Paying for It: Grants, the Three Funds, Accounts and Audit
Chapter Nine
Syllabus topic rule 1.3 sweep of Chapter V. MU names no topic here.
Pages 44 to 47 of 377
In one line
Parliament votes money to NALSA, NALSA keeps it in the National Legal Aid Fund and passes it down to the States, the States pass it down to the districts, and the Comptroller and Auditor-General audits all of it.
In exam wording: Chapter V of the Legal Services Authorities Act 1987 provides for grants by the Central Government under section 14, three legal aid funds at the national, State and district levels under sections 15 to 17, and accounts and audit by the Comptroller and Auditor-General of India under section 18.
Why five sections about money belong in a book about ADR
Because a right without a budget is a promise. Chapter 20 shows that free legal aid is a constitutional right; Chapter V of this Act is what pays for it, and it is also what pays for every Lok Adalat organised in the country.
There is also a distinction here that students get wrong in the tier chapters. Administrative expenses and legal aid expenses come from different places. The salaries of an Authority's own officers come from the Consolidated Fund of India or of the State, under sections 3(6), 6(7) and 9(7). The cost of a poor litigant's lawyer comes from the legal aid funds in sections 15 to 17. Two different pockets.
Section 14: grants by the Central Government
The Central Government shall, after due appropriation made by Parliament by law in this behalf, pay to the Central Authority by way of grants such sums of money as it may think fit, to be used for the purposes of the Act.
"After due appropriation made by Parliament" is not decoration. It is article 266(3) of the Constitution at work: money cannot leave the Consolidated Fund of India except under an appropriation made by law. So NALSA's funding is voted, annually, like any other item of expenditure.
Sections 15, 16 and 17: the three funds
The three sections are built on the same pattern, and the pattern is easier to learn as a table than as three lists.
| National Legal Aid Fund, section 15 | State Legal Aid Fund, section 16 | District Legal Aid Fund, section 17 | |
|---|---|---|---|
| Established by | The Central Authority | A State Authority | Every District Authority |
| Credited with | Grants from the Central Government under section 14; grants or donations from any other person for the purposes of the Act; any amount received under the orders of any court or from any other source | Sums or grants paid by the Central Authority; grants or donations from the State Government or any person; any other amount received under the orders of any court or from any other source | Sums or grants from the State Authority; grants or donations from any person, with the prior approval of the State Authority; any other amount received under the orders of any court or from any other source |
| Applied for | The cost of legal services under the Act, including grants to State Authorities; the cost of legal services provided by the Supreme Court Legal Services Committee; other expenses the Central Authority must meet | The cost of the functions in section 7; the cost of legal services provided by the High Court Legal Services Committee; other expenses the State Authority must meet | The cost of the functions in sections 10 and 11B; other expenses the District Authority must meet |
Paying for It: Grants, the Three Funds, Accounts and Audit
Three details are worth pulling out of that table, because each is a fair question.
Money flows down the tiers. Section 15(2)(a) lets NALSA make grants to State Authorities, section 16(1)(a) records those grants arriving, and section 17(1)(a) does the same for the district. That is how a single parliamentary appropriation reaches a taluk.
Donations are allowed, and only at the district level do they need permission. Section 17(1)(b) requires the prior approval of the State Authority for a donation to a District Authority, which sections 15 and 16 do not require. The reason is obvious enough: a district office is closer to the people who litigate there, and a donor with an interest in local litigation is a risk worth controlling.
Each fund pays for the Committee at its own level. The National Fund pays for the Supreme Court Legal Services Committee under section 15(2)(b), and the State Fund pays for the High Court Legal Services Committee under section 16(2)(b). Both clauses were inserted along with those Committees by Act 59 of 1994.
And one link back to chapter 60: the reference to section 11B in section 17(2)(a) is how the Taluk Legal Services Committee is paid for. Section 11A(5) says its administrative expenses are defrayed out of the District Legal Aid Fund, and section 17(2)(a) is the matching authority on the spending side.
Section 18: accounts and audit
Section 18 applies to the Central, State and District Authorities alike, calling each of them "the authority".
Section 18(1): each shall maintain proper accounts and other relevant records and prepare an annual statement of accounts, including an income and expenditure account and a balance sheet, in the form and manner prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India.
Section 18(2): the accounts shall be audited by the Comptroller and Auditor-General at such intervals as he specifies, and the cost of the audit is payable by the Authority.
Section 18(3): the Comptroller and Auditor-General, and anybody appointed by him for the audit, has the same rights, privileges and authority as in auditing Government accounts, including the right to demand the production of books, accounts, vouchers and other documents and to inspect any of the offices of the Authorities.
Paying for It: Grants, the Three Funds, Accounts and Audit
Section 18(4): the certified accounts and the audit report are forwarded annually to the Central Government or the State Governments.
Sections 18(5) and 18(6), both inserted by Act 59 of 1994, complete the chain and are the most important part of the section: the Central Government shall cause the accounts and audit report to be laid before each House of Parliament, and the State Government before the State Legislature, as soon as may be after they are received.
That is the point of section 18, and it is worth one sentence in an answer. Legal aid money is publicly accounted for, audited by the constitutional auditor and laid before the legislature that voted it. An Authority run by judges is still answerable for how it spends.
A worked example
A District Legal Services Authority in Maharashtra wants to run a series of legal literacy camps in tribal villages and to pay panel lawyers for forty maintenance cases.
Where does the money come from? The District Legal Aid Fund under section 17. It is credited with grants made by the State Authority, which in turn received them from NALSA under section 15(2)(a).
Is it permitted spending? Yes. Section 17(2)(a) allows the fund to be applied to the cost of the functions in section 10, and organising legal services and Lok Adalats in the district is section 10(2). Legal literacy is one of NALSA's own functions under section 4(l), carried into the district through the delegation in section 10(1).
A local trust offers two lakh rupees towards the camps. May the Authority take it? Only with the prior approval of the State Authority, under section 17(1)(b).
Who checks any of this? The Comptroller and Auditor-General under section 18(2), and the audited accounts of the State's Authorities go before the State Legislature under section 18(6).
What beginners get wrong
There are three funds, not one. National, State and District, in sections 15, 16 and 17.
Administrative expenses do not come out of the legal aid funds. Salaries of an Authority's officers come from the Consolidated Fund of India or of the State. The exception is the Taluk Committee, whose administrative expenses come out of the District Legal Aid Fund under section 11A(5).
The auditor is the Comptroller and Auditor-General, not a private auditor and not the Government.
Donations are allowed at every level, but only a District Authority needs the State Authority's prior approval to accept one.
Paying for It: Grants, the Three Funds, Accounts and Audit
Quick revision
- Section 14: the Central Government pays grants to NALSA after due appropriation by Parliament.
- Section 15: National Legal Aid Fund; pays for legal services including grants to State Authorities, and for the Supreme Court Legal Services Committee.
- Section 16: State Legal Aid Fund; pays for the section 7 functions and for the High Court Legal Services Committee.
- Section 17: District Legal Aid Fund; pays for the functions in sections 10 and 11B. A donation needs the prior approval of the State Authority.
- Section 18: accounts in the prescribed form; audit by the Comptroller and Auditor-General, who may inspect offices and demand documents; accounts and audit report laid before Parliament or the State Legislature.
Test yourself
1. Which fund pays for the Supreme Court Legal Services Committee, and which for the High Court Committee? The National Legal Aid Fund under section 15(2)(b) pays for the Supreme Court Legal Services Committee; the State Legal Aid Fund under section 16(2)(b) pays for the High Court Legal Services Committee.
2. Can a District Legal Services Authority accept a donation? Yes, under section 17(1)(b), but only with the prior approval of the State Authority. No such approval is required for donations to the Central or State Authority under sections 15(1)(b) and 16(1)(b).
3. Who audits the accounts of a State Legal Services Authority, and what happens to the report? The Comptroller and Auditor-General of India under section 18(2). The certified accounts and audit report go annually to the State Government under section 18(4), and the State Government must lay them before the State Legislature under section 18(6).
4. From where are the administrative expenses of a Taluk Legal Services Committee met? From the District Legal Aid Fund, by the District Authority, under section 11A(5), and section 17(2)(a) permits that fund to be applied to the functions in section 11B.
5. Why does section 14 refer to appropriation by Parliament? Because money cannot be paid out of the Consolidated Fund of India except under an appropriation made by law, so NALSA's grant has to be voted by Parliament like any other expenditure.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself for the same subject.