Kamal Ghorui
Prime Minister Narendra Modi’s appeal to citizens to conserve petrol, diesel, defer buying gold for at least a year and avoid foreign travel etc. reminds one of a dormant provision in the constitution under article 360 for financial emergency. There is however no indication whatsoever from the government to declare such an emergency. The provision has not been used since 1950 i.e. the year in which the constitution became operational. The discussion about this provision therefore is purely academic.
Article 360 contained in Part XVIII of the constitution provides for the declaration of financial emergency. As per that article the President may by a proclamation make a declaration of such emergency if he is satisfied that a situation has arisen whereby the financial stability or credit of India or of any part of the territory has been threatened. This proclamation is made based on the objective analysis of economic conditions and administrative inputs. It has to be approved by a resolution of both houses of Parliament with a simple majority within two months.
During such an Emergency, the Union may issue financial directions to States which may include direction for reduction of salaries of government officials, including the judges of the Supreme Court and High Courts.
Courts and financial emergency
During the days of Covid pandemic many PILs were reportedly filed in the Supreme court. One such petition was filed by the Centre for Accountability and Systemic Change. This petition gave rise to a peculiar question whether the Supreme Court can issue a writ of mandamus to the Union/Ministry of Home Affairs/President directing it to impose financial emergency. It was held that the judiciary has certain inherent limitations. It’s function is adjudication of disputes and not of administering the country. The function of governance is in the domain of the executive.
The function of the judiciary is limited to ensure that the governance is carried out in accordance with the Constitution and the laws.
The Courts are meant to see that the other organs of Government do not cross the line while exercising power and are not meant for intervening in the exercise of powers within their domain. It is a matter of government policy as to how to handle the financial crisis. In case it were understood to be a power coupled with duty, then every time there was financial instability, an emergency would have to be declared and if the President did not do so, the courts would have to step in.
The power exercised by the President under Article 360 is on the advice of the Council of Ministers tendered under Article 74(1). The Proclamation is dependent on the satisfaction of the President with regard to the existence of the relevant conditions.
In State of Rajasthan v. Union of India Judge Bhagwati in the context of declaration President’s rule under article 356 held that the minimal area of judicial review is restricted to the mala fide/extraneous/irrelevant grounds on which satisfaction of the President is based. As financial emergency has not been declared in the country till date there was no occasion for supreme court to decide whether the decision was mala fide or was based on extraneous or irrelevant grounds.
Drafting committee deliberations
In the draft constitution, financial emergency was dealt with in article 280-A which subsequently became article 360. It is curious to note that the draft article was absent in the draft constitution of India 1948. It was introduced by the drafting committee Chairman in the Assembly on 16 October 1949.
That article gave the President the power to declare a financial emergency and partly suspend India’s federal structure if it was felt that India’s financial stability was being threatened. The Union Executive was empowered to issue directions to the State Executive to undertake certain financial measures. If these directions were not followed, the President could impose President’s rule in the State.
The drafting committee Chairman had informed the house that the draft Article was inspired by the 1930 National Recovery Act of USA. That act gave the US President extraordinary powers to deal with the financial crisis caused by the great depression. The US Supreme Court had struck it down as unconstitutional which left the US President without necessary powers to deal with financial doom. The chairman of the drafting committee therefore argued that such an article was necessary in the constitution to avoid such a situation by constitutionally guaranteeing the President sufficient powers to deal with a financial emergency.
Many committee members felt that the powers given by this article were too wide. Some members therefore suggested curtailment of these powers. Some members felt that power to reduce salaries, reserve State bills and impose President’s rule were excessive. He was of the opinion that a mere ‘threat to financial stability and credit’ was not enough to justify the emergency powers. Some felt that the draft article appeared to distrust the states’ ability and initiative to deal with a financial emergency. As against this a small group of members came in support of the draft article and even suggested giving more powers to the President. A Member suggested power to President to legislate on matters in state list as if they were in the concurrent List. Another member moved an amendment to suspend India’s federal structure and provincial autonomy in toto for the duration of a financial emergency. Such were the diverse views of the drafting committee members.
However towards the end of the debate, members supported the draft article. All the amendments were rejected by the Assembly. The chairman assured the members that the Union had no interest in interfering with State autonomy. He further said that the financial affairs of the states and the union were so intimately connected that a financial crisis in a single state could affect the financial integrity of the entire nation and vice-a-versa. Therefore, any financial crisis required a Union led response even if it meant a temporary intrusion into the executive power of the States. The original draft article moved by the drafting committee Chairman was adopted by the Assembly.
As said earlier, such an emergency has not been declared up to now and god willing such an occasion should not arise in future.
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