Question

Consider the following statements about the effects of a Financial Emergency under Article 360.

1. The President can issue directions to reduce the salaries of Supreme Court and High Court judges during a Financial Emergency.

2. A Financial Emergency requires parliamentary approval within two months and continues indefinitely until revoked.

3. The reservation of state money bills for the President’s consideration is a mandatory provision during a Financial Emergency.

Which of the statements given above is/are correct?

• A. 1 and 2 only
• B. 1 and 3 only
• C. 2 and 3 only
• D. All of the above

Answer 1

Answer:

A. 1 and 2 only

Financial Emergency (Article 360)

• The provision for a Financial Emergency is enshrined in Article 360 of the Indian Constitution, under Part XVIII (Emergency Provisions).

• It empowers the President to declare a Financial Emergency if he is satisfied that a situation has arisen whereby the financial stability or credit of India or any part of its territory is threatened.

• India has never experienced a Financial Emergency to date.

Effects of a Financial Emergency

• Statement 1: Reduction of Salaries of Judges

  • During a Financial Emergency, the President is empowered to issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union, including the judges of the Supreme Court and the High Courts. This is a significant power ensuring financial discipline across all branches of government.

  • This power highlights the severe nature of a financial crisis and the measures that can be taken to mitigate it.

• Statement 2: Parliamentary Approval and Duration

  • A proclamation declaring a Financial Emergency must be approved by both Houses of Parliament within two months from the date of its issue.

  • Such approval requires a simple majority in both Houses.

  • Once approved by both Houses, the Financial Emergency continues indefinitely until it is revoked by the President. There is no maximum period prescribed for its operation.

  • The President can revoke the proclamation at any time by a subsequent proclamation, which does not require parliamentary approval.

• Statement 3: Reservation of State Money Bills

  • During a Financial Emergency, the President can issue directions to any state to reserve all Money Bills or other Financial Bills, passed by the state legislature, for his consideration.

  • However, it is not an automatically mandatory provision that all state money bills are reserved for the President's consideration. It is a power that the President may exercise by issuing specific directions. Once such a direction is issued, it becomes mandatory for the states. The statement implies it is an automatic, inherent mandatory provision, which is incorrect.

Additional Key Facts for Competitive Exams

• A Financial Emergency cannot be challenged in any court on the ground of malafide or extraneous reasons. However, the 44th Amendment Act of 1978 introduced a provision that the President's satisfaction in declaring any type of emergency (including financial) is subject to judicial review.

• The proclamation of Financial Emergency can also direct states to observe specified canons of financial propriety.

• This emergency provision enables the Union government to assume complete control over the financial affairs of the states, ensuring fiscal stability during a crisis.