TaxTMI 
TaxTMI 
2022 (10) TMI 690
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....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 case, it is submitted that every participating policyholder was entitled to a minimum of 90% of the surplus arising from non-participating policies, but the amendment under challenge has reduced their entitlement to nil and, therefore, being a policyholder, she has challenged Sections 128 to 146 of the Act of 2021, apart from Section 5(9) of the Act of 1956. 4. Narrating the facts further, it is submitted that by virtue of Part III of Chapter VI of the Act of 2021, the Parliament has amended the Act of 1956 and made substantial changes to various facets of the LIC. The amendment by way of the Act of 2021 was brought after the Finance Bill, 2021 was classified ....
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....ia, 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 of the Constitution of India. 9. Referring to the Act of 1956, it is submitted that initially the President of India promulgated the Life Insurance (Emergency Provisions) Ordinance, 1956 to vest management of all life insurance business in Central Government pending nationalization in the backdrop of alleged mismanagement of the affairs of number of insurance companies. The Parliament converted the aforesaid Ordinance to an Act and enacted the Life Insurance (Emergency Provisions) Act, 1956, followed by the Act of 1956. The Act of 1956 provides for regulation, management, audit and control of the affairs of LIC, apart from other subject-mat....
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....ia 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 prosperity of the nation and the welfare of the general public. 17. The Union is empowered to carry on any trade or business as per Article 298 of the Constitution of India and the decision of the Central Government was duly approved by the Parliament to trade 5% of its shareholding in LIC through Initial Public Offering "IPO" under the procedure of "Offer for Sale" as per the SEBI norms and, therefore, the amendment is valid and there is no constitutional bar in bringing out IPO. 18. It is next submitted that the amendments have been brought in to allow the Central Government to float the IPO and receive the money into the Consolidated F....
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....; 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 company and provides access to financial markets and unlocks its value. It also gives opportunity for retail investors to participate in the wealth so created. The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO)." [emphasis supplied] 24.2. Subsequently, while presenting the Union Budget for the year 2021-22, the Finance Minister stated that: "In 2021-22 we would also bring the IPO of LIC for which I am bringing the requisite amendments in this Session itself." 24.3. Accordingly, the Finance Bill, 2021 was introduced in the Lok Sabha carrying out the appropriate amendments to the Act of 1956 to ....
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.... 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: Provided that the Central Government shall, on a fully diluted basis hold, - (a) at all times, not less than fifty-one per cent. of the issued equity share capital of the Corporation; (b) during a period of five years from the date of first issue of shares to any person other than the Central Government, not less than seventy-five per cent. of the issued equity share capital of the Corporation: Provided further that no shares shall be issued other than by way of rights issue unless authorized by a special resolution, except in the circumstances where the provisions of the second and third provisos to sub-section (1) of sect....
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....at 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 the Securities and Exchange Board regarding issue of capital and disclosure requirements, to the extent not repugnant with the provisions of this Act. (10) The Corporation may issue other securities, including bonds, debentures, notes, commercial paper and other debt instruments, for the purpose of raising funds to meet its business requirements." [emphasis supplied] 25.2. Section 5 of the Act of 1956 has been substituted to provide for LIC's capital, issue of equity shares to the Central Government in consideration for paid-up equity capital provided by the Central Government to LIC....
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....nation 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 directed or required to be done by the Corporation in general meeting. (2) The Board of Directors of the Corporation shall consist of the following directors, not exceeding eighteen, of whom at least one shall be a woman, namely:- (a) a Chairperson of the Board, to be appointed by the Central Government, who shall,- (i) during the initial period, be a whole-time director of the Corporation; and (ii) after the initial period, be from amongst the non-executive directors nominated or to be nominated by the Central Government; (b) after the initial....
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....urther 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, shall be deemed to be a director and the Chairperson under sub-clause (i) of clause (a) of subsection (2); (ii) in the capacity as a Managing Director of the Corporation, shall be deemed to be a director and a Managing Director under clause (c) of subsection (2); (iii) and is an officer of the Central Government not below the rank of a Joint Secretary to the Government of India in the Department of Financial Services, shall be deemed to be a director nominated under clause (d) of sub-section (2)....
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....f 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. Sections 19A, 19B, 19C and 19D of the Act of 1956, amended by Section 132 of the Act of 2021, provide for the constitution of various committees of the Board, namely, Investment Committee; Nomination and Remuneration Committee; Audit Committee and Other Committees (as the Board may deem fit to constitute to render advice to it). 25.10. Section 23A of the Act of 1956, inserted by Section 135 of the Act of 2021, provides for the holding of annual general meeting and other ....
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....ging 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, - (a) for every financial year previous to the financial year for which the funds referred to in subsection (2) of section 24 are to be maintained, and for any subsequent financial year for which members may exempt the maintenance of such funds,- (I) ninety per cent., or such higher percentage as the Board may approve, of such surplus shall be allocated to or reserved for the life insurance policyholders of the Corporation; and....
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....ery 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 the Act of 2021 to make provisions regarding the declaration of dividend and crediting of unclaimed and unpaid dividend amount to an Unpaid Dividend Account. 25.17. Section 46 of the Act of 1956 amended vide Section 143 of the Act of 2021 declares that defects in the constitution of the Board and committees thereof, or in appointment or nomination of directors, will not invalidate their acts or procee....
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.... 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 recommendations and the Council of States shall within a period of fourteen days from the date of its receipt of the Bill return the Bill to the House of the People with its recommendations and the House of the People may thereupon either accept or reject all or any of the recommendations of the Council of States. (3) If the House of the People accepts any of the recomm....
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....r 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 Additional Solicitor General stating that the purpose of amendment is to receive money in the Consolidated Fund of India to be used for the development of the country and, accordingly, the Act of 2021 falls within the realm of Article 110 of the Constitution of India, i.e., Money Bill. 30. A serious contest on t....
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....it 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 nature which have been made in the proper working of the Act. In any case, a part of Section 57 has already been declared unconstitutional. We, thus, hold that the Aadhaar Act is validly passed as a "Money Bill"." [emphasis supplied] 34. Further, the Apex Court, in the case of Justice K.S.Puttaswamy (Retd.), supra, ....
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....eed 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 considered by the Apex Court in the case of Rojer Mathew, supra. The relevant paragraph of the judgment is quoted hereunder for ready reference: "111. In the context of Article 110(1) of the Constitution, use of the word "only" in relation to sub-clauses (a) to (f) pose an interesting, albeit a difficult question which was no....
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....position. 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 of matters be placed before the Hon'ble the Chief Justice of India, on the administrative side, for consideration by a larger Bench." [emphasis supplied] 38. 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....
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....cause 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 Bills given under Article 110 of the Constitution of India has to be read along with Article 110(1)(g) of the Constitution of India. If the word "only" is meant to govern only the subject-matters falling in any of the categories given under sub-clauses (a) to (f) of clause (1) of Article 110 of the Constitution of India, then it would make Article 110(1)(g) of the Co....
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....ill 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 into the Consolidated Fund of India on account of the IPO, which is to be used for the development of the country. The intrusion or inference to the implementation of a public interest policy by way of legislation should be eschewed, as it directly impacts the economic growth of the country and interference therein may have far-reaching consequences, because the rec....