Demands, Appropriation and Finance

Article 114(2). No amendment shall be proposed to any such Bill in either House which will have the effect of varying the amount or altering the destination of any grant so made or of varying the amount of any expenditure charged on the Consolidated Fund of India, and the decision of the person presiding as to whether an amendment is inadmissible under this clause shall be final.

Why the bar exists. The House of the People has already decided the amounts, on demands moved on the President's recommendation. If the Appropriation Bill could be amended, the decision would be reopened in a Bill in which the Council of States also participates, and the Council has no part in the demands. Clause (2) protects the finality of the vote on the demands, and its last words make the presiding officer's ruling final.

Article 114(3). No money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law passed in accordance with the provisions of this article.

Article 114(3) is the operative lock, and it is the sentence to quote. Article 266(3) says money may not be appropriated except in accordance with law; article 114(3) says it may not be withdrawn except under an appropriation made by a law passed under article 114. Together they mean that a withdrawal without an Appropriation Act is unconstitutional, whatever else may have been authorised.

The Appropriation Bill and the Finance Bill

This is the distinction examiners test, and most answers conflate them.

The Appropriation Bill authorises the SPENDING. It is introduced under article 114 after the grants are made, and it takes money out of the Consolidated Fund.

The Finance Bill authorises the TAXING. It gives effect to the financial proposals of the Government for the year, imposing, abolishing, remitting, altering or regulating taxes, and it puts money into the Fund.

Three practical differences.

Timing. The Appropriation Bill follows the completion of the voting on demands. The Finance Bill deals with the taxation proposals and is passed by the end of the financial year.

Amendment. No amendment to an Appropriation Bill may vary an amount or alter a destination, article 114(2). A Finance Bill may be amended, and the proviso to article 117(1) provides that no recommendation of the President is required for the moving of an amendment making provision for the reduction or abolition of any tax.

Subject matter. Appropriation is article 110(1)(d); taxation is article 110(1)(a). Chapter 1350 works which of them makes a Bill a Money Bill.

Article 117: financial Bills

117(1). A Bill or amendment making provision for any of the matters specified in article 110(1)(a) to (f) shall not be introduced or moved except on the recommendation of the President, and such a Bill shall not be introduced in the Council of States. Proviso: no recommendation is required for an amendment making provision for the reduction or abolition of any tax.

117(2). A Bill or amendment is not deemed to make such provision by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licences or fees for services rendered, or that it provides for the imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes.

117(3). A Bill which, if enacted and brought into operation, would involve expenditure from the Consolidated Fund of India, shall not be passed by either House unless the President has recommended to that House the consideration of the Bill.

Read 117(1) and 117(3) together and the executive's grip on money is complete. 117(1): a Bill about taxation, borrowing, the Funds or appropriation cannot even be introduced without the President's recommendation, and cannot start in the Council of States. 117(3): a Bill about anything at all cannot be passed if it would involve expenditure from the Consolidated Fund, unless the President recommends its consideration.

So a private member cannot in practice legislate anything that costs money, and this, with article 113(3), is the constitutional foundation of the criticism in chapter 1270 that the House's financial power is a veto and not an initiative.

And the proviso to 117(1) is the citizen's one opening. A member may move, without any recommendation, an amendment reducing or abolishing a tax. The Constitution lets the House give the taxpayer relief on its own motion and never lets it spend on its own motion.

A worked example

A Budget is presented.

The taxation proposals are contained in a Finance Bill, introduced on the President's recommendation under article 117(1) and only in the House of the People.

The expenditure estimates are laid as the annual financial statement under article 112, and the votable half goes as demands for grants under article 113(2).

A member moves an amendment to the Finance Bill abolishing a cess. No recommendation of the President is required: the proviso to article 117(1).

A member moves an amendment to the Appropriation Bill increasing a grant by fifty crores. Inadmissible: article 114(2) bars any amendment varying the amount or altering the destination of a grant, and the presiding officer's decision is final.

A private member introduces a Bill creating a new statutory authority with a salaried staff. Article 117(3): it shall not be passed by either House unless the President has recommended its consideration, because it would involve expenditure from the Consolidated Fund.

His Bill instead provides only for fines for a new offence. Article 117(2): it is not treated as a financial Bill by reason only of providing for fines or other pecuniary penalties.

The grants are made and the Appropriation Act passed. Money may now be withdrawn, and only now: article 114(3), no money shall be withdrawn from the Consolidated Fund except under appropriation made by law passed in accordance with this article.

What beginners get wrong

That the Appropriation Bill and the Finance Bill are the same. One authorises spending, the other taxing; one takes money out, the other puts it in.

That the Appropriation Act covers only voted expenditure. Article 114(1)(b): it covers the charged expenditure too, not exceeding the amount previously shown.

That the Appropriation Bill can be amended like any other. Article 114(2): no amendment varying an amount or altering a destination, and the presiding officer's decision is final.

That a Bill involving expenditure needs the President's recommendation to be introduced. Article 117(3) bars its being passed without a recommendation for its consideration; 117(1) is what bars introduction, and it applies to Bills within article 110(1)(a) to (f).

That a member can never propose a financial change. He may move an amendment for the reduction or abolition of a tax without any recommendation: the proviso to article 117(1).

Quick revision

Art 113(2): demands to the House of the People, which may assent, refuse, or reduce; 113(3): no demand except on the President's recommendation. No power to increase or propose.

Art 114(1): an Appropriation Bill as soon as may be after the grants are made, covering (a) the grants and (b) the charged expenditure not exceeding the amount previously shown.

Art 114(2): no amendment varying the amount or altering the destination of a grant or varying charged expenditure; the presiding officer's decision is final.

Art 114(3): no money shall be withdrawn from the Consolidated Fund except under appropriation made by law passed in accordance with this article.

Appropriation Bill against Finance Bill: spending against taxing; money out against money in; after the grants against the taxation proposals; unamendable as to amount against amendable, with the proviso to art 117(1) allowing an amendment reducing or abolishing a tax without any recommendation.

Art 117(1): a Bill or amendment within art 110(1)(a) to (f) needs the President's recommendation and may not be introduced in the Council of States. 117(2): fines, penalties, fees for licences or services, and local taxation do not by themselves make a Bill financial. 117(3): a Bill involving expenditure from the Consolidated Fund shall not be passed unless the President has recommended its consideration.

Test yourself

1. How does money lawfully leave the Consolidated Fund? By four steps. The votable estimates are submitted as demands for grants to the House of the People under article 113(2), which may assent, refuse to assent or assent subject to a reduction, no demand being made except on the recommendation of the President. As soon as may be after the grants are made, an Appropriation Bill is introduced under article 114(1) providing for the appropriation of all moneys required to meet the grants so made and the charged expenditure, the latter not exceeding the amount previously shown in the statement. No amendment may be proposed varying the amount or altering the destination of any grant or varying charged expenditure, the decision of the presiding officer being final. And article 114(3) provides that no money shall be withdrawn from the Consolidated Fund except under appropriation made by law passed in accordance with the article, which is the operative lock, article 266(3) forbidding appropriation otherwise than in accordance with law.

2. Distinguish the Appropriation Bill from the Finance Bill. The Appropriation Bill authorises spending: it is introduced under article 114 after the voting on demands is complete, and it takes money out of the Consolidated Fund to meet the grants made and the charged expenditure. The Finance Bill authorises taxing: it gives effect to the Government's financial proposals for the year by imposing, abolishing, remitting, altering or regulating taxes, and it puts money into the Fund. They differ in timing, since the Appropriation Bill follows the completion of the voting on demands; in amendability, since article 114(2) forbids any amendment to an Appropriation Bill varying an amount or altering a destination while a Finance Bill may be amended and the proviso to article 117(1) allows an amendment reducing or abolishing a tax to be moved without any recommendation of the President; and in subject matter, appropriation falling under article 110(1)(d) and taxation under article 110(1)(a).

3. Why does article 114(2) forbid amendments to an Appropriation Bill? Because the amounts have already been decided. The demands for grants were moved on the recommendation of the President and voted by the House of the People alone, and the Council of States has no part in them. If the Appropriation Bill were amendable as to amounts or destinations, that decision would be reopened in a Bill in which the Council of States does participate, and the finality of the vote on the demands would be lost. The clause therefore protects the settled grants, and it makes the presiding officer's decision on the admissibility of an amendment final so that the point cannot itself become a means of delay.

4. What is the combined effect of article 117? That the executive controls all financial legislation from beginning to end. Under clause (1) a Bill or amendment making provision for any of the matters in article 110(1)(a) to (f), that is taxation, borrowing and guarantees, the custody of and payments into and out of the Funds, appropriation, the declaring or increasing of charged expenditure, and receipts, custody, issue or audit, may not be introduced or moved except on the recommendation of the President, and such a Bill may not be introduced in the Council of States. Under clause (3) any Bill at all which if enacted would involve expenditure from the Consolidated Fund may not be passed by either House unless the President has recommended its consideration. The two together mean that no member can effectively legislate anything that costs money, which with article 113(3) is the constitutional basis for describing the House's financial power as a veto rather than an initiative. The single opening left is the proviso to clause (1), under which an amendment providing for the reduction or abolition of a tax needs no recommendation: the Constitution permits the House to relieve the taxpayer on its own motion and never permits it to spend on its own motion.