24 Apr 2016

Unravelling 'Money Bills'

The recent introduction of Aadhar Bill [The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, 2016] in the Parliament as a 'Money Bill' created quiet a furor and debate both on the floor of Parliament and outside. In this post we examine the nuances of Money Bill to unravel the shroud of mystery surrounding it. 

First and foremost, Money Bill is not a different species of law. Once passed it is like any other law passed by the Parliament. The only difference between a 'Money Bill' and ordinary 'Bill' is vis-a-vis the manner of its introduction on the floor of the Parliament and the special procedure for passing it in the house. Article 107 of the Constitution prescribes the "provisions as to the introduction and passing of Bills". Article 109 prescribes the "special procedure in respect of Money Bills" and Article 110 stipulates the "definition of Money Bills".

In terms of Article 110, a Bill qualifies as a 'Money Bill' "if it contains only provisions dealing with all or any of the" six matters or matters incidental to such six matters, which are the following;
"(a) the imposition, abolition, remission, alteration or regulation of any tax;
(b) 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;
(c) the custody of the consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund;
(d) the appropriation of moneys out of the consolidated Fund of India;
(e) 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;
(f) 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
(g) any matter incidental to any of the matters specified in sub clause (a) to (f)."
Besides the above positive traits of a 'Money Bill', there is an accompanying negative stipulation in Article 110 which states that "a Bill shall not be deemed to be a Money Bill by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licences 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". 

The crux of the matter, however, is not the above. What is relevant is the fact that whether a Bill qualifies as a Money Bill or not is one to be tested on the basis of the objective facets set out about but based upon a subject satisfaction of the Speaker of Lok Sabha. The Constitution vide Article 110 on this count states that "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". In practice, therefore, one is required to hinge solely upon the subjective satisfaction of the Speaker of Lok Sabha. 

A question arises, why such differentiation between an ordinary bill and a money bill. The answer perhaps likes in the nature of representation between the constituents of Lok Sabha and Rajya Sabha. As it is known, the member of Lok Sabha are directly represented by the citizens whereas the members of the Rajya Sabha are indirectly represented. While the Rajya Sabha equally constitutes the Parliament, the framers of the Constitution perhaps wanted that the nation's financial resources should be governed directly and exclusively by the elected members constituting the Lok Sabha. The Constitution therefore stipulates that a Money Bill can be introduced only in the Lok Sabha [Article 109(1)] and the Rajya Sabha only gets 14 days time to examine a Money Bill passed by the Lok Sabha. Technically the Rajya Sabha can make suggest changes to a Money Bill passed by the Lok Sabha but their acceptance is subject to exclusive discretion of the Rajya Sabha [Article 109(2)]. Similar stipulations exist for the State Legislatures. [Article 199 and 199].

The above discussion, practically implies, that once Speaker of the Lok Sabha declares that a bill is a Money Bill, the Rajya Sabha technically becomes just a place for discussion without any legislative competence. This is a big departure from the normal legislative practice and thus bound to raise issues. 

In a recently reported decision [Yogendra Kumar Jaiswal versus State of Bihar (2016) 3 SCC 183] the Supreme Court had an occasion to consider a similar issue i.e. a contention having been raised by the Appellant therein that the impugned legislation relating to prevention of corruption was not a Money Bill and thus not enacted properly. The Supreme Court considered the issue in detail and the judgments related to it but only to hold that once the Speaker of the Lower House had declared the Bill as a Money Bill, there was no further scope for examination. 

The legal position was examined by the Court in the following terms;
33.    First, we shall take up the issue pertaining to the introduction of the Bill as a money bill in the State legislature. Mr. Vinoo Bhagat, learned counsel appearing for some of the appellants, has laid emphasis on the said aspect. Article 199 of the Constitution, defines Money Bills. For our present purpose, sub-article (3) of Article 199 being relevant is reproduced below:-

“(3). If any question arises whether a Bill introduced in the Legislature of a State which has a Legislative Council is a Money Bill or not, the decision of the Speaker of the Legislative Assembly of such State thereon shall be final.”


We have extracted the same as we will be referring to the authorities as regards interpretation of the said sub-article.


34.    Placing reliance on Article 199, learned counsel would submit that the present Act which was introduced as a money bill has remotely any connection with the concept of money bill. It is urged by him that the State has made a Sisyphean endeavour to establish some connection. The High Court to repel the challenge had placed reliance upon Article 212 which stipulates that the validity of any proceedings in the Legislature of a State shall not be called in question on the ground of any alleged irregularity of procedure.


35.    Learned counsel for the appellants has drawn inspiration from a passage from Special Reference No. 1 of 1964, wherein it has been held that Article 212(1) lays down that the validity of any proceedings in the legislature of a State shall not be called in question on the ground of any alleged irregularity of procedure and Article 212(2) confers immunity on the officers and members of the legislature in whom powers are vested by or under the Constitution for regulating procedure or the conduct of business, or for maintaining order, in the legislature from being subject to the jurisdiction of any court in respect of the exercise by him of those powers. The Court opined that Article 212(1) seems to make it possible for a citizen to call in question in the appropriate Court of law the validity of any proceedings inside the Legislative Chamber if his case is that the said proceedings suffer not from mere irregularity of procedure, but from an illegality. If the impugned procedure is illegal and unconstitutional, it would be open to be scrutinised in a Court of law, though such scrutiny is prohibited if the complaint against the procedure is not more than that the procedure was irregular. Thus, the said authority has made a distinction between illegality of procedure and irregularity of procedure.


36. Our attention has also been drawn to certain paragraphs from the Constitution Bench decision in Raja Ram Pal v. Hon’ble Speaker, Lok Sabha and Others. In the said case, in paragraphs 360 and 366, it has been held thus:-


“360. The question of extent of judicial review of parliamentary matters has to be resolved with reference to the provision contained in Article 122(1) that corresponds to Article 212 referred to in M.S.M. Sharma v. Dr. Shree Krishna Sinha, AIR 1960 SC 1186 [Pandit Sharma (II)]. On a plain reading, Article 122(1) prohibits “the validity of any proceedings in Parliament” from being “called in question” in a court merely on the ground of “irregularity of procedure”. In other words, the procedural irregularities cannot be used by the court to undo or vitiate what happens within the four walls of the legislature. But then, “procedural irregularity” stands in stark contrast to “substantive illegality’ which cannot be found included in the former. We are of the considered view that this specific provision with regard to check on the role of the judicial organ vis-à-vis proceedings in Parliament uses language which is neither vague nor ambiguous and, therefore, must be treated as the constitutional mandate on the subject, rendering unnecessary search for an answer elsewhere or invocation of principles of harmonious construction.


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366. The touchstone upon which parliamentary actions within the four walls of the legislature were examined was both the constitutional as well as substantive law. The proceedings which may be tainted on account of substantive illegality or unconstitutionality, as opposed to those suffering from mere irregularity thus cannot be held protected from judicial scrutiny by Article 122(1) inasmuch as the broad principle laid down in Bradlaugh, (1884) 12 QBD 271 : 53 LJQB 290 : 50 LT 620, acknowledging exclusive cognizance of the legislature in England has no application to the system of governance provided by our Constitution wherein no organ is sovereign and each organ is amenable to constitutional checks and controls, in which scheme of things, this Court is entrusted with the duty to be watchdog of and guarantor of the Constitution.”


37.    In this regard, we may profitably refer to the authority in Mohd. Saeed Siddiqui v. State of Uttar Pradesh and another, wherein a three-Judge Bench while dealing with such a challenge, held that Article 212 precludes the courts from interfering with the presentation of a Bill for assent to the Governor on the ground of non-compliance with the procedure for passing Bills, or from otherwise questioning the Bills passed by the House, for proceedings inside the legislature cannot be called into question on the ground that they have not been carried on in accordance with the Rules of Business. Thereafter, the Court referring to Article 199(3) ruled that the decision of the Speaker of the Legislative Assembly that the Bill in question was a Money Bill is final and the said decision cannot be disputed nor can the procedure of the State Legislature be questioned by virtue of Article 212. The Court took note of the decision in Raja Ram Pal (supra) wherein it has been held that the proceedings which may be tainted on account of substantive or gross irregularity or unconstitutionality are not protected from judicial scrutiny. Eventually, the Court repelled the challenge.


38.    In our considered opinion, the authorities cited by the learned counsel for the appellants do not render much assistance, for the introduction of a bill, as has been held in Mohd. Saeed Siddiqui (supra), comes within the concept of “irregularity” and it does come with the realm of substantiality. What has been held in the Special Reference No. 1 of 1964 (supra) has to be appositely understood. The factual matrix therein was totally different than the case at hand as we find that the present controversy is wholly covered by the pronouncement in Mohd. Saeed Siddiqui (supra) and hence, we unhesitatingly hold that there is no merit in the submission so assiduously urged by the learned counsel for the appellants.

The long and short of the above discussion is that while the Constitution makes elaborate stipulations over what constitutes and what does not constitute a 'Money Bill', in view of the decision of the Supreme Court that it is the prerogative of the Speaker, it appears that the provisions are to guide the Speaker on when a Bill should be declared a Money Bill for the Speaker's decision is final.

17 Apr 2016

Intellectual Property and Competition Law: HC examines competing considerations

Owners of Intellectual Property (IP) are under law permitted to restrict others from utilizing the IP for commercial benefit. This is directly at odds with the competition principle which obligates free market and no undue restriction. Whether patent holders (and the ensuing compulsory licence regime) can indirectly ensure against new players in the market was a question recently considered by the Delhi High Court. While it was essentially a dispute between Ericsson and Micromax, the issue attained very wide significance in view of the various competing considerations at play. 

Micromax had taken Ericsson before the Competition Commission of India (CCI) alleging abuse of dominant position in the wake of its insistence to pay higher royalty for using the Ericsson softwares etc. The indulgence granted by the CCI to Micromax was challenged before the High Court by Ericsson principally claiming that IP disputes cannot be determined at a competition forum as essentially IP represents a special law and is not amenable to competition law. This dispute has recently been adjudged by the High Court in favour of Micromax holding that IP principles cannot restrict a competition inquiry. 

It is a very crucial decision for it is perhaps a first of its kind in India and sets the stage for evolution of competition inquiry in the IP stage. Some important observations of the Delhi High Court in TELEFONAKTIEBOLAGET LM ERICSSON (PUBL) Vs. COMPETITION COMMISSION OF INDIA AND ANOTHER [Writ Petition (Civil) No. 464/2014, decision dated 30.03.2016] are reproduced below;

A. On the scope of intervention by High Court in Writ Petition against CCI preliminary orders;
78. In terms of Section 26(1) of the Competition Act, a direction to cause an investigation can be made by CCI only if it is of the opinion that there exists a prima facie case. Formation of such opinion is sine qua non for exercise of any jurisdiction under Section 26(1) of the Competition Act. Thus, in cases where the commission has not formed such an opinion or the opinion so formed is ex- facie perverse in the sense that no reasonable person could possibly form such an opinion on the basis of the allegations made, any directions issued under Section 26(1) of the Competition Act would be without jurisdiction and would be liable to be set aside.
79. Any direction under Section 26(1) of the Competition Act could also be challenged on the ground - as is sought to be contended in the present case - that the subject matter is outside the pail of the Competition Act. However, it must be added that a challenge to the jurisdiction of the CCI to pass such directions under Section 26(1) of the Competition Act must be examined on a demurrer; that is, the information received under Section 19 must be considered as correct; any dispute as to the correctness or the merits of the allegations - unless the falsity of the allegations is writ large and ex facie apparent from the record - cannot be entertained in proceedings under Article 226 of the Constitution of India. Equally, in cases where the direction passed is found to be malafide or capricious, interference by this Court under Article 226 of the Constitution of India would be warranted. 
B. On the issue whether CCI examine complaints for violation of IP terms;
106. The next issue to be addressed is whether the CCI would have the jurisdiction to entertain complaints regarding abuse of dominance in view of the specific provisions under the Patents Act enacted to address the issue of abuse of dominance by a patent holder. It is contended on behalf of Ericsson that the Patents Act provides for an adequate mechanism to prevent any abuse of patent rights granted under that Act. It is urged that any issues regarding abuse of patent rights including abuse of dominance as contemplated under Section 4 of the Competition Act, are required to be addressed under the provisions of the Patents Act and, thus, the applicability of the Competition Act in certain matters regarding patents is ousted. It is contended that the Patents Act is a special Act which contains comprehensive provisions relating to grant of patents rights as well as for remedying any abuse thereof; and, on the other hand, the Competition Act is a general law enacted with a view to ensure freedom of trade and to promote and sustain competition in the market. It is, thus, urged that the Patents Act would prevail over the Competition Act and the CCI would have no jurisdiction to entertain the complaints in question.
...
110. Thus, whereas patent laws are concerned with grants of rights enabling the patent holder to exclude others from exploiting the invention, and in that sense promoting rights akin to a monopoly; the competition law is essentially aimed to promote competition and, thus, fundamentally opposed to monopolization as well as unfair and anticompetitive practices that are associated with monopolies.
...
137. Insofar as the allegations contained in the complaints are concerned - that is, demand of excessive licence fee, unreasonable and anti-competitive licensing terms, and breach of FRAND obligations - the Patents Act does provide a remedy by way of compulsory grant of licences. The question is whether provision of such remedies excludes the applicability of the Competition Act to certain abuse of patent rights - such as demand for excessive royalty and imposition of unreasonable terms for grant of patent licences.
...
148. Thus, in my view Section 60 of the Competition Act, which provides for the provisions of the said Act to have an effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, must be read harmoniously with Section 62 of the Competition Act and in the context of the subject matter of the Competition Act. As discussed earlier, the Competition Act is directed to prohibit certain anti-competitive agreements, abuse of dominant position and formation of combinations which cause or are likely to cause appreciable adverse effect on competition. Plainly, agreements which may otherwise be lawful and enforceable under the general law - such as the Indian Contract Act, 1872 - may still be anti-competitive and fall foul of Section 3 of the Competition Act. Similarly, a practice or conduct which may be considered as an abuse under Section 4 of the Competition Act may otherwise but for the said provision be legitimate under the general law. Equally, mergers and amalgamations that are permissible under the general law may result in aggregation of market power that may not be permitted under the Competition Act. Section 60 of the Competition Act must be read in the aforesaid context.
...
172. It follows from the above that whilst an agreement which imposes reasonable condition for protecting Patent Rights is permissible, an anti competitive agreement which imposes unreasonable conditions would not be afforded the safe harbor of Section 3(5) of the Competition Act and would fall foul of Section 3 of the Competition Act. The question as to whether a condition imposed under the agreement is reasonable or not would be a matter which could only be decided by the CCI under the provisions of the Competition Act. Neither the Controller of Patents discharging his functions in terms of the Patents Act, nor a Civil Court would have any jurisdiction to adjudicate whether an agreement falls foul of Section 3 of the Competition Act. This is so because the Controller of Patents cannot exercise any powers which are not specifically conferred by the Patents Act and by virtue of Section 61 of the Competition Act, the jurisdiction of Civil Courts to entertain any suit or proceedings in respect of any matter which the CCI or the COMPAT is empowered to determine, stands expressly excluded. Thus, in so far as the scope of Section 3 of the Competition Act is concerned, there does not appear to be any overlap or inconsistency with the Patents Act.
...
174. In my view, there is no irreconcilable repugnancy or conflict between the Competition Act and the Patents Act. And, in absence of any irreconcilable conflict between the two legislations, the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of Patent rights cannot be ousted.

26 Mar 2016

Urgently need to ensure transparently in publicly obtained funds of Political Parties: High Court

In its recent decision in Commissioner of Income Tax v. Indian National Congress [ITA No. 145/2001, decision dated 23.03.2016] a division bench of the Delhi High Court has delineated the need for urgent probity in affairs of political parties. The High Court made certain scathing remarks over the perceived sorry state-of-affairs in so far their non-transparent actions are concerned particularly in the manner in which they deal with contributions from the citizens. The High Court quoted with disdain the observations made by the Supreme Court four decades back on the conduct of political parties to rue that the practices unappreciated all the way back then continue to haunt the society. The Delhi High Court highlighted the need to urgently tackle the issue by quoting the Supreme Court - "The small man’s chance is the essence of Indian democracy and that would be stultified if large contributions from rich and affluent individuals or groups are not divorced from the electoral process."

The High Court was dealing with an income tax appeal filed by Indian National Congress against the decision of a tax tribunal which had found the political party ineligible for tax concession since it failed to maintain proper accounts of the money received as donation. The High Court not only endorsed the decision of the tax tribunal, it also cited (a) the Supreme Court's missive against failure of political parties to account for money; (b) the directions of the Election Commission of India; (c) the concern expressed by the Law Commission of India and (d) the publicly available figures on unknown sources of finance of political parties, to hold and adjudge serious introspection required on the part of the political parties generally in the country. 

The Delhi High Court noted the following to conclude against the political
  • Congress had failed to file the tax returns despite clear directions by the Gujarat High Court in an earlier case and that too since the year 1995. [para 11]
  • The Supreme Court had declared that Political Parties are not above the law. [Common Cause v. Union of India 1996-222-ITR-260-SC] [para 12]
  • Political parties do not carry out charitable activities. Their claim for exemption akin to one extended to charitable trusts is ill-founded. [para 69]
  • Receipts of Political Parties by way of voluntary donations are their "income from other sources" [para 80]
  • The income tax law grants exemption to a political party on the receipts by way of voluntary donation. However this exemption is subject to filing detailed and certified accounts. The statutory provisions reveal that "it was critical from the point of view of the legislature that political parties are made to disclose what their state of financial affairs is in any given financial year". [para 93]
The High Court even chastised the chartered accountant / auditor for having certified the books of accounts of Congress even though he specifically stated that he did not have all the figures and information for this purpose. On this count the High Court made the following observations;
103. It is also disconcerting to note that the same auditor has issued identical certificates for other AYs for which simultaneously accounts have been finalised. This kind of an auditor’s report, to say the least, leaves much to be desired. It does not comport with the degree of seriousness with which a duly qualified auditor is expected to discharge his statutory obligations. An auditor is discharging both the professional and a statutory duty. He is licensed under the expectation that he will faithfully discharge the above obligations. In the present case, the Court is constrained to note that the auditor’s report submitted before the CIT (A) on 4th November 1997 is woefully short of the requirement of the law.
The High Court concluded by declaring that the "case demonstrates the need for a slew of legislative measures that need to be put in place for an effective check on the influence of money on the electoral process". The High Court further held that "considering that political parties are an essential part of our democracy and are dealing in large sums of public money, much of which is unaccounted, the proper auditing of the accounts of the political parties is both imperative critical to the conduct of free and fair elections". And the reason for this all; to "infuse transparency and accountability into the functioning of the political parties thereby strengthening and deepening democracy".

We hope that this decision of the High Court will not just form another precedent consigned to the law reports but will be implemented in both spirit and form for the betterment of the democratic outlook of the country.

13 Mar 2016

Dichotomy in Government functioning - Citizens not to be penalized : Supreme Court

What happens when the citizens act on the representation of the Government (particularly its Ministers and Policy) only to find to their detriment that the Government machinery has failed to act on time? Can a citizen be penalized for following the Government Policy on the ground that even though the Government promised yet it failed to act? Can benefit of a benevolent industrial policy be denied to the citizen on such grounds? These were some of the questions which were put before the Supreme Court by a tax payer to claim that in the absense of any fault on its part, the benefit of Industrial Policy announced by the State Government should not be denied and the Supreme Court concurred.

In its recent decision in Lloyd Electric & Engineering Ltd. v. State of Himachal Pradesh [Civil Appeal No. 6838/2015] (now reported at (2016) 1 SCC 560) the Supreme Court was dealing with the decision taken by Cabinet of Himachal State Government which extended benefit of a tax concession from 1st April onwards. However the enabling legislative notification was issued in middle of June and it stated that benefit was available "with immediate effect". On this count the High Court declined to decide in favour of the tax-payer giving strict effect to the notification. The Supreme Court reversed the decision of the High Court taking into context the Cabinet's resolve and the decision taken by the highest body of the State Government i.e. the Council of Ministers.

Making the Government answerable and responsible for the statement / decision of its Council of Ministers, the Supreme Court sternly declared the impermeability of the Government to say one thing and effectuate another. The Court declared the legal position inter alia in the following terms;
10. We do not think it necessary to go into the various contentions raised by the parties in view of the undisputed factual position we have referred to above. The State Government cannot speak in two voice. Once the Cabinet takes a policy decision to extend its 2004 Industrial Policy in the matter of CST concession to the eligible units beyond 31.03.2009, upto 31.03.2013, and the Notification dated 29.05.2009, accordingly, having been issued by the Department concerned, viz., Department of Industries, thereafter, the Excise and Taxation Department cannot take a different stand. What is given by the right hand cannot be taken by the left hand. The Government shall speak only in one voice. It has only one policy. The departments are to implement the Government policy and not their own policy. Once the Council of Ministers has taken a decision to extend the 2004 Industrial Policy and extend tax concession beyond 31.03.2009, merely because the Excise and Taxation Department took some time to issue the notification, it cannot be held that the eligible units are not entitled to the concession till the Department issued the notification. It has to be noted that the Finance Department of the State Government had concurred with the proposal of the Department of Industries to extend the tax concession beyond 31.03.2009 till 31.03.2013 and the Council of Ministers had accordingly taken a decision also. No doubt, the statutory notification issued by the Excise and Taxation Department under Section 8(5)(b) of the Act on 18.06.2009 has stated that the eligible units will be entitled to the concession with immediate effect. Merely because such an expression has been used, it cannot be held that the State Government can levy the tax against its own policy. The State Government is bound by the policy decision taken by the Council of Ministers and duly notified by the Department concerned, viz., Department of Industries.
13.       The High Court, with great respect, has gone wrong in not appreciating the background of the case and the decision of the Council of Ministers to extend its own Industrial Policy announced in 2004 and the tax concession beyond 31.03.2009. Once the Council of Ministers takes a policy decision, the implementing Department cannot issue a notification contrary to the policy decision taken by the Government. The High Court also erred in analyzing and understanding the Notification dated 18.06.2009 as if it introduced the CST concession @ 1 per cent with effect from the date of issuance of notification. As we have already clarified, it is not the introduction of a new policy but an extension of the benefits under the extended policy. It is in this context, the decision of this Court in Suprabhat Steel Limited (supra) and State of Jharkhand and others v. Tata Communications Limited and another become relevant.
In terms of Article 141 of the Constitution of India, this declaration of legal position by the Supreme Court amounts to law of the land and is binding on one and all, including all Government functionaries and even the High Courts. We hope that Government departments will take due note of this decision and ensure that there is no dichotomy in their public declarations and functioning.