The Role of the Judiciary in Budgetary Oversight

By Vaidehi Sharma, a student of BALLB at Mohanlal Sukhadia University

Introduction To The Role of the Judiciary in Budgetary Oversight

The judiciary's role in budgetary oversight is a complex and evolving area of law, particularly when it intersects with constitutional rights and mandatory spending obligations. Courts around the world have been called upon to review government budget decisions, especially when these decisions are alleged to infringe on fundamental rights or fail to comply with statutory mandates. In India, this power is endowed to the constitutional courts under Article 13 of the Indian Constitution. The courts in India courts have any legislative or executive action to be unconstitutional and void if it is ultra vires of the legislative and executive powers.  This article explores the extent of judicial influence in budgetary matters, focusing on key legal principles, landmark cases, and the balance between judicial review and governmental discretion.

Constitutional Basis for Judiciary in Budgetary Oversight

The power of courts to revie budgetary decisions is often derived from constitutional provisions that establish judicial autonomy and their duty to protect fundamental rights and ensure the due process of law is followed. In India, numerous pronouncements have secured the judiciary's independence and its power to invalidate a state action that infringes upon fundamental rights and the judicial system's independence. The 42^nd Constitutional Amendment Act was passed following which in Keshvanand Bharti v. Union of India[1] the Supreme Court evolved the doctrine of basic structure. According to this Judicial Review forms a part of the basic structure of the Indian Constitution and the power of judicial review of legislative actions is vested in the High Court and the Supreme Court cannot be excluded even by an amendment as was held in L Chandra Kumar v. Union of India[2]. In foreign jurisdictions too, the constitutions grant the judiciary the power to invalidate government actions, including budgetary allocations, if they are found to violate constitutional principles.

For instance, in the United States, Marbury v. Madison[3] it was established that the judiciary has the power to review executive and legislative actions under the doctrine of judicial review. Constitutional courts are empowered to intervene when budgetary decisions are alleged to infringe upon constitutional rights or when they fail to meet mandatory obligations outlined in the Constitution.

Money Bills, Bills of Expenditure, and Financial Bills distinguished

When we look at these terms generally, they look synonyms to each other and could be used interchangeably but when we explore the legal meaning of these there seems to be a huge and visible difference. Accordingly, a Money bill is defined in Article 110 of the Indian Constitution which covers an exhaustive definition whereas financial bills derive their status from Article 117(1) of the Indian Constitution and bills of expenditure being defined under Article 117(3).

Money Bills: A bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely: --

• the imposition, abolition, remission, alteration, or regulation of any tax;
• the regulation of the borrowing of money or the giving of any guarantee by the Government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India;
• the custody of the Consolidated Fund or the Contingency Fund of India, the payment of money into or the withdrawal of money from any such Fund;
• the appropriation of money out of the Consolidated Fund of India;
• the declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;
• the receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or
• any matter incidental to any of the matters specified in sub-clauses (a) to (f)

The proviso to the article adds that a bill shall be considered to be money only by the reason that it imposes fines or penalties, or for the demand or payment of fees for licenses or fees for services rendered, or by reason that it provides for the imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes.

Who decides if a bill is a Money Bill?

The supreme question that arises when dealing with clause (g) of Article 110(1) is that who has the authority to decide if a bill is a money bill or not. This issue has been dealt with under Article 110(3) of the Indian Constitution. It reads that the Speaker of the House shall be the final authority in this regard to decide whether a bill is a money bill or not. Another question that needs to be settled is that can the decision of the Speaker of the House be challenges. The Supreme Court dealt with this in the case of Beghar Foundation v. Union of India[4]. In this case, a review petition was filed for the case K.S. Puttuswami v. Union of India[5]. The Supreme Court by a majority of 4:1dismissed the review petition as no case for review was made out. However, Justice D.Y. Chandrachud had given a dissenting opinion in K.S. Puttuswami v. Union of India that the decision of the Speaker of the House of People to certify the Aadhar Act as a ‘Money Bill’ under Article 110(1) was unconstitutional.

Financial Bills: Apart from dealing with the matters mentioned in Article 110(1), financial bills also deal with other matters. Thus, a financial bill is a money bill to which provisions of general legislation are also added apart from one or more matters enumerated in Article 110(1). Thus, to conclude it is safe to say that all money bills are financial bills but not all financial bills are money bills.

Bills of expenditure: commonly known as Budget: According to Article 112 the President is required to lay down the statement of the estimated receipts and expenditure of the Government of India for that year before both the houses of the Parliament.

The estimated sums are to be divided into two parts and are to be laid separately. The sums are related to:

• the sums required to meet expenditure described by this Constitution as expenditure charged upon the Consolidated Fund of India; and
• the sums are required to meet other expenditures proposed from the Consolidated Fund of India.

The following expenditures are charged to the Consolidated Fund of India:

1. The emoluments and allowances of the President and other expenditures relating to his office;
2. The salaries and allowances of the Chairman and the Deputy Chairman of the Council of States and the Speaker and the Deputy Speaker of the House of the People;
3. Debt charges for which the Government of India is liable including interest, sinking fund charges and redemption charges, and other expenditures relating to the raising of loans and the service and redemption of debt;
4. The salaries, allowances, and pensions payable to or in respect of Judges of the Supreme Court, Comptroller and Audit General of India, Judges of High Courts, and Federal Court.
5. Any sums required to satisfy any judgment, decree, or award of any court or arbitral tribunal;
6. Any other expenditure declared by this Constitution or by Parliament by law to be so charged.

Taxation vis-à-vis violation of Constitutional Principles

There have been various instances where the constitutional courts have played a proactive role in affixing the limit and extent of the power of the government to levy taxes on the public. The courts have ensured that the levying of taxes shall in no way infringe upon the basic principle enshrined in the Constitution of India. For instance, in the case of Western India Theatre v. Cantonment Board[6] a higher tax on cinema-house containing large seating accommodations and situated in fashionable and busy localities where the number of visitors is more numerous than the tax imposed on smaller cinema-house containing less accommodation and situated in a locality where visitors are poor and less numerous was held not to be violative of Article 14 of the Indian Constitution as the classification was a reasonable classification based on income of the cinema-house.

The Doctrine of Separation of Powers and the Extent of Judicial Intervention

While courts have a vital role in ensuring that budgetary decisions comply with constitutional mandates, there is an ongoing debate about the limits of judicial intervention in budgetary matters. The doctrine of separation of powers requires that the judiciary respects the discretion of the executive and legislature in budgetary decisions.

Courts have generally been cautious in their approach, recognizing that budgetary allocations are a pure legislative process that involves complex policy decisions which must be performed by the policymakers only. However, when these decisions encroach upon constitutional rights or mandatory obligations, courts have not hesitated to intervene. The courts have ensured that a balance between respecting governmental discretion and upholding constitutional mandates remains untouched and the constitutional principles are well respected. For instance, in the case of Beghar Foundation v. Union of India,[7] the Supreme Court rejected the revision petition and upheld that the decision of the Speaker of the House as to whether a bill is a money bill or not is final and binding

Conclusion

The role played by the Judiciary in Budgetary oversight is of crucial importance which cannot be overlooked. It ensures that constitutional rights and compliance with mandatory spending obligations are complied with. Thus, this function must be cautiously performed ensuring that it is carefully balanced with the principles of separation of powers and democratic governance. Courts must navigate this delicate balance, intervening when necessary to protect fundamental rights while respecting the discretionary powers of the executive and legislature.

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[1] AIR 1973 SC 1461

[2] AIR 1997 SC 1125

[3] 5 U.S. 137 (1803)

[4] Diary No. 45777/2018, decided on January 11, 2021

[5](2019) 1 SCC 1

[6] AIR 1959 SC 582; Krishna Das v. Town Area Committee, (1990) 3 SCC 645

[7] Diary No. 45777/2018, decided on January 11, 2021