Money Bills and Judicial Review: Lessons from a Constitutional Crisis in 1911 [Guest Post]

[This is a guest post by Rahul Narayan.]


A little over a century ago, Britain was headed for a Constitutional crisis due to severe differences between the Conservative party dominated, more-or less hereditary House of Lords and the elected Liberal Party dominated House of Commons. Matters came to a head in 1909 when the Lords rejected the Finance Act passed by the Commons leading to a resignation of the government, and political turmoil and elections. By 1911 a newly minted Liberal party majority in the Commons wished to remove the power of the Lords to reject Money Bills and derail other reform legislation. Thus began discussions on what became the Parliament Act 1911.

In many ways this was a continuation of a historical process. The right to originate bills of “aid and supply” had traditionally rested with the Commons since the Magna Charta. In 1671 and 1678 the Commons had passed resolutions denying the Lords the right to amend finance bills. This was accepted by the Lords, who only insisted that no unrelated matter be “tacked” on to the bills of supply to avoid scrutiny of the Lords on such unrelated questions because such tacking would be “unparliamentary” and would tend to “the destruction of Constitutional Government”. This sentiment was accepted by Commons in 1702. Bills of aid and supply were passed as consolidated Finance Acts after the 1860s to discourage the Lords from rejecting individual components of finance bills as it was believed the Lords would hesitate in striking the entire Finance Act. The skirmishes between the Lords and Commons from 1906 to 1909 which culminated in the rejection of the Finance Act 1909 only precipitated the end of the last remaining power of the Lords re money bills- the right to reject them.

In 1910, the Lords, stuck between the Scylla of money bill reform and the Charybdis of wholescale restructuring of the Lords to remove their hereditary privileges bowed to the inevitable and agreed not to press their Constitutional privilege to reject money bills asking in return only that the ancient malpractice of “tacking” be dealt with appropriately.

The quickly agreed contours of the discussion as regards money bills were: (a) The Commons had the sole privilege to pass or reject money bills; (b) No extraneous matter would be tacked on to a money bill to avoid scrutiny of the Lords.

In England, each House is the judge of its own privileges. Thus the Commons majority rejected the suggestions made by the Conservative opposition and by the Lords that either the courts or a Joint Committee decide when a bill was a money bill. The decision was that of the Speaker alone. Eventually it was decided that the Speaker would certify the bill as a money bill if practicable after consultation with 2 members of the House of Commons, one from each side of the House.

Extensive and learned debate was carried out in the Commons between PM Asquith, Samuel and Churchill (then a liberal) on the Government side and Balfour, Anson and others for the Conservative opposition on whether the actual definition of a Money Bill conformed to the contours everyone agreed upon. Speaker after speaker expressed the fear that the broad based definition of money bills could result in extraneous matters being tagged by the Speaker as a money bill to remove scrutiny of the House of Lords on important questions. The government tried to dispel these fears in two ways. Firstly, they argued that section 1 of the Bill only formalised the existing legal position on Money Bills alone. Secondly, they said that the word “only” in draft signified that nothing extraneous could be tacked on to a money bill. On 11th April 1911 PM Asquith stated that a law appointing 2 new high court judges would not be a money bill despite the fact that it would involve expenditure from the consolidated fund because “No human being could say that was a Bill which contained only provisions dealing with charges on the Consolidated Fund. It was for the appointment of two judges, and incidentally their salaries were a charge on the Consolidated Fund. That is a good illustration of the way in which these words will have to be construed.”  

Following serious debate, the Parliament Act, 1911 was passed in August 1911 and the incipient Constitutional crisis was averted. The Parliament Act 1911 was amended in 1949. Its use by the Labour Government to pass the Hunting Act 2004 over the protest of the Lords led to a huge brouhaha and a landmark case in the House of Lords, though not on the aspect of money bills. In the House of Commons with its strong tradition of an impartial Speaker (recently demonstrated during the Brexit debates by Speaker Bercow), there has never been a partisan food fight on the certification of a Money Bill and no accusation of “tacking”.

Money Bills were adopted into the Constitution of Ireland, 1937 with a little modification- as per Article 22 thereof, the certificate of the Speaker could be disputed by the upper house and the President could set up a committee headed by a High Court judge to determine the issue.

In our Constituent Assembly, the Framers used the Constitution of Eire as a basis for the money bill clause but removed the idea of a joint committee instead giving finality to the decision of the Speaker. An amendment to remove the word “only” was negatived on 8th June 1949 when the draft Article was approved.

What lessons can our Courts draw from the resolution of the crisis of 1911 when they examine the provisions relating to Money Bills under our Constitution in Article 110? On the issue of judicial review of the certification by the Speaker, the Courts must be conscious of the difference between the English position and ours while on the interpretation of the word “only” in Article 110(1), they must be conscious of the similarity.

Under our Constitution, judicial review of the certification of a Money Bill by the Courts ought to be permissible because:

  1. In Indian law, judicial review has to be specifically excluded and mere finality is not enough. Judicial review is specifically excluded in the Parliament Act, 1911, unlike in Article 110.  
  2. In India, the privileges of each house are subject to the provisions of Constitution as interpreted by the Courts, unlike in England.
  3. There is no absolute or unfettered power under the Indian Constitution.
  4. Certification by the Speaker is not “procedural” but is a substantive determination and a mistake is not irregularity of procedure but an illegality, and there is no bar on judicial review of an illegality.

Like in Britain, under our Constitution, the definition of a Money Bill is to be strictly construed because:

  1. The word “only” indicates that bills have to deal only with the provided heads and extraneous matter cannot be tacked on.
  2. Money Bills are the exception to the rule of bicameral legislative action and ought not to be allowed to subsume the main rule. The Rajya Sabha is emphatically not a hereditary chamber like the Lords in 1911 and the Rajya Sabha has a vital role to play. 
  3. Traditionally our Constitutional courts have not looked upon kindly at disguising the form of legislation to hide the substance- what is sometimes referred to as a “fraud on the Constitution”. 

The Aadhaar Act, inter-alia deals with eligibility for subsidies which are expenditures from the Consolidated Fund but neither creates subsidies nor directs such expenditures. Even otherwise no one would say this is a law only for this purpose. The majority judgment in the Aadhaar case, upheld the passing of the law as a money bill on the basis that the dominant purpose was subsidies, a characterisation disputed persuasively in fact and in law by Justice Chandrachud’s dissent. In Rojer Mathews case, when the Court was dealing with the amendment to the composition and rules governing Tribunal made vide the Finance Act, 2017, doubted the Aadhar judgment as regards money bills referred the issue to a larger bench both on the interpretation of the word “only” and on judicial review.

Based on his speech on April 11, 1911, PM Asquith would not think the Aadhaar Act is a Money Bill and would think that the merging of tribunals was tacked on to the Finance Act 2017 in a way that the Lords could describe as unparliamentary and what John Hatsell writing in 1785 would call “dangerous” and “unconstitutional”. As and when the Supreme Court considers the Aadhaar Review Petitions and the reference in Rojer Mathews, they should hold the same.    

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