Thursday, April 20, 2017

Financial Emergency under Article 360 of Indian Constitution

The third and final type of emergency is known as the financial emergency.

The provisions for declaring a financial emergency are mentioned in Article 360 of the Indian Constitution.

According to this provision, the president can declare a proclamation for financial emergency if he is satisfied that a situation has arisen which can affect the financial stability or the credit of India or any part of the Indian Territory.

Just like we talked about in President's Rule, the thirty eight Amendment Act of 1975 provided that the satisfaction of the president about such a situation is final and conclusive.

This satisfaction, which acts as the grounds of financial emergency, cannot be challenged in a court of law.

This provision was also amended later by the 44th Amendment Act of 1978 which provided that the satisfaction of the president is not outside boundaries of judicial review.

Process of proclamation of financial emergency under Article 360 of Indian Constitution

The president can declare a financial emergency in the whole country or any part of the country if he is satisfied of its need.

Any such proclamation must be approved by both the houses of the Parliament which are Lok Sabha and Rajya Sabha, within two months from the date of the declaration.

But, if at the time of the declaration, Lok sabha is dissolved due to any reason whatsoever, then such a proclamation can only survive for 30 days starting from the first sitting of the reconstituted Lok Sabha.

Also, if the Lok Sabha is dissolved within the first two months of the proclamation, even then the proclamation will only survive for 30 days after the Lok Sabha has been reconstituted and has had its first sitting.

In the meantime the proclamation must have been approved by the Rajya Sabha.

Once the proclamation for financial emergency has been approved by both houses of the Parliament it shall continue indefinitely, until it is revoked by the president.

The president unlike national Emergency, can revoke the proclamation for financial emergency at any time, without seeking the approval of the Parliament(Lok Sabha).

Implications of Financial Emergency under Article 360 of Indian Constitution

1. There is no maximum period set for the operation of financial emergency.
2. Unlike National emergency or state emergency, there is no need for repeated approval from the parliament for the continuation of financial emergency

Effects of financial emergency as detailed under Article 360 of Indian Constitution

1. The executive authority of the central government is extended to give directions to the state governments to take proper and just financial decisions to tackle the problem at hand.

Also the central government is authorized to give adequate directions to the states as instructed by the president.

2. These directions may include the reduction in salaries and allowances of a particular class of people serving in the state or every citizen in the state.

The president can also reserve all money bills or other financial bills for his own consideration after they have been passed by the Legislature of the state.

3. The president can also issue directions to reduce the salaries and allowances of people from any class serving the union, including the judges of the Supreme Court and the High Courts.

Therefore to conclude, during a financial emergency, the central government takes full control over the financial matters of the states.

According to HN Kunzru, a member of the constituent assembly, the financial emergency provisions pose a grave threat to the financial autonomy of every Indian state.

Dr BR Ambedkar explained the reasons behind such provisions by stating that these provisions are similar in pattern to the National Recovery Act of the United States which was passed in 1933.

According to this, the President of The United States of America had the power to make similar provisions in order to remove and tackle both economic and financial difficulties.

This step was taken as a result of the Great Depression which had overtaken the American people in 1930.

Till date no financial emergency has been declared in the country or any part of it. However there was a financial crisis in the year 1991.

This concludes all three types of emergency provisions.

Despite all these advantages, some members of the constituent assembly criticized the inclusion of emergency provisions into the constitution based on the following grounds:

1. They were concerned that these provisions will destroy the federal character of the Constitution by making the central government really powerful.

2. President might become a dictator.

3. The financial emergency provisions will take away the financial autonomy and independence of a state.

4. Basic structure of the constitution which is based upon the rigidness of the fundamental rights will be destroyed.

According to H V Kamath, the emergency provisions lay the foundation of a totalitarian state which completely oppose all the ideas and principles of liberty and freedom.

He was concerned that the words Liberty or democracy might remain as mere words under the constitution if the president decides to use the emergency provisions to become a dictator.

TT Krishnamachari feared that by using these provisions the president and the executive will exercise a constitutional dictatorship.

HN Kunzru was concerned about the loss of financial autonomy of the states during financial emergencies.

In favor of the emergency provisions, Alladi Krishnaswamy Ayyer, called the emergency provisions the very life and breath of the constitution whereas Mahavir Tyagi considered the emergency provisions as a safety valve which will in turn help in the maintenance of the Indian Constitution.

Dr BR Ambedkar defended the emergency provisions in the constituent assembly but he was also concerned about their misuse.

In a statement he said," I do not altogether deny that there is a possibility of the articles being abused or employed for political purposes".

So to conclude this section of emergency provisions, these provisions can be called as the necessary evil of our constitution with both advantages and disadvantages.

There have been a lot of cases where the provisions for state emergency have been used for political gains in the past.

But there have also been certain cases where these unique emergency provisions have helped our nation under grave circumstances.


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  45. Article 360 of the Indian Constitution empowers the President to declare a financial emergency if the financial stability or credit of India is threatened. Such a declaration allows the government to take extraordinary financial measures, including cutting salaries and allowances of government officials and suspending the constitutional distribution of revenues to states. However, India has never declared a financial emergency since its adoption in 1950, making it a rarely invoked provision in the constitution.
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