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The Finance Bill, 2017 is being discussed in Lok Sabha today.  Generally, the Finance Bill is passed as a Money Bill since it gives effect to tax changes proposed in the Union Budget.  A Money Bill is defined in Article 110 of the Constitution as one which only contains provisions related to taxation, borrowings by the government, or expenditure from Consolidated Fund of India.  A Money Bill only needs the approval of Lok Sabha, and is sent to Rajya Sabha for its recommendations.  It is deemed to be passed by Rajya Sabha if it does not pass the Bill within 14 calendar days.

In addition to tax changes, the Finance Bill, 2017 proposes to amend several laws such the Securities Exchange Board of India Act, 1992 and the Payment and Settlements Act, 2007 to make structural changes such as creating a payments regulator and changing the composition of the Securities Appellate Tribunal.  This week, some amendments to the Finance Bill were circulated.  We discuss the provisions of the Bill, and the proposed amendments.

Certain Tribunals to be replaced

Amendments to the Finance Bill seek to replace certain Tribunals and transfer their functions to existing Tribunals.  The rationale behind replacing these Tribunals is unclear.  For example, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) will replace the Airports Economic Regulatory Authority Appellate Tribunal.  It is unclear if TDSAT, which primarily deals with issues related to telecom disputes, will have the expertise to adjudicate matters related to the pricing of airport services.  Similarly, it is unclear if the National Company Law Appellate Tribunal, which will replace the Competition Appellate Tribunal, will have the expertise to deal with matters related to anti-competitive practices.

Terms of service of Tribunal members to be determined by central government

The amendments propose that the central government may make rules to provide for the terms of service including appointments, term of office, salaries and allowances, and removal for Chairpersons and other members of Tribunals, Appellate Tribunals and other authorities.  The amendments also cap the age of retirement for Chairpersons and Vice-Chairpersons.  Currently, these terms are specified in the laws establishing these Tribunals.

One may argue that allowing the government to determine the appointment, reappointment and removal of members could affect the independent functioning of the Tribunals.  There could be conflict of interest if the government were to be a litigant before a Tribunal as well as determine the appointment of its members and presiding officers.

The Supreme Court in 2014, while examining a case related to the National Tax Tribunal, had held that Appellate Tribunals have similar powers and functions as that of High Courts, and hence matters related to their members’ appointment and reappointment must be free from executive involvement.[i]  The list of Tribunals under this amendment includes several Tribunals before which the central government could be a party to disputes, such as those related to income tax, railways, administrative matters, and the armed forces Tribunal.

Note that a Bill to establish uniform conditions of service for the chairpersons and members of some Tribunals has been pending in Parliament since 2014.

Inclusion of technical members in the Securities Appellate Tribunal 

The composition of the Securities Appellate Tribunal established under the SEBI Act is being changed by the Finance Bill.  Currently, the Tribunal consists of a Presiding Officer and two other members appointed by the central government.  This composition is to be changed to: a Presiding Officer, and a number of judicial and technical members, as notified by the central government.

Creation of a Payments Regulatory Board

Recently, the Ratan Watal Committee under the Finance Ministry had recommended creating a statutory Payments Regulatory Board to oversee the payments systems in light of increase in digital payments.  The Finance Bill, 2017 seeks to give effect to this recommendation by creating a Payments Regulatory Board chaired by the RBI Governor and including members nominated by the central government.  This Board will replace the existing Board for Regulation and Supervision of Payment and Settlement Systems.

Political funding

The Finance Bill, 2017 proposes to make changes related to how donations may be made to political parties, and maintaining the anonymity of donors.

Currently, for donations below Rs 20,000, details of donors do not have to be disclosed by political parties.  Further, there are no restrictions on the amount of cash donations that may be received by political parties from a person.  The Finance Bill has proposed to set this limit at Rs 2,000.  The Bill also introduces a new mode of donating to political parties, i.e. through electoral bonds.  These bonds will be issued by banks, which may be bought through cheque or electronic means.  The only difference between cheque payment (above Rs 20,000) and electoral bonds may be that the identity of the donor will be anonymous in the case of electoral bonds.

Regarding donations by companies to political parties, the proposed amendments to the Finance Bill remove the: (i) existing limit of contributions that a company may make to political parties which currently is 7.5% of net profit of the last three financial years, (ii) requirement of a company to disclose the name of the parties to which a contribution has been made.  In addition, the Bill also proposes that contributions to parties will have to be made only through a cheque, bank draft, electronic means, or any other instrument notified by the central government.

Aadhaar mandatory for PAN and Income Tax

Amendments to the Finance Bill, 2017 make it mandatory for every person to quote their Aadhaar number after July 1, 2017 when: (i) applying for a Permanent Account Number (PAN), or (ii) filing their Income Tax returns.  Persons who do not have an Aadhaar will be required to quote their Aadhaar enrolment number indicating that an application to obtain Aadhaar has been filed.

Every person holding a PAN on July 1, 2017 will be required to provide the authorities with his Aadhaar number by a date and in a manner notified by the central government.  Failure to provide this number would result in the PAN being invalidated.

The Finance Bill, 2017 is making structural changes to some laws.  Parliamentary committees allow for a forum for detailed scrutiny, deliberations and public consultation on proposed laws.  The opportunity to build rigour into the law-making process is lost if such legislative changes are not examined by committees

[i] Madras Bar Association vs. Union of India, Transfer Case No. 150 of 2006, Supreme Court of India, September 25, 2014 (para 89).

Mr. Ramnath Kovind completes his tenure as President in July.  With the Election Commission of India expected to notify the election dates this week, we look at how India will elect its next President.  

As the Head of the State, the President is a key part of Parliament.  The President calls the two Houses of Parliament into session on the advice of the Council of Ministers.  A Bill passed by the Lok Sabha and Rajya Sabha does not become a law unless assented to by the President.  Further, when Parliament is not in session, the President holds the power to sign a law with immediate effect through an Ordinance.

Who elects the President?

The manner of election of the President is provided in Article 55 of the Constitution.  Members of Parliament and Members of Legislative Assemblies (MPs and MLAs) including elected representatives from the Union Territories (UTs) of Delhi and Puducherry form the electoral college, which elects the President.  At least 50 elected representatives must propose a candidate, who must then be seconded by 50 other electors to run for the President's office.  Members of Legislative Councils and the 12 nominated members of Rajya Sabha do not participate in the voting process.

The history behind having proposers and seconders 
The requirement of having a certain number of electors propose a candidate was introduced after the experience of the first five Presidential elections.  It was common then for several candidates to put themselves up for election when they did not have a remote chance of getting elected.  In the 1967 Presidential elections, 17 candidates contested, but nine of them did not win a single vote.  This repeated again in the 1969 elections, when out of 15 candidates, five did not secure any votes.

To discourage the practice, candidates had to secure at least 10 proposers and seconders each to contest the elections from the 1974 election onwards.  A compulsory security deposit of Rs 2,500 was also introduced.  The changes were brought in through an amendment to the Presidential and Vice-Presidential Act, 1952

In 1997, the Act was further amended to increase the security deposit to Rs 15,000 and the minimum number of proposers and seconders to 50 each.


How are the votes calculated?

The Presidential election uses a special voting to tally the votes.  A different voting weightage is assigned to an MP and an MLA.  The value of each MLA's vote is determined based on the population of their state and the number of MLAs.  For instance, an MLA from UP has a value of 208 while an MLA from Sikkim has 7 (see Table 1).  Due to a Constitutional Amendment passed in 2002, the population of the state as per the 1971 census is taken for the calculation.

The value of an MP's vote is the sum of all votes of MLAs across the country divided by the number of elected MPs.  

How will the numbers look in 2022?

In the 2017 Presidential elections, electors from 31 states and the UTs of Delhi and Puducherry participated. However, in 2019, with the Jammu and Kashmir (J&K) Reorganization Act, the number of states were reduced to 30. The J&K Assembly was dissolved as per the Act and a new legislature for the UT of J&K is yet to be reconstituted. UTs with legislatures were not originally part of the electoral college for the election of the President. The Constitution was amended in 1992 to specifically include the UTs of Delhi and Puducherry. Note that for MLAs from J&K to participate in future Presidential elections, a similar Constitutional amendment would be required to be passed by Parliament.

Based on the assumption that J&K is not included in the 2022 Presidential election, the total number of votes of MLAs in 2022 elections will have to be adjusted.  The 87 Jammu and Kashmir MLAs must be removed from the total number of MLAs of 4,120.  Jammu and Kashmir’s contributing vote share of 6,264 must also be reduced from the total vote share of 549,495.  Adjusting for these changes, 4,033 MLAs will participate in the 2022 elections and the combined vote share of all MLAs will add up to 543,231.

Table 1: The value of votes of elected MLAs of different states at the 2017 Presidential Election

Name of State

Number of Assembly seats

Population (1971 Census)

Value of vote of each MLA

Total value of votes for the state (B x D)

A

B

C

D

E

Andhra Pradesh

175

2,78,00,586

159

27,825

Arunachal Pradesh

60

4,67,511

8

480

Assam

126

1,46,25,152

116

14,616

Bihar

243

4,21,26,236

173

42,039

Chhattisgarh

90

1,16,37,494

129

11,610

Goa

40

7,95,120

20

800

Gujarat

182

2,66,97,475

147

26,754

Haryana

90

1,00,36,808

112

10,080

Himachal Pradesh

68

34,60,434

51

3,468

Jammu and Kashmir

87

63,00,000

72

6,264

Jharkhand

81

1,42,27,133

176

14,256

Karnataka

224

2,92,99,014

131

29,344

Kerala

140

2,13,47,375

152

21,280

Madhya Pradesh

230

3,00,16,625

131

30,130

Maharashtra

288

5,04,12,235

175

50,400

Manipur

60

10,72,753

18

1,080

Meghalaya

60

10,11,699

17

1,020

Mizoram

40

3,32,390

8

320

Nagaland

60

5,16,449

9

540

Odisha

147

2,19,44,615

149

21,903

Punjab

117

1,35,51,060

116

13,572

Rajasthan

200

2,57,65,806

129

25,800

Sikkim

32

2,09,843

7

224

Tamil Nadu

234

4,11,99,168

176

41,184

Telangana

119

1,57,02,122

132

15,708

Tripura

60

15,56,342

26

1,560

Uttarakhand

70

44,91,239

64

4,480

Uttar Pradesh

403

8,38,49,905

208

83,824

West Bengal

294

4,43,12,011

151

44,394

NCT of Delhi

70

40,65,698

58

4,060

Puducherry

30

4,71,707

16

480

Total

4,120

54,93,02,005

 

5,49,495

Source: Election Commission of India (2017); PRS.

The value of an MP’s vote correspondingly will change from 708 in 2017 to 700 in 2022. 

Value of one MP's vote =   Total value of all votes of MLAs      =   543231     =    700 
                                              Total number of elected MPs                 776

Note that the value of an MP’s vote is rounded off to the closest whole number. This brings the combined value of the votes of all MPs to 543,200 (700 x 776). 

What is the number of votes required to win?

The voting for the Presidential elections is done through the system of single transferable vote. In this system, electors rank the candidates in the order of their preference. The winning candidate must secure more than half of the total value of valid votes to win the election. This is known as the quota. 

Assuming that each elector casts his vote and that each vote is valid:

Quota = Total value of MP’s votes + Total value of MLA’s votes + 1                                                        
                                                        2

= 543200 + 543231 +1     =   1086431 +1     =    543,216 
                2                                   2

The anti-defection law which disallows MPs from crossing the party line does not apply to the Presidential election. This means that the MPs and MLAs can keep their ballot secret.  

The counting of votes takes place in rounds. In Round 1, only the first preference marked on each ballot is counted. If any of the candidates secures the quota at this stage, he or she is declared the winner. If no candidate secures the quota in the first round, then another round of counting takes place. In this round, the votes cast to the candidate who secures the least number of votes in Round 1 are transferred. This means that these votes are now added to the second preference candidate marked on each ballot. This process is repeated till only one candidate remains. Note that it is not compulsory for an elector to mark his preference for all candidates. If no second preference is marked, then the ballots are treated as exhausted ballots in Round 2 and are not counted further.  

The fifth Presidential election which elected Mr. VV Giri is the only instance when a candidate did not secure the quota in the first round.  The second preference votes were then evaluated and Mr. Giri secured 4,20,077 of the 8,36,337 votes and was declared the President.

The only President of India to win unopposed 
India’s sixth President, Mr. Neelam Sanjiva Reddy who served from 1977 to 1982 was the only President to be elected unopposed.  37 candidates had filed their nominations for the 1977 elections, however on scrutiny, the nomination papers of 36 candidates were rejected by the Returning Officer and Mr. Reddy was the only candidate standing.