On December 21, 2015, the Insolvency and Bankruptcy Bill, 2015, was introduced as a money bill in the Lok Sabha. This is disconcerting because money bills have a special place in our Constitution. Article 110 mandates that a money bill must only entertain provisions dealing with the imposition, abolition, remission, alteration or regulation of any tax; the regulation of borrowings by the government of India and the regulation of the Consolidated Fund of India, including appropriation of moneys out of this fund.
A money bill is also special to a ruling party that does not have a majority in the Rajya Sabha. Unlike other bills, a money bill can be introduced only in the Lok Sabha. The Rajya Sabha can only make “recommendations” that are not binding on the Lok Sabha. The president has no power to return a money bill. In short, the Rajya Sabha will not be able to stall the bankruptcy code as it has, unfortunately, blocked the GST bill. But the bankruptcy code, by any reckoning, is not a money bill and introducing it as such was an unfortunate constitutional trick.
The bankruptcy code proposes to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons and other entities, and to establish an “insolvency and bankruptcy fund”. Sections 243 to 245 of the proposed code amend laws relating to central excise, income tax and customs to safeguard the priority rights of secured creditors over tax dues. This is evident from Section 53 of the code and the interim report of the Bankruptcy Law Reform Committee. But these amendments cannot fall under the category of “imposition, abolition, remission, alteration or regulation of any tax”. By this analogy, the Special Economic Zones Act, 2005, which inserted Section 10AA in the Income Tax Act, 1961, and granted tax exemptions would also have been a money bill.
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Section 224 of the code creates an insolvency and bankruptcy fund that will receive grants from the Central government, deposits from any person or any other source. But such grants made by the government will not amount to an “appropriation of money” out of the Consolidated Fund of India. For example, Section 16 of the University Grants Commission Act, 1956, provides for a “fund of the commission” to which the Central government grants money. Does this make the University Grants Commission Bill a money bill? The answer would clearly be in the negative.
In the United Kingdom, Section 1(2) of the Parliament Act, 1911, defines a money bill as a public bill that, in the opinion of the speaker of the House of Commons, contains only provisions dealing with all or any of the following subjects: The imposition, repeal, remission, alteration or regulation of taxation; the imposition for the payment of debt or other financial purposes of charges on the Consolidated Fund or the National Loans Fund. The word “only” is also present in Article 110(1), which is clearly modelled on Section 1(2). During the Constituent Assembly debates, Ghanshyam Singh Gupta moved an amendment to delete the word “only” from Article 90 of the draft Constitution, which later became Article 110 of the Indian Constitution.
On May 20, 1949, Gupta said: “Now Article 90 says that a bill shall be deemed to be a money bill if it contains only provisions dealing with the imposition, regulation, etc, of any tax or the borrowing of money, etc. This can mean that if there is a bill which has other provisions and also a provision about taxation or borrowing, etc, it will not become a money bill. If that is the intention, I have nothing to say; but if that is not the intention, I must say the word “only” is dangerous, because if the bill does all these things and at the same time does something else also it will not be a money bill.”
The amendment moved by him was rejected by the Constituent Assembly. Thus, the position in the UK and India is that a money bill must contain only matters mentioned in Sub-clauses (a) to (g) of Article 110, although it may incidentally deal with other issues. But if a bill is primarily concerned with a different topic but incidentally refers to any of the enumerated matters in Article 110, the bill is not a money bill.
The 23rd edition of Erskine May’s classic Parliamentary Practice points out that even if the main object of a bill is to create a new charge on the Consolidated Fund or on money provided by Parliament, the bill will not be certified as a money bill if it is apparent that the primary purpose of the new charge is not purely financial. The book points out that the Family Allowances Bill, 1944-45, and the Reinsurance (Acts of Terrorism) Bill, 1992-93, will not be money bills even though they contained a charge on the Consolidated Fund of the UK.
Equally, the stated purpose of the bankruptcy code is to consolidate bankruptcy and insolvency laws in India. The fact that the code amends fiscal statutes and provides for a grant from the Central government cannot make it a money bill. The deadlock in the Rajya Sabha is not grounds to circumvent the Constitution as it is a basic principle of law that what cannot be done directly cannot be permitted to be done indirectly. However, Article 110(3), like Section 3 of the UK Parliament Act, 1911, says that the speaker’s decision to certify a bill as a money bill is conclusive and cannot be questioned in a court of law. But the speaker, who is also a member of Parliament, takes an oath to solemnly affirm his/ her true faith and allegiance to the Constitution of India. Certifying a bill as a money bill when its primary purpose is not governed by Article 110 is an unconstitutional act. Let us hope that the bankruptcy code is not the beginning of a new trend.