MARCH 09, 2015

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate

AS we know, the Finance Bill, 2015 has proposed certain major amendments to the Foreign Exchange Management Act, 1999. Section 6 of the FEMA, 1999 is proposed to be amended to enable the Central Government to exercise control on capital and equity flows, in consultation with the RBI. The FEMA is further being amended to incorporate the black money related provisions.

The issue is not the motive behind the proposal to shift from the RBI, what is a very important direct task performed by it for decades now, to a set of Babus in the North Block, who, perhaps, have little knowledge of the intricate issues involved. The issue is whether, the Government can indeed bring out an amendment to the FEMA, 1999 through the Finance Bill, which is a money bill, not requiring the passage in the Rajya Sabha.

Under article 110(1) of the Constitution, a Bill is   deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely: (emphasis provided by me)

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-clauses (a) to (f).

My very limited understanding of constitutional law tells me that, a Bill is not deemed to be 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 term “incidental” in article 110(1 )( g) of the   Constitution has wide implications. It is comprehensive   enough to include not merely the rates, area and field of tax, but also complete machinery for assessment,   appeals, revisions, etc. It is in this light that Finance   Bills which, in addition to rates of taxation, contain   provisions regarding machinery for collection, etc. are   certified as Money Bills. Similarly, a Bill seeking to   amend or consolidate the law relating to Income-tax is treated as a Money Bill. Since such Bills substantially   aim at imposition, abolition, etc. of any tax, the   presence of other incidental provisions do not take them out of the category of Money Bills. Thus there   may be only one section in a Money Bill imposing a   tax and there may be several other sections which may   deal with the scope, method, manner, etc. of its   imposition.

And, as we know, money bills need to be certified by the Speaker and the certificate of the Speaker to   the effect that a Bill is a Money   Bill,   is to be endorsed   and signed by him when it is transmitted to   Rajya   Sabha   and also when it is presented to the   President for his assent.

Being a student of law with a highly deficient understanding of constitutional law, I wonder if the amendments proposed in Part VI of the Finance Bill, 2015 vis-a-vis the FEMA,1999 and especially the amendment to Section 6 of the FEMA which would significantly in terms of the very significant amendment to Section 6 of the FEMA, 1999 can be treated as a money bill and consequently, avoid being passed by the Rajya Sabha.

Irrespective of the fact that the current ruling party and its supporting parties does not command a majority in the Rajya Sabha, would it not be unconstitutional for the FEMA related amendments to be treated as a money bill? Would it not have been proper for the Government to pass the requisite amendments to the FEMA by introducing an amendment Act?