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).
Recently, Delhi witnessed large scale protests by various groups demanding stricter punishment and speedier trial in cases of sexual assault against women. In light of the protests, the central government has constituted a Commission (headed by Justice Verma) to suggest possible amendments in the criminal law to ensure speedier disposal of cases relating to sexual assault. Though the Supreme Court, in 1986, had recognised speedy trial to be a fundamental right, India continues to have a high number of pending cases. In 2012, the net pendency in High Courts and subordinate courts decreased by over 6 lakh cases. However, there is still a substantial backlog of cases across various courts in the country. As per the latest information given by the Ministry of Law and Justice, there are 43.2 lakh cases pending in the High Courts and 2.69 crore cases pending in the district courts.[1]
After the recent gang-rape of a 23 year old girl, the Delhi High Court directed the state government to establish five Fast Track Courts (FTCs) for the expeditious adjudication of cases relating to sexual assault. According to a news report, other states such as Maharashtra and Tamil Nadu have also begun the process of establishing FTCs for rape cases. In this blog, we look at the status of pending cases in various courts in the country, the number of vacancies of judges and the status of FTCs in the country. Vacancies in the High Courts and the Subordinate Courts One of the reasons for the long delay in the disposal of cases is the high number of vacancies in position for judges in the High Courts and the District Courts of the country. As of December 1, 2012, the working strength of the High Court judges was 613 as against the sanctioned strength of 895 judges. This reflects a 32% vacancy of judges across various High Courts in the country. The highest number of vacancies is in the Allahabad High Court with a working strength of 86 judges against the sanctioned strength of 160 judges (i.e. vacancy of 74 judges). The situation is not much better at the subordinate level. As on September 30, 2011, the sanctioned strength of judges at the subordinate level was 18,123 judges as against a working strength of 14,287 judges (i.e. 21% vacancy). The highest vacancy is in Gujarat with 794 vacancies of judges, followed by Bihar with 690 vacancies. Fast Track Courts The 11th Finance Commission had recommended a scheme for the establishment of 1734 FTCs for the expeditious disposal of cases pending in the lower courts. In this regard, the Commission had allocated Rs 500 crore. FTCs were to be established by the state governments in consultation with the respective High Courts. An average of five FTCs were to be established in each district of the country. The judges for these FTCs were appointed on an adhoc basis. The judges were selected by the High Courts of the respective states. There are primarily three sources of recruitment. First, by promoting members from amongst the eligible judicial officers; second, by appointing retired High Court judges and third, from amongst members of the Bar of the respective state. FTCs were initially established for a period of five years (2000-2005). However, in 2005, the Supreme Court[2] directed the central government to continue with the FTC scheme, which was extended until 2010-2011. The government discontinued the FTC scheme in March 2011. Though the central government stopped giving financial assistance to the states for establishing FTCs, the state governments could establish FTCs from their own funds. The decision of the central government not to finance the FTCs beyond 2011 was challenged in the Supreme Court. In 2012, the Court upheld the decision of the central government.[3] It held that the state governments have the liberty to decide whether they want to continue with the scheme or not. However, if they decide to continue then the FTCs have to be made a permanent feature. As of September 3, 2012, some states such as Arunachal Pradesh, Assam, Maharashtra, Tamil Nadu and Kerala decided to continue with the FTC scheme. However, some states such as Haryana and Chhattisgarh decided to discontinue it. Other states such as Delhi and Karnataka have decided to continue the FTC scheme only till 2013.[4]
Table 1: Number of Fast Track Courts and the pending cases in FTCs (As on March 31, 2011)
| State | No of FTC | No of cases transferred until March 31, 2011 | Pending cases |
| Arunachal Pradesh | 3 | 4,162 | 2,502 |
| Bihar` | 179 | 2,39,278 | 80,173 |
| Assam | 20 | 72,191 | 16,380 |
| West Bengal | 109 | 1,46,083 | 32,180 |
| Goa | 5 | 5,096 | 1,079 |
| Punjab | 15 | 58,570 | 12,223 |
| Jharkhand | 38 | 1,10,027 | 22,238 |
| Gujarat | 61 | 5,37.636 | 1,03,340 |
| Chattisgarh | 25 | 9,4670 | 18,095 |
| Meghalaya | 3 | 1,031 | 188 |
| Rajasthan | 83 | 1,49,447 | 26,423 |
| Himachal Pradesh | 9 | 40,126 | 6,699 |
| Karnataka | 87 | 2,18,402 | 34,335 |
| Andhra Pradesh | 108 | 2,36,928 | 36,975 |
| Nagaland | 2 | 845 | 129 |
| Kerala | 38 | 1,09,160 | 13,793 |
| Mizoram | 3 | 18,68 | 233 |
| Haryana | 6 | 38,359 | 4,769 |
| Madhya Pradesh | 84 | 3,60,602 | 43,239 |
| UP | 153 | 4,64,775 | 53,117 |
| Maharashtra | 51 | 4,23,518 | 41,899 |
| Tamil Nadu | 49 | 4,11,957 | 40,621 |
| Uttarakhand | 20 | 98,797 | 9006 |
| Orissa | 35 | 66,199 | 5,758 |
| Manipur | 2 | 3,059 | 198 |
| Tripura | 3 | 5,812 | 221 |
| Total | 1192 | 3898598 | 6,05,813 |
Sources: Lok Sabha Unstarred Question No.498, March 3, 2012; PRS
[1]. Rajya Sabha Starred Question no 231 dated December 10, 2012.
[2]. Brij Mohan Lal v Union of India (2005) 3 SCR 103.
[3]. Brij Mohan Lal v Union of India (2012) 6 SCC 502. [4]. Rajya Sabha Unstarred Question no 2388 dated September 3, 2012.
