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).
One of the main tasks of the Parliament is to frame laws through debate and discussion on the floor of the House. However, there have been repeated instances where Bills introduced by the government have been passed without substantive discussion (For news reports, click here and here). Even where Bills are debated extensively, occasions where the government introduces changes in the Bill directly as a response to Parliamentary debate are hard to find.
One recent exception is the list of amendments introduced to the National Green Tribunal Bill, 2010 by the Minister for Environment and Forests directly in response to issues raised on the floor of the House.
The Bill
The National Green Tribunal Bill, 2009 aims to set up specialised environmental courts in the country. It will hear initial complaints as well as appeals from decisions of authorities under various environmental laws. The Tribunal shall consist of both judicial and expert members. Expert members have to possess technical qualifications and expertise, and also practical experience.
The Tribunal shall hear only ‘substantial question relating to the environment’. Substantial questions are those which (a) affect the community at large, and not just individuals or groups of individuals, or (b) cause significant damage to the environment and property, or (c) cause harm to public health which is broadly measurable.
PRS in its analysis of the original (unamended) Bill, had raised the following issues (for detailed analysis, clickhere) :
The Debate
In the debate on the Bill in the Lok Sabha on April 21, 2010 a number of MPs raised substantive issues with respect to the Bill. Some of the issues raised were (From the news article quoted above):
1. The Bill fell short on parameters of “scope, efficiency, and access to justice”.
2. Setting up five benches while barring the jurisdiction of courts will “create huge distance for the poor community members and tribals to seek justice”.
3. Offenses under the Wildlife Protection Act and the Wildlife Protection Act will not be heard by the Tribunal.
4. “Section 15 puts an embargo against [persons] other than retired Judge of Supreme Court or Chief Justices of High Court. The other clause puts 15 years of administrative experience, which would open the path for packing the Tribunal with bureaucrats of the kind who did not enforce the environment related laws in their time in service.”
The Minister acknowledged the contribution of the members by stating that: “The members have made important suggestions. Even though their exact demands may not be part of the official amendments moved by the government… but I am open to their suggestions…I will remove all objectionable clauses or sections in the proposed law and keep the window of discussion open.”
The Minister’s response
In response to these issues, the Minister Mr. Jairam Ramesh introduced 10 amendments to the Bill on April 30, 2010. Though not all the issues raised were addressed, a number of changes were made. In addition, the Minister also assured the House that issues regarding access would be addressed by the government by following a “circuit” approach for the benches of the Tribunal i.e. the benches would travel around the area within their jurisdiction to hear complaints. (To read the response, click here, page 15250)
Some of the main amendments are:
1. Now any aggrieved person can can approach the Tribunal. Earlier limited access was provided.
2. The whole Act will be operational by notification at the same time. Different provisions will not be enforced separately at different points of time.
3. There is a procedure for direct appeal to the Supreme Court from the judgement of the Tribunal.
4. The number of expert and judicial members is clearly specified.
In addition, the Minister also assured that the Selection Committee for picking the members of the Tribunal will be transparent and will ensure that members are not “a parking place for retired civil servants”.
