Making a money bill of it

The bankruptcy code, not a money bill, was introduced in Lok Sabha as one. Is this the first of a new trend?

Written by ARVIND P. DATAR , Rahul Unnikrishnan | Published:January 12, 2016 12:03 am
Bankruptcy law, Bankruptcy law India, Industrial and Financial Reconstruction, BIFR, Sick Industrial Companies Act, express column 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.

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.

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.

The writers are practising advocates.

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  1. K
    K SHESHU
    Jan 12, 2016 at 7:22 am
    Consution provisions are being moulded to suit the whims and fancies of the ruling parties and their supporting corporates. This is a part of the design. Hence, there is aneed to uphold the consutional values and the rules laid down in it.
    Reply
    1. D
      DC
      Jan 15, 2016 at 8:49 pm
      that unelected body is part of our democratic structure ,the way it is by ped this time may be foR a good purpose but what guarantees the new gate opened will always be used for same Reason ,and then it can't be challenged in court even ...what do you thing it gonna help Democracy by stating a bill money bill ..distroyiNg the checks and balances provided by our consution
      Reply
      1. J
        jagdish
        Jan 12, 2016 at 9:55 am
        i agree with the writer when he talks about technical aspects of article 110 , but then i disagree when he points out some vague arguments against government takeing money bill route to p the bill. when you know your fellow collegues are adamant in stalling parliament and will not you function your consutional duties . then mature persons takes alternative route to do there work.. this is all GOI nd its ministers are doing.. INSOLVENCY AND BANKRUPTCY bill is for the nation and its interest which conution gurantes to protect in that way if consution would have been living person he would not mind bending for Nations shake..
        Reply
        1. R
          Rajesh
          Jan 12, 2016 at 10:42 am
          How can demolishing an unelected, undemocratic body be disastrous to democracy? What type of foolish people we have.
          Reply
          1. P
            Pradz
            Jan 12, 2016 at 4:19 am
            If this is the only way to byp the obstructionism from the opposition, the govt has no choice but to p key bills under the guise of money bills. Author has not lamented on the ruckus created in RS, so his article is clearly partisan.
            Reply
            1. C
              cool
              Jan 12, 2016 at 2:26 am
              Bread buttered by KHANGRESS!!!!!!
              Reply
              1. M
                Manoj Goel
                Jan 12, 2016 at 6:38 am
                No consutional provisions should be mishandled.The concerned bill can't be considered as money bill rather its only a escape route to p bill.Both rajya sabha and lok sabha must have voice in these types of bills.
                Reply
                1. P
                  Pramod
                  Jan 12, 2016 at 12:52 am
                  For the proposed Bankruptcy Code to be effective, repeal of SICA is necessary. Can it be done by Lok Sabha alone?
                  Reply
                  1. D
                    Devi
                    Jan 12, 2016 at 2:34 am
                    Shri Premchandran Hon'ble MP from Kollam had argued the issue admirably when he spoke on omnibus Finance Bill 2015 in Lok Sabha. He quoted Business Rules, Consutional provisions and the ruling of first speaker Shri Mavlankar on Speaker's powers to decide if a Bill is money bill or not. Author here seems to have missed on referring to the Ruling given by Hon'ble speaker!
                    Reply
                    1. R
                      Ravi Blr
                      Jan 12, 2016 at 1:14 am
                      So the author feels that all legislation has to await the tantrums of a discredited and rejected congress in RS, and all governance should stop while the barmaid has mood swings. Dynasty bootlicker in tje guise of a consutional expert
                      Reply
                      1. C
                        Chetan Agarwal
                        Jan 12, 2016 at 8:38 am
                        The honorable consution also did not envision Rajya Sabha to turn into a blackmailing tool by the goons and fancy of a minority por opposition.. if they were to honor the code and consution, this would not have happened. Krishna has said in Geeta that superiority of the end over means is the key to do dharma in this Kalyug. Sadly, this could not be more true that it is today!
                        Reply
                        1. S
                          SP
                          Jan 12, 2016 at 7:31 am
                          Bankruptcy bill is a very critical "must have" bill. Consution did not envisage Rajya Sabha being a place of disruption on inane issues but a place for debate.
                          Reply
                          1. S
                            sk
                            Jan 12, 2016 at 5:14 am
                            A large number of commentators here forget that government is also a protector of Consution. Will they accept if the police start acting as thief to protect? All the stupid logic by blind followers.
                            Reply
                            1. T
                              T.V. SIVAKUMARAN
                              Jan 12, 2016 at 5:34 am
                              For whom is the author batting ? The corporate predators who have borrowed huge amounts from the PSBs and are reluctant to repay? Can't easing the collecting of debts most of which belong to the Government owned banks be clified as a money bill?
                              Reply
                              1. V
                                Vish
                                Jan 12, 2016 at 8:03 pm
                                So by the definition of a money bill the GST bill should have been automatically introduced as a money as it eminently qualifies to be done. Strange that this govt. has not done so.
                                Reply
                                1. N
                                  narayana
                                  Jan 12, 2016 at 5:07 am
                                  as long as cat kill the mouse, it's color doesn't matter, in the absense of sane voices in opposition in RS, if govt. introduces as money bill to serve greater public good it's ok
                                  Reply
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