Part V: The Union

Procedure in Financial Matters

Article 112: Annual Financial Statement

Overview of Article 112: Annual Financial Statement

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(1) The President shall in respect of every financial year cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year, in this Part referred to as the "annual financial statement''.

(2) The estimates of expenditure embodied in the annual financial statement shall show separately—

  • (a) the sums required to meet expenditure described by this Constitution as expenditure charged upon the Consolidated Fund of India; and
  • (b) the sums required to meet other expenditure proposed to be made from the Consolidated Fund of India, and shall distinguish expenditure on revenue account from other expenditure.

(3) The following expenditure shall be expenditure charged on the Consolidated Fund of India—

  • (a) the emoluments and allowances of the President and other expenditure relating to his office;
  • (b) the salaries and allowances of the Chairman and the Deputy Chairman of the Council of States and the Speaker and the Deputy Speaker of the House of the People;
  • (c) debt charges for which the Government of India is liable including interest, sinking fund charges and redemption charges, and other expenditure relating to the raising of loans and the service and redemption of debt;
  • (d) (i) the salaries, allowances and pensions payable to or in respect of Judges of the Supreme Court;
  • (ii) the pensions payable to or in respect of Judges of the Federal Court;
  • (iii) the pensions payable to or in respect of Judges of any High Court which exercises jurisdiction in relation to any area included in the territory of India or which at any time before the commencement of this Constitution exercised jurisdiction in relation to any area included in a Governor's Province of the Dominion of India;
  • (e) the salary, allowances and pension payable to or in respect of the Comptroller and Auditor-General of India;
  • (f) any sums required to satisfy any judgment, decree or award of any court or arbitral tribunal;
  • (g) any other expenditure declared by this Constitution or by Parliament by law to be so charged.

Explanations

Article 112 of the Constitution of India outlines the fundamental procedure for the annual financial management of the government. It mandates that the President presents an "annual financial statement," which is essentially the budget, to both Houses of Parliament. This statement contains the estimated receipts and expenditure for the upcoming financial year, distinguishing between different types of expenses.

Clause-by-Clause Explanation

Clause (1): Presentation of the Annual Financial Statement

This clause mandates the President to present a statement of the Government of India's estimated receipts and expenditures for every financial year. Commonly referred to as the "Union Budget," this document is essential for outlining the government's financial priorities. The budget is crucial for ensuring parliamentary scrutiny and approval of the government's planned expenses, thus reinforcing the principle of legislative control over public finances.

Clause (2): Expenditure Classification

The annual financial statement must distinguish between two kinds of expenditures:

  • Expenditure Charged upon the Consolidated Fund of India: These expenses are directly chargeable and non-votable by Parliament. They are of a compulsory nature, ensuring constitutional offices and key commitments are funded.
  • Other Expenditures: This includes discretionary expenses, which require Parliament's approval through voting.

Clause (3): Expenditure Charged on the Consolidated Fund of India

This clause outlines the expenditures charged directly on the Consolidated Fund of India. These expenses include:

  • Emoluments and Allowances of the President: Reflects the importance of maintaining the dignity of the head of state.
  • Salaries of Key Parliamentary Positions: These include the Chairman and Deputy Chairman of the Council of States and the Speaker and Deputy Speaker of the House of the People.
  • Debt Charges: Ensures that the government meets its debt obligations, including interest payments and debt redemption.
  • Judges’ Salaries and Pensions: Includes payments to Supreme Court and High Court judges, maintaining the independence of the judiciary.
  • Comptroller and Auditor-General of India: Secures the salary and pensions of the CAG, an independent authority responsible for auditing government accounts.
  • Judicial Orders and Arbitration Awards: Any payments required by judgments or arbitral awards are covered here.
  • Other Declared Expenditures: Any additional expenditures that are declared charged by the Constitution or Parliament.

Real-Life Examples

  • Every year, the Union Budget is presented in February, followed by discussions and approvals in Parliament. The 2021 budget, for example, focused on health and infrastructure in the wake of the COVID-19 pandemic, reflecting the government's response to national needs.
  • In 2018, controversy arose when a judgment required the government to compensate a private company, which had to be charged from the Consolidated Fund. This highlighted the critical role of Article 112 in ensuring legal obligations are fulfilled through public funds.

Historical Significance

The creation of this article underscores the British tradition of parliamentary control over public finances. Historically, the budget process was a means of securing the government's accountability to elected representatives.

Legislative History

Article 112 of the Indian Constitution, initially formulated and debated as Article 92 on June 8th, June 10th, and October 13th, 1949, was ultimately incorporated into the Constitution.

Debates and Amendments

During the constitutional debate, Professor K. T. Shah advocated amendments to Article 92, proposing that the Finance Minister, rather than the President, should present the budget to Parliament, aligning with the British parliamentary model. Additionally, he suggested granting the House of the People exclusive authority over the annual financial statement. However, both proposals were ultimately rejected by the assembly.

Dr. B. R. Ambedkar proposed changes to sub-clause (b) of clause (3) of Article 92, substituting "emoluments" with "salaries" and including salaries and allowances of Ministers and Members of Parliament as expenditures charged to the revenues of India. This amendment was adopted.

Professor Shibban Lal Saksena critiqued the amendment that rendered Ministers' and Members of Parliament's salaries non-votable, expressing concerns that it might make the executive irremovable. He advocated for the removal of the clause allowing Parliament to declare any expenditure non-votable, citing potential undemocratic implications.

Shri T. T. Krishnamachari proposed an amendment to paragraph (iii) of sub-clause (d) of clause (3) of Article 92, relating to pensions payable to judges within the framework of the annual financial statement. His amendment aimed to modify the phrase 'exercises or immediately' to 'exercises jurisdiction within any area included in the territory of India or which at any time', a change that was discussed and approved by the assembly.

References

  • The Constitution of India - Article 112, Annual Financial Statement.
  • Constituent Assembly Debates - Debates surrounding Article 92 (Draft Article 92).
  • Basu, D.D. "Commentary on the Constitution of India".
  • Government of India's Union Budget records (2020, 2021) - Real-life budget examples and analyses.
  • Jain, M.P., "Indian Constitutional Law," 8th Edition - Financial provisions and constitutional governance.
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