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Supreme Court Ruling on Finance Act, 2017

  • 14 Nov 2019
  • 5 min read

Why in News

Recently, a Constitution Bench of the Supreme Court of India (SC) struck down the rules framed by the government under the Finance Act of 2017 to alter the appointments to 19 key judicial tribunals.

  • SC struck down the changes made by the Finance Act, 2017 in entirety, as it found them contrary to the parent enactment and the principles envisaged in the Constitution.
    • These rules (Tribunal, Appellate Tribunal, and other Authorities Rules, 2017) were formulated by the Central Government under Section 184 of the Finance Act, 2017.
  • Also, the SC raised the question of whether the Finance 2017 Act could have been passed as a money bill. For now, it has been referred to a larger Bench of 7 judges.
    • Ordinarily, the Finance Act is enacted at the beginning of every accounting year to give effect to the government’s fiscal policies.
    • However, the Finance Act, 2017 apart from setting the fiscal agenda, made changes that affected the powers and composition of various tribunals. For example, National Green Tribunal, Income Tax Appellate Tribunal, etc.

Reasoning Behind the Judgement

  • On the issue of changes made by the Finance Act, 2017
    • The Finance Act, 2017 gave the Union government the power to govern appointments and modify service terms and conditions of members of tribunals.
      • The government can make changes in them through rules (executive action).
    • The problem associated with these changes is two-fold:
      • A bill requires parliamentary approval in order to be enforced, therefore changing appointment, removal, and reappointment of members on a tribunal through rules lowers the threshold of parliamentary scrutiny.
      • Also, in 2014, the SC, while examining provisions related to the National Tax Tribunal, had held that Appellate tribunals have powers and functions similar to that of High Courts.
      • Hence matters related to the appointment and reappointment of their members must be free from executive involvement.


  • Tribunal is a special court to deal with specific matters or problems of a particular type. They are established by an act of Parliament.
  • However, the courts are constitutional bodies, that deal with all types of cases.

  • On the issue of Money Bill
    • The case has been referred to a larger bench. However, the minority opinion of the Constitution Bench held that the Finance Act, 2017, could not have been enacted as a money bill.

Money Bills

  • A Bill is said to be a Money Bill if it only contains provisions related to taxation, borrowing of money by the government, expenditure from or receipt to the Consolidated Fund of India. Bills that only contain provisions that are incidental to these matters would also be regarded as Money Bills.
  • A Money Bill may only be introduced in Lok Sabha, on the recommendation of the President. It must be passed in the Lok Sabha by a simple majority of all members present and voting.
  • Following this, it may be sent to the Rajya Sabha for its recommendations, which Lok Sabha may reject if it chooses to. If such recommendations are not given within 14 days, it will deem to be passed by Parliament.

Other highlights of the judgment

  • On account of the merger of tribunals, the SC directed the government to undertake a ‘Judicial Impact Assessment’ of all 24 tribunals and analyze the ramifications of the merger.
  • The SC also highlighted the dismal state of tribunals. Therefore, in order to monitor the working of tribunals, the SC directed the constituting a statutory organization called the National TribunalCommission.

Source: TH

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