The story so far: The Chief Justice of India (CJI) D.Y. Chandrachud on Friday said that he will constitute a seven-judge Constitution Bench to hear a batch of petitions on October 12 challenging the Centre’s use of the money bill route to pass key legislations after senior advocate Menaka Guruswamy mentioned the matter for urgent listing. A Bench comprising the Chief Justice and Justices J.B. Pardiwala and Manoj Misra intimated that all pending seven-judge bench matters will be listed on October 12 for issuing procedural directions like the appointment of a nodal counsel, and not for final hearing.
The decision, in this case, will give quietus to the controversy pertaining to the government introducing crucial laws such as the Aadhaar Bill, amendments to the Prevention of Money Laundering Act, 2002 (PMLA), and the Foreign Contributions Regulations Act, 2010, as money bills, purportedly to circumvent the Rajya Sabha where it does not enjoy a majority.
What is a money bill?
A money bill has been defined under Article 110 of the Constitution as a draft law that must deal “only” with matters specified in Article 110 (1)(a) to (g) — taxation, borrowing by the government, and appropriation of money from the Consolidated Fund of India, among others. As per Article 110(1)(g), “any matter incidental to any of the matters specified in Articles 110(1)(a)-(f)” can also be classified as a money bill.
Generally, for a bill to be enacted into law it requires the approval of both the Lok Sabha and the Rajya Sabha. However, a money bill can be introduced only in the Lok Sabha, and the Rajya Sabha cannot amend or reject such bills. The Rajya Sabha can suggest amendments, but it is up to the Lok Sabha to accept or reject them. In the event that a dispute arises over whether a bill is a money bill or not, the Lok Sabha Speaker’s decision on the issue shall be considered final. However, the Supreme Court in 2018 while delivering the judgment upholding the Aadhaar Act stated that the Speaker’s decision will be subject to judicial scrutiny.
The categorisation of a bill as a ‘money bill’ is not unique to India. Article 110 is similar to Section 1 of the Parliament Act, 1911, of the United Kingdom. The provision owes its origin to a political crisis in the United Kingdom in 1909 when the unelected House of Lords (Upper House) rejected the Budget passed by the House of Commons. This resulted in the enactment of the 1911 law to ensure that the House of Lords would not veto or stall money bills passed by the House of Commons which reflected the will of the people.
Was the passage of the Aadhaar Act as a money bill lawful?
The first major challenge about whether a bill qualified as a money bill under the Constitution was in the Aadhaar case. In K.S. Puttaswamy v. Union of India (2018), the Supreme Court while upholding the constitutionality of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, by a 4:1 majority stated that no illegality was committed by passing the Aadhaar Bill as a money bill in the Parliament. Justice Chandrachud, however, dissented.
The majority opinion penned by Justice Sikri reasoned that the main objective of the legislation is to extend benefits in the nature of aid, grant, or subsidy to the marginalised sections of society with the support of the Consolidated Fund of India. This finds expression in Section 7 which the Court held is the main provision in the Act. Therefore, the Act fell within the ambit of Article 110 (1)(e) of the Constitution (expenditure charged to the consolidated fund) and was validly passed as a money bill. It was highlighted that the other provisions are only “incidental” in nature for the proper working of the Act. Notably, the concurring opinion by Justice Bhushan affirmed that the matter is subject to future judicial review.
On the other hand, Justice Chandrachud in his dissenting opinion criticised the government for passing the Act as a money bill and said that it constitutes a “fraud on the Constitution”. He pointed out an important word in provision (i) of Article 110— “only,” followed by a list of matters connected to taxation and expenditure from the Consolidated Fund of India.
In light of this, he dismissed the argument that since the Aadhar Act involved extending grants from the Consolidated Fund, it should qualify as a money bill. In his view, such a contention would allow just about anything to be passed as a money bill — an outcome that would amount to rewriting the Constitution. The dissent also underscored that superseding the authority of the Rajya Sabha is in conflict with the constitutional scheme and the legitimacy of democratic institutions.
Why was a reference to a larger bench made?
In Roger Mathew v. Union of India (2019), a five-judge Constitution Bench headed by then CJI Ranjan Gogoi struck down an amendment to the 2017 Finance Act, passed as a money bill, that altered the structure and functioning of various tribunals. Referring to the majority dictum in Puttaswamy, the Bench noted that it did not substantially discuss the effect of the word “only” in Article 110(1) and did not examine the repercussions of a finding when some of the provisions of an enactment passed as a “money bill” do not conform to Article 110(1)(a) to (g).
The Bench also ruled that there is no bar against judicial review of certification of a bill as a money bill by the Speaker although there would be a presumption of legality in favour of the Speaker’s decision and the onus would be on the person challenging its validity to show that such certification was “grossly unconstitutional or tainted with blatant substantial illegality.”
Pointing out that the money bill issue in the Puttaswamy judgment was “not convincingly reasoned” and could lead to a potential conflict in interpretation, the Bench asked for the question to be put before a larger bench of the Supreme Court since it was similar in strength to the Puttaswamy Bench.
PMLA verdict — question left open for consideration by a larger bench
In 2015, 2016, 2018, and 2019, amendments including those on bail and classification of predicate offences were made to the PMLA through the Finance Act. Finance Bills passed during the budget are introduced as money bills. Petitions thereafter filed in the Supreme Court contended that the passage of such amendments as money bills was in violation of Article 110.
In July last year, a three-judge Bench comprising Justices AM Khanwilkar, Dinesh Maheshwari, and CT Ravikumar upheld key provisions of the PMLA which conferred extensive powers upon the Enforcement Directorate (ED) but left it open for a seven-judge Bench to decide whether these amendments could have been passed through the money bill route.
Justice Khanwilkar observed — “At the outset, it was made clear to all concerned that this ground of challenge will not be examined in the present proceedings as it is pending for consideration before the Larger Bench of this Court (seven judges) in view of the reference order passed in Roger Mathew. We are conscious of the fact that if that ground of challenge is to be accepted, it may go to the root of the matter and amendments effected vide Finance Act would become unconstitutional or ineffective.”
Potential impact
The final outcome of this seven-judge Bench reference could potentially invalidate crucial laws passed in the past and penalise the government for its legislative approach. The Lok Sabha enjoys a more popular mandate than the Rajya Sabha, since the latter consists of indirectly elected and nominated members. However, the framers of the Constitution ensured that a certain role was carved out for the Rajya Sabha as an institution in a constitutional democracy. This shall be the epicentre of the discussion surrounding this reference.
