What Constitutes a Money Bill: Supreme Court's Upcoming Review and Key Cases

What’s in today’s article?

• Why in News?
• What is a Money Bill?
• Difference between money Bills and financial Bills
• Important bill passed using money bill route
• What constitutes a Money Bill: The important cases in SC

Why in News?

The Supreme Court has agreed to consider petitions challenging the government's use of the "Money Bill route" to pass contentious legislation in Parliament.

The issue of which Bills can be designated as Money Bills was referred to a seven-judge Bench in November 2019 by a five-judge Bench led by then CJI Ranjan Gogoi in the case of Rojer Mathew vs South Indian Bank Ltd.

In October 2023, CJI Chandrachud announced that the seven-judge Bench would be established soon.

What is a Money Bill?

• Article 110 defines a money Bill as one containing provisions dealing with taxes, regulation of the government’s borrowing of money, and expenditure or receipt of money from the Consolidated Fund of India, among others.
• Article 109 delineates the procedure for the passage of such a Bill and confers an overriding authority on the Lok Sabha in the passage of money Bills.
  • Under Article 109, a Money Bill shall be introduced only in Lok Sabha and, upon passage, transmitted to Rajya Sabha for its recommendations.
  • Rajya Sabha must revert within 14 days, but it is up to Lok Sabha to accept or reject any or all of its recommendations. If the Bill is not returned b
• The Speaker certifies a Bill as a Money Bill, and the Speaker’s decision is final.
  • Under Article 110(3), If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People thereon shall be final.
• Over the last seven years, the government has introduced multiple legislations through the money Bill route, the most notable of which are the Aadhaar Act, 2016, and the Finance Act, 2017.

Difference between money Bills and financial Bills

• While all Money Bills are Financial Bills, all Financial Bills are not Money Bills. 
  • E.g., the Finance Bill which only contains provisions related to tax proposals would be a Money Bill. 
  • However, a Bill that contains some provisions related to taxation or expenditure, but also covers other matters would be considered as a Financial Bill. 
  • The Compensatory Afforestation Fund Bill, 2015, which establishes funds under the Public Account of India and states, was introduced as a Financial Bill.
• The procedure for the passage of the two bills varies significantly. 

The Rajya Sabha has no power to reject or amend a Money Bill. 

• After being passed by the Lok Sabha, money Bills are sent to the Rajya Sabha for its recommendations.
• Within 14 days, the Upper House must submit the Bill back to the Lower House with its non-binding recommendations.
• If the Lok Sabha rejects the recommendations, the Bill is deemed to have passed by both Houses in the form in which it was passed by the Lok Sabha without the recommendations of the Rajya Sabha.
• Even if the Rajya Sabha doesn’t respond with its recommendations within 14 days, the same consequences would follow.
  • However, a Financial Bill must be passed by both Houses of Parliament.
• While an ordinary Bill can originate in either house, a money Bill can only be introduced in the Lok Sabha, as laid down in Article 117 (1).
• Additionally, no one can introduce or move money Bills in the Lok Sabha, except on the President’s recommendation.
• Amendments relating to the reduction or abolition of any tax are exempt from the requirement of the President’s recommendation.
• The two prerequisites for any financial Bill to become a money Bill are that
  • It must only be introduced in the Lok Sabha and not the Rajya Sabha.
  • These bills can only be introduced on the President’s recommendation.

Important bill passed using money bill route

• Money Bills offer a fast-track route to enact legislation because they do not require passage in Rajya Sabha.
• Several important laws have been passed by this route in recent years, circumventing the Upper House.
• These include: amendments to the Prevention of Money Laundering Act, 2002, (PMLA) and the Foreign Contributions Regulations Act, 2010, (FCRA) as well as the Aadhaar Act, 2016 etc.

What constitutes a Money Bill: The important cases in SC

• Challenge to Aadhaar Act
  • In September 2018, the Supreme Court upheld the constitutionality of the Aadhaar Act by a 4-1 majority.
  • Petitioners argued it was improperly passed as a Money Bill, including unrelated provisions.
  • Justice Ashok Bhushan supported the majority, stating the Act's primary aim was to provide subsidies and benefits, justifying its passage as a Money Bill.
  • Justice D.Y. Chandrachud dissented, calling it an abuse of the constitutional process, which undermines the Rajya Sabha's role in lawmaking.
• Finance Act, 2017
  • The Finance Act, 2017, amended various laws and allowed the government to set rules for Tribunal members' service conditions.
  • Petitioners argued it should be struck down for including unrelated provisions.
  • In November 2019, a five-judge Bench invalidated the Tribunal Rules for infringing on judicial independence but referred the Money Bill issue to a larger seven-judge Bench.
  • The court noted the Aadhaar case did not clearly define a valid Money Bill.
• Since 2019
  • The court has avoided addressing the Money Bill issue in several cases due to the pending seven-judge Bench review.
  • These cases include challenges to the Enforcement Directorate's wide powers under the PMLA (Finance Act, 2018) and the Centre's Electoral Bond scheme, both facilitated through the Money Bill route.

Q.1. What is Foreign Contributions Regulations Act, 2010?

The Foreign Contributions Regulations Act, 2010 (FCRA) is an Indian law regulating the acceptance and utilization of foreign contributions and hospitality by individuals, associations, and companies. It aims to ensure that such contributions do not affect national security, sovereignty, or public interest. Compliance and registration are mandatory under the Act.

Q.2. What is Aadhaar Act, 2016?

The Aadhaar Act, 2016, establishes the legal framework for issuing Aadhaar, a unique identity number based on biometric and demographic data. It aims to provide efficient, transparent, and targeted delivery of subsidies, benefits, and services to residents of India, while ensuring data security and privacy.

Source: Key issue will be back in SC: What constitutes a Money Bill? | PRS | Legal Service India