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TMI Blog2022 (10) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... tive sense and that the wisdom of the Speaker of the Lok Sabha must be valued, save where it is blatantly violative of the scheme of the Constitution - It is now settled law that mere reference to a Larger Bench does not stop operation of the judgment till it is reversed by the Larger Bench and, thereby, the judgments of the Apex Court in the cases of Justice K.S.Puttaswamy (Retd.) , and ROJER MATHEW, remain operational and binding on this court. The view aforesaid is fortified by the judgment of the Supreme Court in the case of ASHOK SADARANGANI ANR. VERSUS UNION OF INDIA ORS. [ 2012 (3) TMI 587 - SUPREME COURT] wherein it has been held that a mere reference of an issue to a Larger Bench would not make the judgment inoperative. The judgments of the Apex Court in the cases of Justice K.S.Puttaswamy (Retd.) , and Rojer Mathew , can be applied to the present case. It is, however, necessary to deal with this case even independent to the judgments, cited supra, because the Notes on Clauses to the amendments elaborates the reason to bring in the amendment. It has been stated that the amendment is brought in to allow the Central Government to float the IPO and receive th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr.Prasad Vijayakumar for respondents 1 and 2, Mr.Satish Parasaran Senior Counsel for Mr.B.Deepak Narayanan for 3rd respondent ORDER HON'BLE CHIEF JUSTICE By this writ petition a challenge is made to Sections 128 to 146 of the Finance Act, 2021 [for brevity, the Act of 2021 ], with an alternative prayer to declare Section 5(9) of the Life Insurance Corporation Act, 1956 [for brevity, the Act of 1956 ] and Sections 128 to 130 and Sections 132 to 146 of the Act of 2021 as ultra vires Article 110 of the Constitution of India. An alternative prayer is also made to declare Section 140 of the Act of 2021 as ultra vires Article 110 of the Constitution of India. 2. Learned counsel submits that the petitioner is a policyholder of the Life Insurance Corporation (for brevity, the LIC ) and being aggrieved by Sections 128 to 146 of the Act of 2021, as also Section 5(9) of the Act of 1956, she has filed this writ petition. It is mainly on the premise that the provisions aforesaid were introduced by a Money Bill under Article 110 of the Constitution of India, though the amendment does not fall in the category of Money Bill. 3. Coming to the facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fall under any of the matters given under sub-clauses (a) to (f) of Article 110(1) of the Constitution of India. Therefore, the certificate was wrongly issued by the Speaker of the House of the People under Article 110(4) of the Constitution of India. 8. Learned counsel elaborating the arguments submitted that the Act of 2021 and amendments to the Act of 1956 do not pertain to imposition, abolition, remission, alteration or regulation of any tax; or the regulation of the borrowing of money or giving of any guarantee by the Government of India. It is not even for the custody of the Consolidated Fund of India or the Contingency Fund of India, or for the payment of moneys into or the withdrawal of money from any such fund, and even appropriation of moneys out of the Consolidated Fund of India. The provision under challenge even does not pertain to declaration of expenditure to be expenditure charged on the Consolidated Fund of India, etc., so as to take it under the realm of Article 110 of the Constitution of India. The Finance Bill, 2021 was certified to be a Money Bill, though none of the subject-matters under the Act of 2021 contain any of the matters given under Article 110 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus amount. 13. Learned counsel for the petitioner has made reference to the amendment to Securities and Exchange Board of India Act, 1992 and given reference of other facts, but are not relevant because challenge is made to the Act of 2021 for amendment in the Act of 1956 in reference to Article 110 of the Constitution of India. Thus, issue for consideration would be as to whether provisions of the Act of 2021 fall under any of the subject-matters of Article 110 of the Constitution of India. 14. Per contra, the writ petition has been vehemently contested by learned Additional Solicitor General of India appearing for the Union of India and learned Senior Counsel appearing for the LIC. 15. Learned counsel for the respondents prayed for dismissal of the writ petition at the threshold, as it failed to satisfy the triple test for challenge to the provision on any of the following grounds: (i) constitutional bar; (ii) constitutional illegality; and, (iii) constitutional fraud. 16. It is submitted that any inclusion or interference to the implementation of a public interest policy by way of a legislation should be eschewed, as it directly impacts the economic growth and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the President of India on 28.3.2021 and was notified in the Central Government Gazette on 29.6.2021 giving effect to the Finance Act of 2021 from 30.6.2021, the petitioner has approached this court after almost eight months when IPO is going to be issued and, therefore, the writ petition suffers from laches on the facts of this case. Learned Additional Solicitor General has made elaborate arguments on the issue which would be taken up by this court while dealing with the issues raised by the petitioner to avoid repetition. 23. Before adverting to the merits of the rival contentions, it would be appropriate to refer to the legislative developments; amendments to provisions of the Act of 1956 introduced by way of Money Bill; and, the executive developments, as given by learned Additional Solicitor General. (A) LEGISLATIVE DEVELOPMENTS: 24.1. On 1.2.2020, the Union Government of India announced that the Government proposes to sell a part of its holding in the LIC by way of IPO. The Finance Minister's Speech during the Union Budget 2020-2021 on the proposal is extracted as under: Disinvestment 105. Listing of companies on stock exchanges discipline a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eem fit: Provided further that the Corporation may, with the previous approval of the Central Government, consolidate or reduce the nominal or face value of the shares, divide the authorised share capital into equity share capital or a combination of equity and preference share capital, and divide the nominal or face value of shares into such denomination as the Corporation may decide. (2) The Corporation shall, with the previous approval of the Central Government, issue equity shares to the Central Government in consideration for the paid-up equity capital provided by the Central Government to the Corp,oration as it stood before the coming into force of section 131 of the Finance Act, 2021. ... (4) The Corporation may from time to time increase its issued share capital, with the previous approval of the Central Government, whether by public issue or rights issue or preferential allotment or private placement or issue of bonus shares to existing members holding equity shares, or by issue of shares to employees pursuant to share based employee benefits schemes, or by issue of shares to life insurance policyholders of the Corporation, or otherwise: Provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporation held by the Central Government, including all shares acquired during the period of three years preceding the opening of such public offer, resulting from a bonus issue or otherwise, shall be eligible for such computation; (c) requiring the holding of paid-up equity shares by the sellers for a minimum holding period as a condition for offering such shares for sale to the public, in relation to a public issue by way of an initial public offer, all fully paid-up equity shares of the Corporation held by the Central Government shall be eligible for such an offer for sale: Provided that and subject to any regulation made by the Securities and Exchange Board, no shares issued by the Corporation against revaluation of assets or by utilisation of revaluation reserves or from unrealised profits shall be eligible for computation of minimum promoter s contribution and for offer for sale in relation to a public issue by way of initial public offer. Explanation. -Words and expressions used in this sub-section but not defined either in this Act or in the Insurance Act or in the Companies Act shall have the meanings respectively assigned to them in regulations made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans a director appointed or nominated or deemed as such under section 4. 2(7) member means every person holding shares of the Corporation and whose name is entered in the register of members maintained under clause (a) of sub-section (1) of section 5B. 25.5. Section 4 of the Act of 1956, substituted vide Section 130 of the Act of 2021, provides for vesting of the general superintendence and direction of the affairs and business of LIC in its Board of Directors. Section 4 of the Act of 1956 further provides for the composition of the Board of Directors, the appointment or nomination of directors, conditions to be fulfilled for appointment or nomination and deeming of members constituting LIC immediately before the coming into force of this section as directors to enable the IPO. Relevant portions of Section 4 are reproduced hereunder for easy reference: 4. Board of Directors.- (1) The general superintendence and direction of the affairs and business of the Corporation shall vest in its Board of Directors, which may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation and are not by this Act expressly directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (2), the Central Government or the Nomination and Remuneration Committee, as the case may be, shall satisfy itself that such an individual as a director shall have no financial or other interest as is likely to affect prejudicially the exercise or performance by him of the functions of a director: Provided that the Board shall satisfy itself from time to time with respect to every director other than a director nominated under clause (d) of subsection (2) that he has no such interest: Provided further that, for the purposes of this subsection, any individual who is, or whose appointment or nomination or election is proposed and who has consented to be a director, shall furnish such information as the Central Government or the Nomination and Remuneration Committee or the Board, as the case may be, may require. (6) Notwithstanding anything contained in subsection (2), on and from the appointed date, an individual appointed under section 4 who is eligible to be or remain a director under section 4A and who, immediately before such appointed date, held the office of a member of the Corporation- (i) in the capacity as the Chairman of the Corporation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders including voting in shareholder meeting, disclosure of beneficial interest in securities and recognition of securities as shares in alignment with the requirements under the Securities Contract (Regulation) Act, 1956 and listing requirements. It is again a provision to match the core provision and consequential to the IPO which may require provision for transfer of share. 25.8. Section 19 of the Act of 1956, substituted by Section 132 of the Act of 2021, provides for the constitution of an Executive Committee of the Board, the composition thereof and the functions of the Committee. Section 19 of the 1956, pursuant to the amendment, reads as under: 19. Executive Committee.- (1) The Board may constitute an Executive Committee of the Board, consisting of- (i) the Chief Executive; (ii) Managing Directors; (iii) the director referred to in clause (d) of sub-section (2) of section 4; and (iv) four directors nominated by the Board from amongst the directors referred to in clauses (e), (f) and (g) of sub-section (2) of section 4. (2) The Executive Committee of the Board shall exercise such powers as the Board may entrust to it. 25.9. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese provisions. 25.13. Section 25 of the Act of 1956, as substituted by Section 137 of the Act of 2021, deals with the Appointment of Auditors. Sections 25A, 25B, 25C and 25D of the Act of 1956 provide for the removal and resignation of auditor, powers and duties of auditor and auditor's report, internal auditor and special auditor, respectively. In the Notes on Clauses these provisions have been amended/inserted with the object of bringing the provisions relating to LIC s audit, accounting standards and compliance with law and relevant standards in alignment with listing requirements. It is again a consequence of the core provision of Section 5 of the Act of 2021 to introduce a provision with ultimate goal to get money into the Consolidated Fund of India. 25.14. Section 28 of the Act of 1956, substituted by Section 140 of the Act of 2021, stipulates the manner in which the surplus from life insurance business should be utilized. The provision is reproduced hereunder for easy reference: 28. Surplus from life insurance business, how to be utilized.- (1) If as a result of any investigation undertaken by the Board under section 26, any surplus emerges, - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s website its surplus distribution policy at least once in five years, or such shorter period not less than three years as the Board may deem fit, and such policy shall specify, among other things, the percentages referred to in subsection (1). Thus, Section 28 of the Act of 1956 provides for the allocation to or reservation of 100% of the surplus relating to non-participating policyholders in every financial year's surplus for registered shareholders, in addition to up to 10% of the surplus relating to the participating policyholders as against a maximum of 10% of the total surplus under Section 28 as it stood prior to the amendment. The Notes on Clauses addresses this amendment as representing enhancement in money receivable into the Consolidated Fund of India on account of such increased allocation or reservation. 25.15. The amendment to Section 28A of the Act of 1956 brought in vide Section 141 of the Act of 2021 provides for the allocation to or reservation of balance profits from other businesses to its members after making provision for reserves and other matters. 25.16. Sections 28B and 28C of the Act of 1956 have been newly inserted vide Section 142 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties and Exchange Board of India (SEBI) with respect to compliance of certain provisions of the SEBI Act and its allied Regulations. c) On 11.02.2022, the President of India has approved an Offer for Sale of up to 31,62,49,885 equity shares of LIC. The Board of LIC has also authorized the IPO. d) On 13.02.2022, the Government filed the Draft Red Herring Prospectus with the SEBI for the IPO. Money markets have predicted that the IPO would raise up to Rs.65,000-Rs.70,000 crores. e) As on 26.02.2022, it has been submitted that the Union Cabinet has approved the proposal to amend the FDI policy to permit FDI of up to 20% in LIC. 27. The issue that requires consideration is as to whether the amendments fall within the realm of the subject-matters under Article 110 of the Constitution of India. It would be appropriate to refer to Articles 109 and 110 of the Constitution of India, which are reproduced hereunder: 109. Special procedure in respect of Money Bills. (1) A Money Bill shall not be introduced in the Council of States. (2) After a Money Bill has been passed by the House of the People it shall be transmitted to the Council of States for its recommendation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any of the matters specified in sub-clauses (a) to (f). (2) A Bill shall not be deemed to be a Money Bill by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licences or fees for services rendered, or by reason that it provides for the imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes. (3) If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People thereon shall be final. (4) There shall be endorsed on every Money Bill when it is transmitted to the Council of States under article 109, and when it is presented to the President for assent under article 111, the certificate of the Speaker of the House of the People signed by him that it is a Money Bill. [emphasis supplied] 28. The challenge to the amendments brought in by the Act of 2021 is on the ground that the subject-matter would not fall within the definition of Money Bills and, therefore, Article 110 of the Constitution of India was not attracted. 29. The aforesaid was clarified by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution. While answering the issue formulated as to whether the Aadhaar Act could be passed as Money Bill within the meaning of Article 110 of the Constitution of India, in Justice K.S.Puttaswamy (Retd.) , supra, it was held as under: 515.2. ... Insofar as Section 7 is concerned, it makes receipt of subsidy, benefit or service subject to establishing identity by the process of authentication under Aadhaar or furnish proof of Aadhaar, etc. It is also very clearly declared in this provision that the expenditure incurred in respect of such a subsidy, benefit or service would be from the Consolidated Fund of India. It is also accepted by the petitioners that Section 7 is the main provision of the Act. In fact, introduction to the Act as well as Statement of Objects and Reasons very categorically record that the main purpose of the Aadhaar Act is to ensure that such subsidies, benefits and services reach those categories of persons, for whom they are actually meant. .... 515.5. On examining of the other provisions pointed out by the petitioners in an attempt to take it out of the purview of Money Bill, we are of the view that those provisions are incidental in natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 415 and Yogendra Kumar Jaiswal v. State of Bihar, (2016) 3 SCC 183 insofar as they put decisions of the Speaker under Article 110(3) beyond judicial review, cannot be relied upon. 104. It must be emphasised that the scope of judicial review in matters under Article 110(3) is extremely restricted, with there being a need to maintain judicial deference to Lok Sabha Speaker's certification. There would be a presumption of legality in favour of the Speaker's decision and onus would undoubtedly be on the person challenging its validity to show that such certification was grossly unconstitutional or tainted with blatant substantial illegality. Courts ought not to replace the Speaker's assessment or take a second plausible interpretation. Instead, judicial review must be restricted to only the very extreme instance where there is a complete disregard to the constitutional scheme itself. It is not the function of constitutional courts to act as appellate forums, especially on the opinion of the Speaker, for doing so would invite the risk of paralysing the functioning of Parliament . [emphasis supplied] 36. The word only used under Article 110 was also cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make Article 110 a nullity. No tax can be imposed without making provisions for its assessment, collection, administration, reference to courts or tribunals, etc, one can visualise only one section in a Bill imposing the main tax and there may be fifty other sections which may deal with the scope, method, manner, etc. of that imposition. Further, we have also to consider the provisions of clause (2) of Article 110; and these provisions may be helpful to clarify the scope of the word only , not directly but indirectly. [emphasis supplied] 37. It is, however, submitted that the judgment in Rojer Mathew , supra, has been referred to a Larger Bench of Seven- Judges, as is evident from paragraph 117 thereof, which is reproduced hereinunder: 117. Given the various challenges made to the scope of judicial review and interpretative principles (or lack thereof), as adumbrated by the majority in K.S. Puttaswamy (Aadhaar-5 J.) and the substantial precedential impact of its analysis of the Aadhaar Act, 2016, it becomes essential to determine its correctness. Being a Bench of equal strength as that in K.S. Puttaswamy (Aadhaar-5 J.), we accordingly direct that this batch o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined or precluded from taking a view in the matter. [emphasis supplied] 41. In view of the aforesaid, the judgments of the Apex Court in the cases of Justice K.S.Puttaswamy (Retd.) , supra, and Rojer Mathew , supra, can be applied to the present case. It is, however, necessary to deal with this case even independent to the judgments, cited supra, because the Notes on Clauses to the amendments elaborates the reason to bring in the amendment. It has been stated that the amendment is brought in to allow the Central Government to float the IPO and receive the money into the Consolidated Fund of India. In view of the above, the reason for amendment is to bring the money into the Consolidated Fund of India and all other amendments were required as a consequence thereof and are saved by Article 110(1)(g) of the Constitution of India, because payment of moneys into the Consolidated Fund or the Contingency Fund of India is covered by Article 110(1)(c) of the Constitution of India. We are, therefore, of the view that the amendment in the case on hand falls within the purview of Article 110 of the Constitution of India. 42. The word only used in the definition of Money B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of challenge to the decision of the Speaker of the House of the People, it became final in view of Article 110(3) of the Constitution of India and if challenge to the amendment is accepted, then we would be going against the mandate of Article 110(3) of the Constitution of India with a challenge to the certification by the Speaker of the House of the People. The Bill was otherwise returned by the Rajya Sabha without any comments or objections. 44. We are unable to accept the argument that the certificate given by the Speaker of the House of the People could not have been challenged by the petitioner and if it cannot be, the question would be in reference to the consequence of Article 110(3) of the Constitution of India, which has not been addressed by learned counsel for the petitioner while raising the argument. It is more so when the issue of judicial review has been kept open by the Apex Court, yet the challenge to the decision of the Speaker of the House of the People has not been made. 45. In any case, the petitioner, who is a policyholder having a policy worth Rs.50,000/-, is questioning the receipt of money approximately in the range of Rs.65,000 to Rs.70,000 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. We do not intend to comment on the aforesaid aspect, however in the absence of challenge to the certificate issued by the Speaker of the House of People, the challenge to the Act of 2021 cannot be accepted. The decision of the Speaker of the House of the People is to be treated as final as per Article 110(3) of the Constitution of India, if judicial review of it is not prayed for. 49. Taking into consideration the overall conspectus of the case, we find that the petitioner has challenged the amendment in reference to Article 110 of the Constitution of India without challenging the certificate issued by the Speaker of the House of the People, though his decision is taken as final as per Article 110(3) of the Constitution of India. Moreover, as recorded in the previous paragraphs, when the petitioner was asked as to whether he would challenge the certificate issued by the Speaker of the House of the People, he answered in the negative and this shows that the challenge is made to the amendment ignoring the constitutional mandate under Article 110(3) of the Constitution of India. 50. At this stage, we reiterate that the challenge was made to the amendment when the process t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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