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Money Bills vs Finance Bills: What are the differences, what the court has ruled

The Digital Personal Data Protection (DPDP) Bill is a normal Bill and not a Money bill, Parliamentary Affairs Minister Pralhad Joshi told The Indian Express. Earlier, it was reported that Bill was being introduced under Article 117 of the Constitution, which deals with special provisions for Finance Bills.

What is a Finance Bill?

In a general sense, any Bill that relates to revenue or expenditure is a Financial Bill. A Money Bill is also a specific type of Finance Bill, that must deal only with matters specified in Article 110 (1) (a) to (g).

More specifically, Article 117 of the Constitution deals with the special provisions relating to Financial Bills. Article 117 (1) indicates that a Bill that makes provision for any of the matters specified in clauses (a) to (f) of Article 110 (1) can be introduced or moved only on the President’s recommendation and cannot be introduced in the Rajya Sabha. Examples of this first category of Financial Bills are Money Bills and other Financial Bills originating solely in the Lok Sabha.

The second category of Finance Bills is dealt with under Article 117 (3) of the Constitution. Such Bills are more like ordinary Bills. The difference between this kind of Financial Bill and an ordinary Bill is that if the former is enacted, it will involve expenditure from the Consolidated Fund of India and cannot be passed by either House unless the President has recommended its consideration. In all other respects, such Financial Bills are just like ordinary Bills, and can even be introduced in the Rajya Sabha, amended by it, or be subjected to deliberation by both Houses in a joint sitting.

A Financial Bill becomes a Money Bill when it exclusively falls under one of the seven heads listed under Article 110(1), which defines Money Bills. Moreover, a Money Bill is a Financial Bill that is certified by the Speaker.

What is the difference between Money Bills and Financial Bills?

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, whereas 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.

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A major difference between money and Financial Bills is that while the latter has the provision of including the Rajya Sabha’s (Upper House) recommendations, the former does not make their inclusion mandatory. The Lok Sabha has the right to reject the Rajya Sabha’s recommendations when it comes to Money Bills.

What differentiates a Money Bill from any ordinary Bill or Financial Bill is that 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 first, it must only be introduced in the Lok Sabha and not the Rajya Sabha. Secondly, these bills can only be introduced on the President’s recommendation.

How are money and Financial Bills passed?

The role of the Rajya Sabha in passing Money Bills is restricted. Such Bills can originate only in the Lok Sabha. 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.

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Even if the Rajya Sabha doesn’t respond with its recommendations within 14 days, the same consequences would follow. Thus, when it comes to Money Bills, the Rajya Sabha only has a recommendatory role.

Meanwhile, ordinary Bills and other Financial Bills still require the agreement of both Houses of Parliament to ensure their passage. They can very well be rejected or amended by the Rajya Sabha, unlike Money Bills. Also, all other Financial Bills, separate from Money Bills, must go through the rigours of all stages in the Rajya Sabha as ordinary Bills. This means that while the President can summon a joint sitting of both Houses to resolve differences over a deadlock in passing an ordinary Bill, there is no provision for a joint sitting for differences over a Money Bill.

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.

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What is the top court’s view?

In November 2019, a five-judge Constitution Bench, headed by the (then) Chief Justice of India Ranjan Gogoi, struck down amendments to the 2017 Finance Act, which was passed as a Money Bill, altering the structure and functioning of various tribunals. Directing the formulation of fresh norms for appointing tribunal members, the bench, also comprising CJI Chandrachud along with Justices NV Ramana, Deepak Gupta, and Sanjiv Khanna, ruled that the amendments were “contrary to the principles envisaged in the Constitution as interpreted by this Court”.

However, on the issue of whether the amendments could have been passed as a Money Bill, the court referred the matter to a seven-judge bench for consideration.

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In its 255-page ruling, the Bench also expressed its doubts over the correctness of the Constitution Bench’s 2018 verdict upholding the 2016 Aadhaar Act, which was passed as a Money Bill too.

“The analysis in K S Puttaswamy (Aadhaar-5) makes its application difficult to the present case and raises a potential conflict between the judgments of coordinate Benches”. Incidentally, petitions seeking review of the Aadhaar Act ruling are still pending in the Supreme Court,” the Bench said.

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Incidentally, CJI Chandrachud had been the lone dissenter in the Aadhaar ruling of 2018, criticising the government for passing the Aadhaar Act as a Money bill while calling it a “fraud on the Constitution”.

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