What is a money bill? What are its provisions and what is its significance?

When the Aadhaar Act in 2016 was passed as a money bill, it raised constitutional questions about money bills and their classification

Money bills play a crucial role in India's governance and financial management. They are directly related to matters of taxation, public expenditure, and other financial issues. The matter of money bills came into the spotlight during the passing of the Aadhaar Act in 2016, which raised constitutional questions about money bills and their classification. The issue arose again when Chief Justice DY Chandrachud made a remark to create a seven-judge bench to review the matter of money bills.

 

What are bills?

The purpose of a bill is to outline specific laws or changes to existing laws. They are introduced into a legislative body, such as a parliament, to be debated, discussed, and voted upon by lawmakers. There are a variety of topics and issues that can be addressed in a bill, including social policies, economic issues, environmental regulations, etc. When passed by the Parliament, bills become Acts of the Constitution of India.

 

 

What are finance bills?

Finance Bills deal with taxation, government revenue, and expenditures. It outlines the government's financial plans and is introduced in the Parliament each year to implement the budget proposals. The Finance Bill is typically accompanied by the Union Budget, which presents the government's fiscal policies and allocations for the upcoming financial year. 
Article 117 of the Constitution focuses on special provisions concerning Financial Bills. According to Article 117 (1), any Bill addressing matters mentioned in clauses (a) to (f) of Article 110 (1) can only be introduced in the Lok Sabha, upon the President's recommendation. It cannot be introduced in the Rajya Sabha. Money Bills is listed under Article 110(1).

 

What are money bills?

A money bill is a specific type of financial legislation that exclusively deals with matters related to taxes, government revenues, or expenditures. It can be introduced only in the Lok Sabha (the lower house of the Parliament) and not in the Rajya Sabha (the upper house).

Money bills are crucial for the government to carry out its financial plans, as they provide the legal framework for raising revenues and incurring expenditures. They have special privileges and a simplified legislative process to ensure effective management of the country's finances.
The chief difference between a Money Bill and a Finance Bill is that the latter has a provision for the inclusion of the Rajya Sabha while the former does not.
Moreover, an ordinary Bill can be introduced in any house, while Money Bill can only be introduced in the Lok Sabha.

 

 

Key provisions of money bills:
 

Imposition, abolition, and alteration of taxes

Money bills hold power to impose, abolish, or alter taxes. This provision empowers the Union government to introduce new taxes, modify existing ones, or abolish taxes that are no longer deemed necessary. These decisions directly influence the government's revenue collection and taxation policies.

 

Regulation of borrowing of money

Money bills determine the government's borrowing capacity and influence India's financial strategies and economic stability. This provision ensures that the government adheres to responsible borrowing practices to maintain financial discipline.

 

Matters incidental

One crucial aspect of money bills is that they include any matter incidental to the specified provisions. While Article 110 does not precisely define the term "incidental," it allows flexibility in addressing matters related to the primary financial issues covered in the bill.

 

Consolidated Fund of India

The Consolidated Fund of India is a critical aspect of money bills. It contains all revenues received by the government, including direct and indirect taxes, loans, and interest. The money bill requires parliamentary approval for depositing or withdrawing funds from this fund. The purpose of the Consolidated Fund is to ensure that the government's financial resources are appropriately managed and accounted for.

Money bills allow the appropriation of money from the consolidated fund for specific purposes, such as funding government programmes, infrastructure development, and social welfare schemes. Any expenditure charged on the Consolidated Fund or an increase in such expenditure must be done through a money bill, ensuring transparency and accountability in government spending.

This means if the government wants to increase the President's salary or Lok Sabha Speaker, Chairman of Rajya Sabha, etc., the funds are drawn from the Consolidated Fund of India, which comes under the money bill.

Additionally, they include provisions related to the audit of accounts, ensuring that the financial transactions of both the Union and the states are subjected to scrutiny and oversight.

 

Exclusions from money bills

Certain matters do not qualify as money bills, and these exclusions are outlined in the Indian Constitution. These include the imposition of fines, pecuniary penalties, fees for licenses or services, and local taxes imposed by local authorities for local purposes. These matters are not considered directly related to the central financial policies of the union government.

 

The Aadhaar Act controversy

The concept of money bills in India came into the spotlight during the enactment of the Aadhaar Act in 2016. Despite opposition, the Aadhaar Bill was certified as a "money bill" by the Speaker of the Lok Sabha, meaning it did not require approval from the Rajya Sabha. The Rajya Sabha proposed certain amendments, but the BJP-dominated Lok Sabha rejected them, and the Aadhaar Act was enacted unilaterally.

However, this classification as a money bill was contested. A senior Congress leader, Jairam Ramesh, challenged the decision to treat the Aadhaar Bill as a money bill before the Supreme Court. However, as the Constitution, under Article 110(3), states that the final decision lies with the speaker, it raised the constitutional question of whether the Supreme Court could review the Speaker's decision to classify a bill as a money bill.

In 2018, a five-judge bench led by then chief justice of India, Deepak Mishra, upheld the constitutional validity of the Aadhaar Bill. At the time, Justice DY Chandrachud, the current chief justice of India, was the only one to dissent from this decision.

 

A seven-judge bench on the money bill issue

In May 2023, Chief Justice DY Chandrachud commented on the Constitution of a seven-judge bench for considering the money bill issue, according to a report by Live Law. It came in regard to a reference made to the interpretation of Article 110(1) of the Constitution of India by the constitutional bench in the Roger Mathew vs. South Indian Bank case.

As per Article 110(1) A to G of the Constitution, money bills can be introduced for appropriating funds from the Consolidated Fund of India and taxation matters. Other potential loopholes of the money bill include Article 110(3), which clarifies the Speaker's decision on whether a money bill is final.

Constitution Article 109(1) states that a money bill doesn't have to be introduced in Rajya Sabha but can be sent for recommendations. However, the Rajya Sabha cannot reject or amend it and must return it to the Lok Sabha within 14 days. The Lok Sabha can accept or reject the recommendations. In any case, both Houses are considered to have passed the Bill.

According to Article 109(5), if the Bill is not returned to the Lok Sabha within 14 days, it is deemed to have passed.

No decision has been made, but the chief justice has stated that this has been on his mind.