Question

Which of the following statement(s) accurately contrast the Central Finance Commission (CFC) and the State Finance Commission (SFC)?

i. The CFC is constituted by the President under Article 280, while the SFC is constituted by the Governor under Articles 243-I and 243-Y.
ii. Both commissions are quasi-judicial bodies, but only the SFC is explicitly granted the powers of a civil court for summoning witnesses.
iii. The recommendations of the CFC are legally binding on the Union government, whereas the recommendations of the SFC are only advisory for the State government.
iv. The CFC consists of a chairman and four members, while the SFC can have a maximum of five members including the chairman.

• A. Only i and ii
• B. Only i, ii, and iv
• C. Only iii and iv
• D. All the above (i, ii, iii and iv)

Answer 1

Answer:

A. Only i and ii

Constitutional Basis and Establishment

• Central Finance Commission (CFC): Established by the President of India under Article 280 of the Constitution. It is a quasi-constitutional body.
• State Finance Commission (SFC): Established by the Governor of a State under Articles 243-I and 243-Y of the Constitution. This ensures financial autonomy at the state level.

Powers and Functions

• Both CFC and SFC function as quasi-judicial bodies.
• The SFC is explicitly granted the powers of a civil court for summoning witnesses and compelling the production of evidence, as per the relevant state legislation. This strengthens its investigative capacity at the state level.
• The CFC, while having broad powers to recommend, does not possess the specific civil court powers granted to the SFC.

Nature of Recommendations

• The recommendations of the CFC, although highly persuasive and generally accepted, are essentially advisory in nature to the Union government. The Union government can choose not to accept them, but must then lay them before Parliament with an explanatory memorandum.
• Similarly, the recommendations of the SFC are also primarily advisory to the State government. The State legislature decides the extent to which these recommendations will be implemented.

Composition

• The CFC comprises a Chairman and four other members, appointed by the President.
• The composition of the SFC can vary from state to state, as defined by the respective State Legislature. While it can include a chairman and up to four other members, the total number is often specified by state laws, and can be less than five.

Key Differences for Competitive Exams

• Constitutional Article: Differentiate between Article 280 (CFC) and Articles 243-I/243-Y (SFC).
• Powers: Note the specific mention of civil court powers for SFC, which is a crucial distinguishing factor.
• Binding Nature: Understand that neither commission's recommendations are strictly legally binding, but both are advisory. The phrasing in exams might test this nuance.
• Composition Flexibility: Recognize that SFC composition is state-dependent, unlike the fixed structure of the CFC.