motion is that the Bill be passed. Whereas in the case of Money Bills, the amendments are recommended by the Rajya Sabha and the last motion is that the Bill be returned. On the adoption of this motion, a Money Bill is returned to Lok Sabha with the message that Rajya Sabha has no recommendations to make to the House in regard to the Bill or with the message intimating to Lok Sabha the amendments so recommended, as the case may be. Lok Sabha, under Article 109, has the option to accept or reject all or any of the recommendations made by Rajya Sabha. The Bill, however, has to be returned within a period of 14 days from the date of its receipt by Rajya Sabha, otherwise it is deemed to have been passed by both Houses at the expiration of the said period in the form in which it was passed by Lok Sabha. On the question whether a Bill is a Money Bill or not, the decision of the Speaker is final. In every case of a Money Bill, the Speaker endorses a certificate thereon signed by her to the effect that it is a Money Bill before the Bill is sent to Rajya Sabha or presented to the President for assent. Though the powers of Rajya Sabha are limited in the financial field, yet it has a fairly adequate share in shaping the financial affairs of the country. Even in regard to a Money Bill it can recommend amendments, a power not possessed by the House of Lords in Britain. It may be of interest to note that in Income Tax Bill, 1961, Rajya Sabha did recommend a number of amendments of substantial character, all of which were agreed to by Lok Sabha. FINANCE BILL A typical illustration of a money bill is the Finance Bill which is introduced every year to give effect to the the taxation proposals of the Central Government for that particular financial year. Ordinarily, a Finance Bill determines the rates of income tax and of other taxes. However, opportunity is used to amend the tax laws and to introduce new tax laws also. However, the recent practice of amending non-tax laws through the finance Bill sets a dangerous trend in law making in India. Other Instances of Money Bill Appropriation Bill An Appropriation Bill is to be introduced in Lok Sabha.It cannot be amended and it cannot be referred to Committees of Parliament. An Appropriation Bill is categorized as Money Bills as they seek to authorise appropriation from the Consolidated Fund of India, of all moneys required to meet the grants made by the House and the expenditure charged on the Consolidated Fund of India. Payment Out of Consolidated Fund of India Sub-clause(c) of Article 110 of the Constitution states that if a bill which if it contains only provisions dealing the custody of the Consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund shall be deemed to be a money bill. However, clause (c) of Article 110 is attracted when a bill contains provisions only for the withdrawal of money from the Consolidated Fund of India. The Aadhar Act 2016 creates Unique Identification Authority (UID) as a statutory authority. In the past wherever a non-statutory authority was made a statutory authority, the bill was not treated a money bill. The instances are the Securities Board of India Act, 1992, the Telecom Regulatory Authority of India Act, 1997 and other regulatory authority in insurance sector, in petroleum sector and the airport economic regulatory authority. All these Acts contain provisions identical to the Aadhar Act as to the creation of a fund and making payment out of the consolidated fund of India to such fund and were treated as a financial bill. The Aadhar Act, 2016 contains 59 sections and as its long title states the Aadhar Bill provides for measures, such as, good governance, efficient, transparent, and targeted delivery of subsidies, benefits and services to the people of India. By separate orders Aadhar has been notified as a valid documents for opening of bank accounts, getting telephone connections and also valid proof of identity for various transactions including authentication for Know Your Customer (KYC) requirements. Undoubtedly, Aadhar is a proof of identity for many purposes including disbursement of subsidies to the poor. The Aadhar Act does not fall under clause (c) of Article 110 of the Constitution. Sections 24 and 25 of the Aadhar Act, 20166 cannot make it as a money bill. The Aadhar Act, 2016 could have been introduced as a financial bill as its predecessor the National Identification Authority of India bill, 2010 was rightly treated a financial bill. The introduction of Aadhar Bill as a money bill sets a dangerous trend in law making in India as it dilutes the role of Rajya Sabha in law making. Footnotes 1 Daniel Greenberg, Dangerous Trends in Modern Legislation, [2015] P.L., Issue 1, 96–110. 2 Clause 21 of the Constitution (One Hundred Twenty-Second) Amendment Bill, 2014 passed by the Rajya Sabha on 3rd August, 2016. Clause 21 reads as under ‘21. (1) If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty: Provided that no such order shall be made after the expiry of 3 years from the date of such assent. (2)Every order made under sub-section (1)shall, as soon as may be after it is made, be laid before each House of Parliament’. 3 The Income-tax Act 1961 implements the 12th Report of the Law Commission of India. 4 KN Chaturvedi, ‘Legislative Retrospectivity and Rule of Law’ [2013] Statute Law Review 34, 207–220 5 Forty-second Report of the Standing Committee on Finance (2011–12) Fifteenth Lok Sabha (Ministry of Planning) on The National Identification Authority of India Bill, 2010 (December, 2011), available at http://www.prsindia.org/uploads/media/UID/uid%20report.pdf/ (accessed 12 May 2016). 6 Sections 24 and 25 of the Aadhar (Targeted Delivery of financial and Other Subsidies, Benefits, and Services) Act, 2016 reads as under ‘24. The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Authority, grants of such sums of money as the Central Government may think fit for being utilised for the purposes of this Act. 25. The fees or revenue collected by the Authority shall be credited to the Consolidated Fund of India.’ © The Author(s) 2016. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Statute Law Review Oxford University Press

Dangerous Trends in Law Making in India

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Abstract

Abstract Dangerous legislative trends are emerging that threaten the effective protection of the rule of law. In India, the role of parliamentarians is being diluted in a number of ways. The role of the Upper House of Indian Parliament (Rajya sabha) in law making, is diluted, by inclusion of non-tax laws in the Finance Bill, and by labeling apparently a non-money bill as a money bill. It seems that in order to get its key legislative proposals enacted as law the government rushed through many amendments in non-tax laws through the route of Finance bill. It also succeeded in getting enacted Aadhar Act as a money bill though apparently Aadhar Act falls in the category of a financial bill. The Constitution of India and parliamentary procedure allows Rajya Sabha to effectively debate and vote on a financial bill. A Money Bill can be introduced only in the Lok Sabha. A Money Bill after being passed by the Lok Sabha is transmitted to the Rajya Sabha. It is the discretion of the Lok Sabha to accept or reject the amendments made by the Rajya Sabha to a money bill. The Aadhar Act, 2016 could have been introduced as a financial bill as its predecessor the National Identification Authority of India bill, 2010 was rightly treated a financial bill. INTRODUCTION Dangerous legislative trends are emerging that threaten the effective protection of the rule of law. Daniel Greenberg, a former parliamentary counsel highlights in his writings1 a number of recent developments in legislation and the legislative process which can be seen to have concentrated power in the hands of the Executive and to have diluted the role of Parliamentarians in United Kingdom. In India too, the role of parliamentarians is being diluted in a number of ways. Henry VIII Clause (power to remove difficulties) is not only included in every ordinary legislation but also in some of the constitution amendment bill.2 The dilution of the role of Upper House of Indian Parliament (Rajya sabha) in law making, by inclusion of non-tax laws in the Finance Bill, and enactment of the Aadhar Act, 2016 apparently a non-money bill as a money bill, sets dangerous trends in law-making in India. Indian Parliament is bicameral. It comprises of two Houses—lower house (Lok Sabha) and upper house (Rajya Sabha) and the President of India. The basic function of Parliament is to make laws. All legislative proposals emanate in the form of a Bill. A Bill cannot become law unless it has received the approval of both the Houses of Parliament and the assent of the President of India. A Money Bill can be introduced only in the Lok Sabha. A Money Bill after being passed by the Lok Sabha is transmitted to the Rajya Sabha. The Rajya Sabha can pass the bill within 14 days or return it to the Lok Sabha with its proposals for some changes in the bill. It is the discretion of the Lok Sabha to accept or reject the amendments made by the Rajya Sabha to a money bill. In the 16th Lok Sabha, the ruling party at the centre (NDA-II) has absolute majority but it lacks majority in Rajya Sabha. Because of opposition in Rajya Sabha, the government had to take the Ordinance route for important bills like Land Bill and Insurance Bill. The government rushed through many amendments in non-tax laws through the route of Finance bill and also enacted the Aadhar Act, 2016 as a money bill. The passing of a law may be politically desirable, but dilution of the role of Rajya Sabha in law making has the potential to diminish significantly effectiveness of Parliamentary democracy. FINANCE BILL A Finance bill is a money bill and ordinarily it determines the rates of income tax and of other taxes. These other taxes include excise duty, customs duty, and occasionally postal rates and rates of stamp duty. Under the Indian Constitution, no tax shall be levied and collected except by the authority of law and the legislative practice in the initial years after independence has been to introduce a new tax law after consultation with the Law Commission of India3 and to get it passed after its scrutiny by the Select Committee of Parliament. In 1950s, Nicholas Kaldor was invited from Cambridge to work on Indian Tax Reform. Based on the Nicholas Kaldor Committee Report in 1956, separate legislations were introduced in the Parliament for the levy of tax on wealth, gift, and expenditure. At that time, the practice was to introduce the new taxes through an ordinary legislation. The practice of introducing new tax laws as part of the Finance Bill started from early 80s when tax on inland travel and tax on foreign travel and afterwards the Banking transaction Tax and the Securities Transaction Tax were introduced. Interestingly, these taxes were discontinued by the Finance Acts of subsequent years. A typical instance of a new tax introduced through the Finance Act, 1994 is that of the Service tax. The Service tax was introduced by the Finance Act, 1994 and is continuously being amended each year by the Finance Acts only. This practice deprives Parliament its power of making detailed scrutiny of a tax legislation. Other than tax laws it has been the consistent practice not to amend the Prevention of Money Laundering Act or the Foreign Exchange Management Act as part of Finance Bill prior to 2015. The Prevention of money Laundering Act enacted in 2002 was amended in the years 2005, 2009, and 2012 by an amendment bill in Parliament and not through the Finance Acts. The past practice of confining Finance Bill to taxation proposals only was, however, departed as the Finance Act, 2015 and the Finance Act, 2016 amended non-tax laws such as the Reserve Bank of India Act, 1934, the Foreign Exchange Management Act, 1999, the Prevention of Money Laundering Act, 2002 and the Foreign Contribution Regulation Act, 2010. Amendment of a Non-Tax Legislation as Part of the Finance Bill Whether a Good Practice? Amendment of a non-tax legislation as part of the finance bill raises many isssues. First, the drafting of Finance Bill is given top priority as being part of the budget of a particular year. It means that immediately after the budget speech of the Finance minister is over, the Finance bill is to be introduced in Lok Sabha. For its drafting legislative draftsperson from the legislative department of the Ministry of Law and Justice work with officers of the department of revenue, Ministry of Finance, Government of India and more often adequate time for its drafting is not provided to the draftsperson. This results in the withdrawal of some of the provisions of the Finance bill through government amendments. Secondly, the policy of a Finance bill as reflected in the statement of objects and reasons is to give effect to the the financial proposals of the Central Government for that particular financial year. Whether inclusion of Acts mentioned above, that is Reserve Bank of India Act, Money Laundering Act, Foreign Exchange Management Act, and Foreign Contribution Regulation Act conforms to the statement of objects and reasons appended to the Finance Act, 2016. The obvious answer is no. However, one may argue that the statement of objects and reasons appended to a bill may be of use only in case of ambiguity and the statement of objects and reasons appended to the Finance Bill, 2016 is not relevant for questioning the inclusion of Reserve Bank of India Act, Money Laundering Act, Foreign Exchange Management Act, and Foreign Contribution Regulation Act as part of the Finance Bill, 2016. Be it may, but definitely inclusion of the amendment of the Reserve Bank of India Act, Money Laundering Act, Foreign Exchange Management Act, and Foreign Contribution Regulation Act cannot be a good practice as the Parliamentary Standing Committees cannot scrutinize the provisions of the Finance Bill which amend a non-tax legislation. Why Other Acts are Amended by a Finance Bill? Another significant point which often goes unnoticed is the effect of a colonial legislation, that is, the Provisional Collection of Taxes Act, 1931 on the passing of the Finance Bill. The Provisional Collection of Taxes Act, 1936 is the only legislation where under immediate effect is given to certain provisions of a Bill without its being formally enacted by the Parliament. These provisions relate to clauses of the Finance Bill which concerns with the levy of excise duty. The levy of excise duty becomes effective from the date of the introduction of the Finance Bill. But the levy shall continue only if the Finance bill is passed within 75 days of its introduction. Precisely, for this reason every year the Finance bill is passed and assented to by the President before the expiry of 75 days from the date of its introduction A declaration under the Provisional Collection of Taxes Act, 1931 is also to be made in the Finance Bill. Thus, Finance bill usually contains a declaration as under ‘It is hereby declared that it is expedient in the public interest that the provisions of clauses 138(i), 142(i), 143(i), 159, 231 and 232 of this Bill shall have immediate effect under the Provisional Collection of Taxes Act, 1931(Finance bill2016).’ As the clauses which are to be given immediate effect under the Provisional collection of Tax Act, 1931 cannot be segregated from other clauses of the Finance bill, therefore, amendment of a non-tax legislation also gets approval of Parliament within 75 days of its introduction It means the type of scrutiny required for the passing of a non-tax legislation is bye passed because of their inclusion as part of the Finance bill. Further for the tax law, the basic architecture is contained in Article 265 of the Constitution and the procedure for its passing is contained in Articles 107–118 of the Constitution. As the principles and procedure for enactment of tax laws and non-tax laws are different, therefore, though it may be politically advisable to include non-tax legislation as part of the Finance bill but is against the principles of rule of law. The principles of rule of law are not codified but denote those values which are essential for growth of democracy. For instance, retrospective tax laws though constitutionally permissible but are against the principle of rule of law.4 In the aftermath of Vodafone tax dispute, the new government at the centre assured the foreign investors that it will not resort to retrospective lawmaking of tax laws. However, by the inclusion of non-tax laws in the Finance Act, 2015 and the Finance Act, 2016 the government at the centre signals a dangerous trend in law making in India. Money Bill and Aadhar Act, 2016 The media failed to notice the amendment of non-tax legislation through the Finance Act, 2015 and the Finance Act, 2016. However, furore erupted inside and outside Parliament on the passing of the Aadhar Bill as a money bill. Before we discuss what a money bill is, it is necessary to understand the Aadhar scheme. What is the Aadhar Scheme? The previous UPA-II government started a scheme to deliver subsidy directly in the accounts of the beneficiaries. The Aadhaar scheme assigns each Indian resident a unique 12-digit number based on their photographs, fingerprints, and scans of their irises. The Unique Identity Number (Aadhar) is issued by the Unique Identification Authority of India to deliver State subsidies directly into the hands of beneficiaries. The Unique Identification Authority of India was established as a non-statutory authority in the year 2009 and to give it statutory status a bill namely the National Identification Authority of India Bill, 2010 was introduced in in Rajya Sabha on 3 December, 2010 and was referred to the Standing Committee of Parliament on 10 December, 2010. The Standing Committee of Parliament presented its report on 13 December, 2011.5 The Committee found many lacunae in the scheme and referred to the global practice as under “It has been brought to the notice of the Standing Committee on Finance that on the basis of the findings of London School of Economics (LSE) report, the Government of United Kingdom has abandoned its ID project (repealed its Identity Cards Act, 2006) citing a range of reasons, which includes high cost, unsafe, untested and unreliable technology, and the changing relationship between the state and the citizen etc. To a specific issue of relevance of any of the above mentioned factors in the Indian context, it has been informed by the Ministry as follows: ‘There are significant differences between the UK’s ID card project and the UID project and to equate the two would not be appropriate. The differences are as follows: a) The UK system involved issuing a card which stored the information of the individual including their biometrics on the card. UID scheme involves issuing a number. No card containing the biometric information is being issued. UK already has the National insurance number which is used often as a means to verify the identity of the individual. b) The statutory framework envisaged made it mandatory to have the UK ID card. Aadhaar number is not mandatory. c) The data fields were large and required the individual to provide accurate information of all other ID numbers such as drivers license, national insurance number and other such details thereby linking the UK ID card database to all other databases on which the individual was registered. UID Scheme collects limited information and the database is not linked to other databases. d) In UK, the legislative framework and structure approached it from a security perspective. The context and need in India is different. The UID scheme is envisaged as a mean to enhance the delivery of welfare benefits and services’. The UID scheme as envisaged by UPA-II was adopted by the new government at the centre which assumed office in May, 2014. On 3 March 2016, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Bill, (hereinafter referred to as Aadhar Bii) was introduced in the Parliament. The Aadhar Bill though titled as a bill targeted to ensure delivery of subsidies and benefits to the poorest of the poor but regulates in all important aspects the life of billions of Indians and is not confined to targeted delivery of subsidies and other welfare benefits. Unlike the National Identification Authority of India Bill, 2010 which was introduced in Rajya Sabha as an ordinary bill, the Aadhar Bill was introduced in the Lok Sabha as a money bill. The reason for treating Aadhar Bill as money bill is best summed up in the statement given by the sponsor of the Aadhar Bill (Shri Arun Jaitley, Finance Minister of India) on 11th March, 2016 in the Lok Sabha. The statement, inter alia, reads as under ‘…Though the institution remains the same that you will have an Aadhar Enrollment, but there are two or three distinct differences that it has with the earlier idea. The earlier Bill which was conceived by the UPA, I am not saying that it was a wrong Bill or anything. At that stage, that was the kind of thinking in the society which was on that every individual in India, every resident in India must have a Unique Identity; that Unique Identity can be used in crime detection; that Unique Identity can be used by various institutions and, therefore, a lot of benefit could accrue to the society as a result of this. Now, that went into a side debate relating to privacy of individuals and it becoming public, and we became wiser by this because a lot of people collectively feel that the right of individual’s privacy that is an inherent part of his own liberty is also to be protected. But then we have a second set of problems before the society. We have a lot of weaker sections in India, both socially and economically. We have a large number of people who are still below the poverty line. One of the issues which has been confronting both the Central and the State Governments, and the local bodies, has been that there is a large part of our national resource which is earmarked for these weaker sections and this resource must be targeted. Therefore, in the last one or two years, a discussion has started in the society as to who are the people who are entitled to the benefit of this resource. This Bill deals with only one primary focus and that primary focus is that whoever gets a benefit from the Consolidated Fund of India in terms of subsidies, in terms of any form of resource, either from the Centre or the State Government, or from any other State institution, this person is entitled to have an Aadhar Card. …Therefore, if you see the prime focus of this Bill, the focus entirely is about the usage of money belonging to the Consolidated Fund of India whether of the Centre or the State Governments. In order to spend that money by way of a subsidy and in order to make sure that it is targeted, production of this card is necessary. The rest, how the card is to be issued itself, is incidental provision. That is why it squarely comes within the language of Article 110, sub-clause (c) to be particular, which defines the Money Bill. Therefore, the procedure with regard to the Money Bill itself should be followed.’ TYPES OF BILLS? Indian Parliament can make and unmakes laws. It has power to amend the Constitution, subject to the limitations of basic structure. A constitution amendment can be introduced in either House of Parliament. Other than the constitution amendment bill there are ordinary bills, financial bills, and money bills. An elaborate procedure has been outlined in the constitutional provisions and in the rules of business of the Lok Sabha and Rajya Sabha as to the introduction, consideration and passing of all bills including the Constitution amendment bills. There is a fine distinction between a money bill and a financial bill both as to its contents as well as its procedure. A financial bill may be introduced in any House of Parliament but not a money bill. A money Bill can be introduced only in Lok Sabha. A special procedure has been provided in the constitution regarding the passing of a Money Bill but not of a financial bill. Both Financial bill and money bill require recommendations of the President at the stage of introduction as well at the stage of its passing. In this regard, legislative procedure of Parliament is contained in Articles 107–111, the procedure in financial matters is contained in Articles 112–117 and procedure generally in Articles 118–122 of the Constitution. What is Money Bill? Article 110 of the Constitution defines Money Bill, as under ‘110. Definition of Money Bill (1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely (a) the imposition, abolition, remission, alteration, or regulation of any tax; (b) the regulation of the borrowing of money or the giving of any guarantee by the Government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India; (c) the custody of the consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund; (d) the appropriation of moneys out of the consolidated Fund of India; (e) the declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure; (f) the 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 or the audit of the accounts of the Union or of a State; or (g) any matter incidental to any of the matters specified in sub clause (a) to (f).’ Out of 7 clauses of Article 110 of the Constitution four clauses mention in one form or other the reference of the Consolidated Fund of India. The Consolidated fund of India is a fund in which all revenues received by the Government of India, all loans raised by that Government by the issue of treasury bills, loans, or ways and means advances and all moneys received by that Government in repayment of loans shall be credited. It has been further provided that no moneys out of the Consolidated Fund of India or the Consolidated Fund of a State shall be appropriated except in accordance with law and for the purposes and in the manner provided in this Constitution. Therefore, for appropriation out of the consolidated fund of India the approval of the Parliament is necessary. Procedure with Regard to Money Bill The Procedure with regard to the Money Bills in Rajya Sabha is not the same as in case of other Bills transmitted by Lok Sabha. The difference is that in case of other Bills the amendments, if any, moved in Rajya Sabha are adopted and the last motion is that the Bill be passed. Whereas in the case of Money Bills, the amendments are recommended by the Rajya Sabha and the last motion is that the Bill be returned. On the adoption of this motion, a Money Bill is returned to Lok Sabha with the message that Rajya Sabha has no recommendations to make to the House in regard to the Bill or with the message intimating to Lok Sabha the amendments so recommended, as the case may be. Lok Sabha, under Article 109, has the option to accept or reject all or any of the recommendations made by Rajya Sabha. The Bill, however, has to be returned within a period of 14 days from the date of its receipt by Rajya Sabha, otherwise it is deemed to have been passed by both Houses at the expiration of the said period in the form in which it was passed by Lok Sabha. On the question whether a Bill is a Money Bill or not, the decision of the Speaker is final. In every case of a Money Bill, the Speaker endorses a certificate thereon signed by her to the effect that it is a Money Bill before the Bill is sent to Rajya Sabha or presented to the President for assent. Though the powers of Rajya Sabha are limited in the financial field, yet it has a fairly adequate share in shaping the financial affairs of the country. Even in regard to a Money Bill it can recommend amendments, a power not possessed by the House of Lords in Britain. It may be of interest to note that in Income Tax Bill, 1961, Rajya Sabha did recommend a number of amendments of substantial character, all of which were agreed to by Lok Sabha. FINANCE BILL A typical illustration of a money bill is the Finance Bill which is introduced every year to give effect to the the taxation proposals of the Central Government for that particular financial year. Ordinarily, a Finance Bill determines the rates of income tax and of other taxes. However, opportunity is used to amend the tax laws and to introduce new tax laws also. However, the recent practice of amending non-tax laws through the finance Bill sets a dangerous trend in law making in India. Other Instances of Money Bill Appropriation Bill An Appropriation Bill is to be introduced in Lok Sabha.It cannot be amended and it cannot be referred to Committees of Parliament. An Appropriation Bill is categorized as Money Bills as they seek to authorise appropriation from the Consolidated Fund of India, of all moneys required to meet the grants made by the House and the expenditure charged on the Consolidated Fund of India. Payment Out of Consolidated Fund of India Sub-clause(c) of Article 110 of the Constitution states that if a bill which if it contains only provisions dealing the custody of the Consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund shall be deemed to be a money bill. However, clause (c) of Article 110 is attracted when a bill contains provisions only for the withdrawal of money from the Consolidated Fund of India. The Aadhar Act 2016 creates Unique Identification Authority (UID) as a statutory authority. In the past wherever a non-statutory authority was made a statutory authority, the bill was not treated a money bill. The instances are the Securities Board of India Act, 1992, the Telecom Regulatory Authority of India Act, 1997 and other regulatory authority in insurance sector, in petroleum sector and the airport economic regulatory authority. All these Acts contain provisions identical to the Aadhar Act as to the creation of a fund and making payment out of the consolidated fund of India to such fund and were treated as a financial bill. The Aadhar Act, 2016 contains 59 sections and as its long title states the Aadhar Bill provides for measures, such as, good governance, efficient, transparent, and targeted delivery of subsidies, benefits and services to the people of India. By separate orders Aadhar has been notified as a valid documents for opening of bank accounts, getting telephone connections and also valid proof of identity for various transactions including authentication for Know Your Customer (KYC) requirements. Undoubtedly, Aadhar is a proof of identity for many purposes including disbursement of subsidies to the poor. The Aadhar Act does not fall under clause (c) of Article 110 of the Constitution. Sections 24 and 25 of the Aadhar Act, 20166 cannot make it as a money bill. The Aadhar Act, 2016 could have been introduced as a financial bill as its predecessor the National Identification Authority of India bill, 2010 was rightly treated a financial bill. The introduction of Aadhar Bill as a money bill sets a dangerous trend in law making in India as it dilutes the role of Rajya Sabha in law making. Footnotes 1 Daniel Greenberg, Dangerous Trends in Modern Legislation, [2015] P.L., Issue 1, 96–110. 2 Clause 21 of the Constitution (One Hundred Twenty-Second) Amendment Bill, 2014 passed by the Rajya Sabha on 3rd August, 2016. Clause 21 reads as under ‘21. (1) If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty: Provided that no such order shall be made after the expiry of 3 years from the date of such assent. (2)Every order made under sub-section (1)shall, as soon as may be after it is made, be laid before each House of Parliament’. 3 The Income-tax Act 1961 implements the 12th Report of the Law Commission of India. 4 KN Chaturvedi, ‘Legislative Retrospectivity and Rule of Law’ [2013] Statute Law Review 34, 207–220 5 Forty-second Report of the Standing Committee on Finance (2011–12) Fifteenth Lok Sabha (Ministry of Planning) on The National Identification Authority of India Bill, 2010 (December, 2011), available at http://www.prsindia.org/uploads/media/UID/uid%20report.pdf/ (accessed 12 May 2016). 6 Sections 24 and 25 of the Aadhar (Targeted Delivery of financial and Other Subsidies, Benefits, and Services) Act, 2016 reads as under ‘24. The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Authority, grants of such sums of money as the Central Government may think fit for being utilised for the purposes of this Act. 25. The fees or revenue collected by the Authority shall be credited to the Consolidated Fund of India.’ © The Author(s) 2016. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.

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Statute Law ReviewOxford University Press

Published: Feb 1, 2018

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