A verdict on the Money Bill that India awaits
The Supreme Court of India’s ruling will have bearing on legislation enacted without the Rajya Sabha’s approval and the state of India’s federal architecture.
(i) Introduction
India’s federal architecture and the legislative process are at a crossroads as a seven-judge Bench of the Supreme Court is set to hear a landmark case regarding the definition and scope of the Money Bill. This ruling will not only determine the legality of several laws passed without the Rajya Sabha’s approval but will also address crucial issues related to the balance of power between the two Houses of Parliament. At its core, this case raises questions about the constitutional limits of using the Money Bill mechanism and its impact on India’s federal structure.
(ii) The Constitutional Framework of Money Bills
The Indian Constitution, under Article 109, prescribes a unique legislative process for Money Bills. Unlike other bills, Money Bills can become law with just the Lok Sabha’s approval, with the Rajya Sabha only permitted to make non-binding recommendations. Article 110(1) defines a Money Bill as one that deals only with matters related to taxation, appropriation of funds, borrowing of money, and related financial provisions. The word “only” is critical here, implying that any bill containing provisions unrelated to the listed subjects cannot be deemed a Money Bill.
(iii) The 2017 Finance Act Controversy
The genesis of the current legal tussle lies in the Finance Act of 2017. This legislation was certified as a Money Bill by the Speaker of the Lok Sabha and made sweeping changes to the structure and functioning of 26 tribunals. It abolished some tribunals, merged others, and granted the Union Executive broad powers to regulate the tribunals, including determining members’ qualifications and service conditions. The petitioners in the case, Rojer Mathew vs. South Indian Bank Ltd., argued that the Finance Act contained provisions far beyond the purview of a Money Bill. While some clauses dealt with salaries paid from the Consolidated Fund of India (a legitimate subject for a Money Bill), most provisions amended substantive laws unrelated to financial matters, thus challenging its classification as a Money Bill.
(iv) The Role of the Supreme Court in Rojer Mathew Case
In Rojer Mathew, the Supreme Court faced the complex question of whether the Finance Act, 2017, was rightly classified as a Money Bill. The majority judgment on the five-judge Bench expressed concerns over the certification process but refrained from providing clear standards for reviewing the Speaker’s decision. The Court acknowledged that prior judgments, particularly in K.S. Puttaswamy vs. Union of India (2018) (related to the Aadhaar Act), had failed to rigorously analyze the implications of the word “only” in Article 110(1).
The Aadhaar Act, passed as a Money Bill, dealt with matters far beyond financial appropriations, including biometric data collection, consent requirements, and establishing a statutory authority. These provisions were hardly incidental to financial legislation, raising serious concerns about the misuse of the Money Bill mechanism.
(v) The Concept of “Colourable Exercise of Power”
A key issue in the Rojer Mathew case is whether the Finance Act was a “colourable exercise of power.” This legal doctrine refers to a situation where legislative authority is used to achieve an objective that is outside its purview, thus circumventing constitutional provisions. In this case, the petitioners argued that the government used the Money Bill classification to bypass the Rajya Sabha and push through legislation that should have required approval from both Houses of Parliament. The Speaker’s certification of the Finance Act, they contended, was a subversion of constitutional norms.
(vi) The Rajya Sabha’s Role in the Legislative Process
The Rajya Sabha, as the Upper House of Parliament, serves as a vital check on the legislative process in a federal system. It represents the interests of states and acts as a deliberative body that can scrutinize legislation passed by the Lok Sabha. Justice D.Y. Chandrachud, in his concurring opinion in Rojer Mathew, emphasized the importance of the Rajya Sabha in reflecting India’s pluralism and federalism. He argued that bypassing the Upper House through the misuse of the Money Bill route undermines the Constitution’s federal structure and dilutes the role of the Rajya Sabha in safeguarding democracy.
Justice Chandrachud pointed out that potential differences between the two Houses cannot be resolved by merely ignoring the Rajya Sabha. The Speaker’s certification of a Money Bill must be subject to judicial review to ensure that it aligns with the Constitution’s intent. Otherwise, the Rajya Sabha’s role as a mirror of India’s diversity could be eroded, and the delicate balance of power between the two Houses would be jeopardized.
(vii) The Finance Act of 2019 and Other Recent Precedents
The 2017 Finance Act is not the only instance where the Money Bill route has been used to bypass the Rajya Sabha. The Finance Act of 2019 made significant amendments to the Prevention of Money Laundering Act (PMLA), 2002. These changes, made through a Money Bill, expanded the definition of “proceeds of crime” and granted the Enforcement Directorate sweeping powers of arrest, search, and seizure. Although the Supreme Court upheld many of these amendments in Vijay Madanlal Choudhary vs. Union of India (2022), it left open the question of whether such amendments could be validly made through a Money Bill.
These instances highlight a growing trend of using Money Bills to bypass the Upper House and push through legislation that significantly impacts citizens’ rights and state powers. If the Supreme Court does not set clear limits on the scope of Money Bills, it could lead to further erosion of the Rajya Sabha’s role in the legislative process.
(viii) Federalism and the Importance of Deliberative Dialogue
India’s federal system is based on the principle of deliberative dialogue between the Centre and the states. The Rajya Sabha plays a critical role in this dialogue by ensuring that state interests are represented in national legislation. By sidelining the Upper House through the frequent use of Money Bills, the government risks undermining the federal character of the Constitution. The current case before the Supreme Court thus goes beyond the technicalities of Article 110 and touches upon the very foundations of India’s democratic system.
If the Rajya Sabha is continually bypassed, the states’ ability to influence national legislation will be weakened, leading to an imbalance in the Centre-state relationship. This would be particularly detrimental in a diverse country like India, where regional interests and identities must be accommodated within the broader framework of national governance.
(ix) The Road Ahead: Awaiting the Verdict
The seven-judge Bench of the Supreme Court now has the responsibility of clarifying the contours of the Money Bill. The Court’s ruling will have far-reaching consequences, not only for the specific legislation under challenge but also for the future of India’s federal architecture. By addressing the ambiguity surrounding the use of the Money Bill mechanism, the Court has an opportunity to restore the balance of power between the two Houses of Parliament and reinforce the federal principles enshrined in the Constitution.
(x) Conclusion
The Supreme Court’s upcoming decision on the Money Bill case will be a defining moment for India’s legislative process and federal structure. It has the potential to restore the Rajya Sabha’s role as a crucial institution in India’s democracy and ensure that the government does not misuse the Money Bill route to bypass constitutional checks and balances. The Court’s verdict will have lasting implications for the division of powers between the Centre and the states and for the future of India’s democratic governance.
