2009 (3) TMI 563 - HC - Companies Law

Market Stabilization Scheme - Held that - The proceeds of the scheme, though they are kept immobilized in a separate non-interest bearing account, do not be outside the Consolidated Fund. The borrowings under the Market Stabilization Scheme are stated to be fiscal deficit neutral as the amounts raised are not used for the normal expenditure of the Government, but are kept immobilized in a separate non-interest bearing account with the Reserve Bank, but as part of the Consolidated Fund of India. The interest paid on such borrowings do add to the fiscal, deficit as the expenditure of the Government of India. The Memorandum of Understanding that has been entered into between the bank and the Central Government is not referable either to the provisions of sub-section (1) or sub-section (2) of section 21. The relief that has been sought is a direction to the effect that the Comptroller and Auditor General should be directed to estimate the profit and loss to the country in the light of the depletion in the Currency and Gold Revaluation Account of the Reserve Bank and the interest paid on the Scheme over the years and to file a detailed report before this Court or to the President of India for laying before the House of Parliament. We do not consider it appropriate that any such direction should be issued by this Court in the exercise of its jurisdiction under Article 226 of the Constitution, particularly in the context of a public interest petition. Appeal dismissed.

Issues Involved:
1. Legality of the Market Stabilization Scheme (MSS) and its funds.
2. Audit and accountability of the MSS funds.
3. Compliance with Section 21 of the Reserve Bank of India Act, 1934.
4. Judicial intervention in economic policy matters.

Issue-wise Detailed Analysis:

1. Legality of the Market Stabilization Scheme (MSS) and its funds:
The petitioner challenged the legality of the MSS, arguing that the funds should be part of the Consolidated Fund of India and appropriated according to law. The Court found that Clause 8 of the Memorandum of Understanding (MoU) between the Reserve Bank of India (RBI) and the Government of India stipulates that amounts raised under the MSS are part of the Consolidated Fund of India, held in a separate identifiable account. The Court noted that the proceeds of the MSS are kept in a separate non-interest-bearing account with the RBI and are accounted for in the Annual Financial Statement of the Central Government. The borrowings under the MSS are fiscal deficit neutral as they are not used for normal government expenditure but are kept immobilized.

2. Audit and accountability of the MSS funds:
The petitioner sought a direction for the Comptroller and Auditor General (CAG) to audit the MSS funds and estimate profit or loss due to depletion in the Currency and Gold Revaluation Account (CGRA). The Court noted that the CAG audits the accounts of the Ministry of Finance and the appropriation accounts of the Government of India at regular intervals. The CAG's affidavit clarified that the receipts and disbursements under the MSS are budgeted and audited. The Court held that the timing, scope, and extent of the audit fall within the CAG's jurisdiction and are not matters for judicial intervention.

3. Compliance with Section 21 of the Reserve Bank of India Act, 1934:
The petitioner argued that the MoU between the RBI and the Government of India should be laid before Parliament as required under Section 21(4) of the RBI Act. The Court found that the MoU is not referable to the provisions of Section 21(1) or (2) of the RBI Act, which pertain to the management of public debt and banking transactions of the Central Government. Therefore, the requirement to lay the agreement before Parliament did not apply.

4. Judicial intervention in economic policy matters:
The Court emphasized the limited scope of judicial intervention in economic policy matters, highlighting that such decisions involve technical expertise and policy-making functions better left to constitutional or statutory authorities. The Court stated that its role is to ensure governance in accordance with constitutional and statutory mandates, not to supplant the role of policy-making authorities. The Court reiterated that economic policies are subject to accountability to Parliament and the people, and judicial intervention is warranted only in cases of breach of constitutional or statutory prescriptions.

Conclusion:
The Court dismissed the petition, finding no merit in the arguments presented. It held that the MSS funds are part of the Consolidated Fund of India, duly audited by the CAG, and that there was no breach of statutory obligations under the RBI Act. The Court also underscored the importance of judicial restraint in matters of economic policy, affirming the separation of powers in a democratic setup.

← Previous Next →