Use of money bills to pass laws

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Context:

The Supreme Court agrees to hear challenges to the government's passage of several laws through the money bill route

Background Details

• The Supreme Court had formed the 7 judge constitutional bench in October 2023 to hear the matter.
• In the Roger Matthew vs. Union of India case in November 2019, the Supreme Court had addressed changes in the service conditions of tribunal members that were introduced as a part of the Finance Act, 2017, passed as a money bill.
• The five-judge bench had found the law unconstitutional for infringing upon the independence of judicial bodies.
• Bench had also referred the money bill aspect of the case to a larger constitution bench.
• The ruling also cast doubt on the validity of a five-judge constitution bench’s 2018 ruling upholding the validity of the passage of the Aadhaar Act as a money bill.

Arguments of the judges in Justice K.S. Puttaswamy and Anr. vs. Union of India (UOI) and Ors.  judgement in favour of passing Aadhar Act  money bill?

• In this case, the Supreme Court upheld the constitutional validity of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (Aadhaar Act) and declared that its legislative passage as a Money Bill was legal and valid,
• Majority of the bench held that the Act's main aim was to provide subsidies and benefits involving expenditure from the Consolidated Fund of India.

Why does the government use the money bill to pass bills?

• A money bill, as defined under Article 110 of the Indian Constitution, concerns financial matters related to taxation and public expenditure.
• Rajya Sabha cannot amend or reject it, due to which, governments rely on it to pass laws through the Rajya Sabha even if they lack a majority in the upper house.
• It would be impossible for the government to pass some of the legislation if Rajya has the majority of opposition.
• In the Aadhaar Act for instance, Petitioners argued that parts of the Act, passed through the two houses as a money bill, contained provisions unrelated to the subjects listed under Article 110.

Issues in Finance Act, 2017

The act altered the appointments to 19 key judicial tribunals, including the National Green Tribunal and Central Administrative Tribunal.

• Critics argue that the Aadhar bill was categorised as a money bill to extend executive control over these institutions (tribunals) by altering the composition of the selection committees and vastly downgrading the qualifications and experience required to staff these bodies.
• Other petitioners argued that various provisions in the Finance Act, 2017, were unrelated to fiscal subjects listed under Article 110.
• Although the Supreme Court had quashed some amendments introduced by the law, it did not strike down the entire Finance Act, 2017.
• Even in the electoral bond scheme case, the court had struck down the scheme and amendments introduced through the Finance Act, 2017.

Other important acts passed as money bills:

• Aadhaar Act, 2016, amendments to The Prevention of Money Laundering Act, 2002, (PMLA), and the Foreign Contributions Regulations Act, 2010.

Issues involved in passing ordinary bills as Money Bills

Erosion of Separation of Powers

• The delegation of tribunal functions traditionally held by the judiciary to the executive raises concerns about the separation of powers.
• Such actions can undermine judicial independence and subject critical judicial roles to political influence.

Qualifications of Tribunal Leadership

• Despite a Supreme Court ruling that mandates tribunal chairpersons be equivalent to the Chief Justice of High Courts, recent legislative changes permit individuals merely qualified to be High Court judges to preside over 13 tribunals.
• This alteration might threaten the integrity and authority of these judicial bodies.

Questionable Legislative Process

• The passage of ordinary bills as money bills challenges the notion that fiscal measures should not encompass substantial legislative matters.

Authority of the Lok Sabha Speaker

• Authority of Lok Sabha to categorise bills as money bill under Article 110(1) is not subject to judicial review, effectively enabling the government to bypass Rajya Sabha's checks and balances.
• This raises concerns about the dilution of parliamentary democracy.

Way Forward

Judicial Review and Legislative Integrity

• While the British model allows no judicial review of a Speaker’s classification, The Supreme Court has maintained that judicial review is integral to the Basic Structure Doctrine.

Protecting Democratic Processes

• Using the classification to categorise bills as money bills diminishes the Upper House's legislative role as a legislative bod There is a need to avoid the process.

Role of the Supreme Court

• It is crucial for the Supreme Court to maintain the sanctity of constitutional arrangements. Judicial oversight ensures that governmental actions align with constitutional mandates, preserving democratic principles and facilitating effective governance.

Role of parliamentary committees

• Every bills must pass the scrutiny of parliamentary committees and committees must raise concerns on issues of categorisation of bills as money bills.

Committee on categorisation of bills:

• Parliament may look forward to constituting a committee which categorises the bills before being introduced in parliament.

Conclusion:

• The recent criticisms of passing ordinary bills as money bills raises significant concerns regarding the integrity of India's legislative process and the erosion of democratic principles. The implications for judicial independence, the qualifications of tribunal leadership, and the authority of the Lok Sabha Speaker underscore a pressing need for reform.

Differences between money bill and finance bill

MONEY BILL v/s FINANCIAL BILL

Must read articles:

Finance Bills

Foreign Contribution Regulation Act

Sources:

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PRACTICE QUESTION Q. Critically analyse the implications of categorising ordinary legislation as Money Bills in India, focusing on the erosion of the separation of powers, judicial independence, and the integrity of parliamentary democracy. Discuss recent Supreme Court rulings related to this issue.(250 words)