Guest Post: The Re-Appropriation of MP-LAD Funds – a Case of Bypassing Constitutional Procedure

[This is a guest post by Samyak Gangwal and Krishnesh Bapat.]

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In 1993, the then Prime Minister, P.V Narasimha Rao announced the Member of Parliament Local Area Development Scheme (“MPLADS”). The objective of the scheme was to enable Members of Parliament to recommend works of developmental nature in their constituencies with an emphasis on creation of durable community assets based on locally felt needs. Since 2011-12, the legislature has been allocating Rs. 5 Crore per annum to every Member of Parliament under MPLADS. In the last five years Rs. 2.59 Lakh Crore have been allocated under MPLADS and only 10.8% of that amount has remained unspent (understandable given that MPLADS Fund is non-lapsable), indicating many Indians have benefited from the Scheme. On 16^th March 2020, the Parliament enacted Appropriation Act, 2020 which earmarked a sum of Rs. 3960 Crore for MPLADS for financial year 2020-21.

It seems that the Government had initially supported the idea of permitting MPs to use MPLADS funds to tackle Covid-19 related problems. On 24.03.2020, the Ministry of Statistics and Programme Implementation issued Circular No. E-4/2020-MPLADS (Pt) allowing MPs and District Authorities to utilize MPLADS fund for medical testing, screening and other facilities required to detect and contain Covid-19. Later on 28.03.2020 in continuation of the Circular dated 24.03.2020, Circular No. E-4/2020-MPLADS (Pt-II) dated 28.03.2020 was issued allowing MP’s to recommend release of funds from MPLADS to such Fund/Government Pool or Head of Account as may be decided by the Central Government for managing Covid-19 in the Country. However, on 8^th April 2020, in stark contrast to the earlier Circulars, the Ministry of Statistics and Programme Implementation, issued Circular No. E-4/2020-MPLADS(Pt II) (“April Circular”) stating that the Government had decided not to operate MPLADS for two years and had placed Rs. 3960 Crore (earmarked for MPLADS) to Ministry of Finance for strengthening its efforts in managing challenges of Covid-19 and its adverse impacts on society.

In this essay, we argue that the re-appropriation of funds earmarked for MPLADS to Ministry of Finance does not comply with the procedure prescribed in the Constitution and that the executive has not complied with the will of the Parliament. To put it simply, as per the Constitution, if the Parliament has sanctioned money for a particular purpose (say healthcare), the executive must use that money for that purpose only and not for anything else (say defence). Therefore, any appropriation of funds. contrary to the direction of the Parliament, is unconstitutional.

In the first part of this essay, which follows this introduction, we set out the Constitutional provisions which justify the aforementioned stance and argue that the April Circular was unconstitutional and without the authority of law. In the second part of the essay, we discuss Constitutional provisions which permit the executive to seek funds from the Constitution in times of emergency and which could have been utilised during the Covid-19 pandemic.

I

Article 112 to Article 117 of the Constitution prescribes the ‘Procedure in Financial Matters’. Article 112 of the Constitution prescribes that the President shall in respect of every financial year cause to be laid before the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year. This is referred to as “annual financial statement” in the Constitution and colloquially referred to as Annual Budget. The estimates of expenditure embodied in the annual financial statement comprise:

1. The sums required to meet expenditure charged upon the Consolidated Fund of India (herein after referred to as ‘charged expenditure’). Charged expenditure does not require a vote in the Parliament for withdrawal from the Consolidated Fund of India and includes salary, allowances and pension for the President as well as Governors of States, Speaker and Deputy Speaker of the House of People, the Comptroller General of India and Judges of the Supreme and High Court; and,
2. The sums required to meet other expenditure proposed to be made from Consolidated Fund of India (herein after referred to as ‘voted expenditure’). This year’s financial statement was presented on 1^st February 2020.

Article 113 of the Constitution prescribes that voted expenditure has to be submitted in the form of demands for grants to the House of People. The House of People has the power to assent or refuse to assent to any demand. For financial year 2020-21, Ministry of Statistics and Programme Implementation submitted a demand to the House of People for a grant of Rs. 5444 Crore. In the said demand, Rs. 3960 Crore was earmarked for the MPLADS Fund. On 16^th March 2020, in accordance with Article 113, the House of People assented to the demand raised by Ministry of Statistics and sanctioned Rs. 3960 Crore for the MPLADS Fund.

Once the House of People has assented to granting money to the Government as per Article 113, Article 114 requires an appropriation bill to be introduced in the House of People to enable the withdrawal funds from the Consolidated Fund of India. On 16^th March 2020 an appropriation bill was introduced in the Parliament and on 25^th March 2020 the Parliament enacted the Appropriation Act, 2020. Entry 95 of the Appropriation Act, 2020 sanctioned an amount of Rs. 5444 Crore to Ministry of Statistics and Programme Implementation, which included a sum of Rs. 3960 Crore for MPLADS.

It is evident from above, that the legislature had granted a sum of Rs. 3960 specifically for MPLADS. It is our submission that the law mandates this money be used only  for MPLADS and not any other purpose. This is for three reasons – firstly, Article 114(3) mandates that no money can be withdrawn from Consolidated Fund of India except according to an appropriation made by law in accordance with Article 114. Article 266(3) also, by and large, restates the same principle. If any money is withdrawn without prior approval of the Parliament through an appropriation act, that withdrawal will be without authority of law. Through the April Circular, the Government of India has sought to do indirectly, what it could not do directly. The Government could not have directly withdrawn money directly from the Consolidated Fund of India for strengthening its efforts in managing Covid-19 as there was no such demand raised before the Parliament and there was no entry in the Appropriation Act, 2020 which would have permitted such withdrawal. The April Circular which re-appropriates money assigned for MPLADS to Ministry of Finance is essentially a withdrawal from Consolidated Fund of India without prior permission of the Parliament.

Secondly, if the Government is permitted to re-appropriate money allocated by Parliament for a specific purpose, then the entire exercise of ‘Annual Financial Budget’ in the Parliament, which is presented with much fanfare, is futile. Such a reading of the Constitution would permit the Government to seek money from the representatives of the people for purpose X and utilise that money for purpose Y. This would enable a conniving government to seek money for a palatable purpose and simply use that money later for another purpose. Such a reading would also be against the first principle of parliamentary democracy that the Government must function, both, in respect of determination of its policies and the administering of these policies, strictly under the control of the representatives of the people. If the house of representatives cannot even guide the government on how taxpayers money ought to be utilised, they will not exercise any real control on the government.

Thirdly, Section 3 read with Section 2 of the Appropriation Act, 2020 itself mandates that the funds applied out of Consolidated Fund of India should be appropriated for services and purposes expressed in the Schedule in relation to the said year. As stated above Entry 95 of the Schedule mandated that Rs. 5440 Crore, which includes a sum of Rs. 3960 Crore for MPLADS, had to be used by Ministry of Statistics and Programme Implementation for the purpose for which the money was sought. Section 2 and Section 3 of the Appropriation Act, 2020 have been reproduced below:-

2. From and out of the Consolidated Fund of India there may be paid and applied sums not exceeding those specified in column 3 of the Schedule amounting in the aggregate to the sum of one hundred ten lakh thirty-nine thousand eight hundred twenty-two crore and thirteen lakh rupees towards defraying the several charges which will come in course of payment during the financial year 2020-21 in respect of the services specified in column 2 of the Schedule.

3. The sums authorised to be paid and applied from and out of the Consolidated Fund of India by this Act shall be appropriated for the services and purposes expressed in the Schedule in relation to the said year.

In view of the above, money can only be withdrawn from Consolidated Fund of India in accordance with the Appropriation made by the Parliament and it is our case that the April Circular was without the Authority of Law.

II

The question that may arise is what is the recourse a government has when the amount provided through an appropriation act under Article 114 is insufficient for a particular service for the current FY or if the need has arisen for additional expenditure for a new service which is not contemplated in the annual financial statement (like Covid-19 Pandemic). The drafters of the Constitution contemplated that such situations may arise and did not expect the Government to be bound for a year to a demand they had raised at the beginning of a financial year. For that purpose, the Constitution provides for Article 115 and Article 116.

Article 115 provides for supplementary, additional or excess grants which can be made by the Parliament in order to permit excess withdrawal of money in exigent situation which may occur in the middle of a financial year. Article 116 gives the power to the House of People to make a grant for meeting an unexpected demand upon the resources of India when on account of the magnitude or the indefinite character of the service the demand cannot be stated with the details ordinarily given in an annual financial statement. The Government of India has chosen to not follow the mechanism provided by Article 115 & Article 116 and has instead indirectly withdrawn from Consolidated Fund of India without the prior approval of the Parliament.

If the Government of India needed money immediately, they could have also taken recourse to Article 267 which provides for the Contingency Fund of India. The money in the Contingency Fund is entirely at the disposal of the President and does not require prior authorization. If any money from the Contingency Fund would have been withdrawn, it would have only required a subsequent authorization from the Parliament.

Therefore, even though the Government had two legally maintainable routes to withdraw money for its efforts against Covid-19, the Government has chosen to act without authority of law and has not complied with a Constitutionally mandated procedure which is necessary for a healthy parliamentary democracy.