Friday, January 31, 2025

Union Finance minister declines special category status to Bihar in Budget 2025-26

Disregarding Chief Minister Nitish Kumar's demand for grant of Bihar special category status, ahead of Bihar assembly election in November 2025, Nirmala Sitharaman, the Union Finance Minister donned Madubani Sari to refer to Bihar on three occasions in her 57-page long budget speech. All the States including Bihar have again been taken for a ride because the Union government has increased its share in import duties by raising the Agriculture Infrastructure and Development Cess (AIDC) but reduced the Basic Customs Duty (BCD), which is shared with states.

In her eighth speech budget speech, she announced the establishment of a Makhana Board in Bihar. The initiative aims to enhance production, processing, and value addition of Makhana in the state. She said, "A Makhana Board will be established in the state to improve production, processing, value addition, and marketing of makhana. The people engaged in these activities will be organized into FPOs. The Board will provide handholding and training support to makhana farmers and will also work to ensure they receive the benefits of all relevant Government schemes." FPOs refers to Farmer Producer Organizations. FPO is a generic name, which means farmer- producers’ organization incorporated/registered either under Part IXA of Companies Act or under Co-operative Societies Act of the concerned States. A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. FPO is one type of PO where the members are farmers. The ownership of the PO is with its members. It is an organization of the producers, by the producers and for the producers.

The minimum number of membership depends on the legal form of the PO. For example, 10 or more primary producers can incorporate a Producer Company under Section 581(C) of Indian Companies Act 1956 (same provisions are retained in the 2013 Act). Section 465(1) of the Companies Act, 2013 mentions that "the provisions of Part IX A of the Companies Act, 1956 (1 of 1956) shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies." There is no restriction on the maximum number of membership. The Income derived by a Producer Company through agricultural activities as defined in Income Tax Act, 1961 as amended from time to time, is treated as agricultural income and is exempted from taxation.

Producer Organisation can be registered under any of the following legal provisions:
a. Cooperative Societies Act/Autonomous or Mutually Aided Cooperative Societies Act of the respective State
b. Multi-State Cooperative Society Act, 2002
c. Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended  in 2013
d. Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013
e. Societies registered under Society Registration Act, 1860
f. Public Trusts registered under Indian Trusts Act, 1882

The PO can undertake the following activities:
a. Procurement of inputs
b. Disseminating market information
c. Dissemination of technology and innovations
d. Facilitating finance for inputs
e. Aggregation and storage of produce
f. Primary processing like drying, cleaning and grading
g. Brand building, Packaging, Labeling and Standardization
h. Quality control
i. Marketing to institutional buyers
j. Participation in commodity exchanges
k. Export

The minister announced that the capacity of the Indian Institute of Technology (IIT), Patna will be expanded as part of a broader initiative to enhance IITs. This includes developing additional infrastructure across five IITs to accommodate 6,500 more students. 

A National Institute of Food Technology, Entrepreneurship, and Management will be set up in Bihar to promote food processing activities. She said,"The institute will provide a strong fillip to food processing activities in the entire Eastern region. This will result in (1) enhanced income for the farmers through value addition to their produce, and (2) skilling, entrepreneurship and employment opportunities for the youth." Besides the expansion of  the Patna airport, the minister announced a brownfield airport in Bihta, Patna. The minister announced financial support for the Western Koshi Canal ERM Project benefiting a large number of farmers cultivating over 50,000 hectares of land in the Mithilanchal region of Bihar.

Bihar government had submitted a 32-page long memorandum to the minister seeking Rs 13,000 crore in central assistance for flood management in North Bihar, additional borrowing limit, 1% GSDP rebate for Bihar until its per capita income reaches the national average. The State had asked for initiation of Pradhan Mantri Gram Sadak Yojana-5.0 to widen and strengthen rural roads, a 250 km Greenfield Corridor from Birpur to Deoghar to promote religious tourism, connecting Nepal’s Pashupatinath to Vaidyanath Dham in Bihar-Jharkhand, construction of a 270 km high-speed corridor from Ladaniya to Nawada and a 135 km Raxaul-Dighwara corridor to enhance regional connectivity and facilitate goods transport to Nepal, establishment of PM Gatishakti Railway University in Jamalpur, Bihta-Aurangabad and Sultanganj-Deoghar railway lines, creation of 10 new Kendriya Vidyalayas and renovation of Vikramshila University. The Union Budget 2024-25 had announced Rs 59,000 crore for road connectivity, power, and flood management in Bihar. One year after the announcement, there is nothing visible on the ground to demonstrate that these announcements in the Union Budget Speech are meaningful. 

Union Budget is the Annual Financial Statement (AFS), as provided under Article 112 of the Constitution of India. It shows the estimated receipts and expenditure of the Government of India for 2025-26 along with estimates for 2024-25 and also actuals for the year 2023-24. The receipts and disbursements are shown under three parts in which Government Accounts are kept viz., (i) The Consolidated Fund of India, (ii) The Contingency Fund of India and (iii) The Public Account of India. The Annual Financial Statement distinguishes the expenditure on revenue account from the expenditure on other accounts, as is mandated in the Constitution of India. The Revenue and the Capital sections together, make the Union Budget. 

The estimates of receipts and expenditure included in the Annual Financial Statement are net of refunds and recoveries respectively. The significance of the Consolidated Fund, the Contingency Fund and the Public Account as well as the distinguishing features of the Revenue and the Capital portions are as under:

The Consolidated Fund of India (CFI) draws its existence from Article 266 of the Constitution. All revenues received by the Government, loans raised by it, and also receipts from recoveries of loans granted by it, together form the Consolidated Fund of India. All expenditure of the Government is incurred from the Consolidated Fund of India and no amount can be drawn from the Consolidated Fund without due authorization from the Parliament.

Article 267 of the Constitution authorizes the existence of a Contingency Fund of India which is an imprest placed at the disposal of the President of India to facilitate meeting of urgent unforeseen expenditure by the Government pending authorization from the Parliament. Parliamentary approval for such unforeseen expenditure is obtained, ex-post-facto, and an equivalent amount is drawn from the Consolidated Fund to recoup the Contingency Fund after such ex-post-facto approval. The corpus of the Contingency Fund as authorized by Parliament presently stands at `30,000 crore.

Money held by Government in trust are kept in the Public Account. The Public Account draws its existence from Article 266 of the Constitution of India. Provident Funds, Small Savings collections, receipts of Government set apart for expenditure on specific objects such as road development, primary education, other Reserve/Special Funds etc., are examples of moneys kept in the Public Account. Public Account funds that do not belong to the Government and have to be finally paid back to the persons and authorities, who deposited them, do not require Parliamentary authorization for withdrawals. The approval of the Parliament is obtained when amounts are withdrawn from the Consolidated Fund and kept in the Public Account for expenditure on specific objects (the actual expenditure on the specific object is again submitted for vote of the Parliament for withdrawal from the Public Account for incurring expenditure on the specific objects). 

The Union Budget can be demarcated into the part pertaining to revenue which is for ease of reference termed as Revenue Budget and the part pertaining to Capital which is for ease of reference termed as Capital Budget.

The Revenue Budget consists of the revenue receipts of the Government (Tax revenues and Non-Tax revenues) and the revenue expenditure. Tax revenues comprise proceeds of taxes and other duties levied by the Union. The estimates of revenue receipts shown in the Annual Financial Statement take into account the effect of various taxation proposals made in the Finance Bill. Non-tax receipts of the Government mainly consist of interest and dividend on investments made by the Government, fees and other receipts for services rendered by the Government. Revenue expenditure is for the normal running of Government Departments and for rendering of various services, making interest payments on debt, meeting subsidies, grants in aid, etc. 

Broadly, the expenditure which does not result in creation of assets for the  Government of India, is treated as revenue expenditure. All grants given to the State Governments/Union Territories and other parties are also treated as revenue expenditure in the books of Union Government even though some of the grants may be used for creation of capital assets by Grantee bodies/entities.

Capital receipts and capital payments together constitute the Capital Budget. The capital receipts are loans raised by the Government (these are termed as market loans), borrowings by the Government through the sale of Treasury Bills, the loans received from foreign Governments and bodies, recoveries of loans from State and Union Territory Governments and other parties and miscellaneous capital Receipts etc. Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by the Central Government to the State and the Union Territory Governments, Government companies, Corporations and other parties. 

The estimates of receipts and disbursements in the Annual Financial Statement and of expenditure in the Demands for Grants are shown according to the accounting classification referred to under Article 150 of the Constitution.

Article 113 of the Constitution mandates that the estimates of expenditure from the Consolidated Fund of India included in the Annual Financial Statement and required to be voted by the Lok Sabha, be submitted in the form of Demands for Grants. The Demands for Grants are presented to the Lok Sabha along with the Annual Financial Statement. Generally, one Demand for Grant is presented in respect of each Ministry or Department.

At the time of presentation of the Annual Financial Statement before the Parliament, a Finance Bill is also presented in fulfilment of the requirement of Article 110 (1)(a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget. It also contains other provisions relating to Budget that could be classified as Money Bill. A Finance Bill is a Money Bill as defined in Article 110 of the Constitution.

The Macro-Economic Framework Statement is presented to Parliament under Section 3 of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 and the rules made thereunder. It contains an assessment of the growth prospects of the economy along with the statement of underlying assumptions. It also contains an assessment regarding the GDP growth rate, the domestic economy and the stability of the external sector of the economy, fiscal balance of the Central Government and the external sector balance of the economy. The FRBM Act came into force on July 2, 2004 with the Fiscal Responsibility and Budget Management Rules, 2004

The FRBM Act generally bars the Union Government from borrowing from the Reserve Bank of India (RBI) except in special situations to meet temporary excess of cash disbursement over cash receipt, subscription of primary issues and thereafter on grounds of national security, national calamity, etc., and open market operations in the secondary market.

The Rules were amended by Fiscal Responsibility and Budget Management (Amendment) Rules, 2007 on January 23, 2007. It was amended again on September 5, 2012 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2012, on May 7, 2013 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2013, June 25, 2015 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2015 on October 31, 2015 by Fiscal Responsibility and Budget Management (Second Amendment) Rules, 2015 and on April 2, 2018 by Fiscal Responsibility and Budget Management (Amendment) Rules, 2018

Notably, Section 7A of the FRBM Act, 2003, as amended in May 2012, provided that the Union Government may entrust the Comptroller and Auditor General (CAG) of India to review periodically as required, the compliance of the provisions of this Act and such reviews shall be laid before both Houses of Parliament. Rule 8 was framed and notified in October 2015 to carry out the effect of Section 7A of the Act. The notified Rule provide that the CAG shall carry out an annual review of the compliance of the provisions of the Act and the Rules made thereunder by the Central Government beginning with the Financial Year 2014-15. The review includes:
(i) analysis of achievement and compliance of targets and priorities set out in the Act and the Rules made thereunder, Medium Term Fiscal Policy Statement, Fiscal Policy Strategy Statement, Macro-economic Framework Statement and Medium Term Expenditure Framework Statement;
(ii) analysis of trends in receipts, expenditure and macro-economic parameters in relation to the Act and the Rules made thereunder;
(iii) comments related to classification of revenue, expenditure, assets or liabilities having a bearing on the achievement of targets set out in the Act and the Rules made thereunder; and
(iv) analysis of disclosures made by the Central Government to ensure greater transparency in its fiscal operations.

In compliance to Section 6 of FRBM Act, along with Budget, six disclosure statements, are placed before the Parliament.

The first Report of CAG-Report No. 27 of 2016-on compliance of the provisions of FRBM Act in respect of financial year 2014-15 was presented in Parliament in August 2016. This 82-page long report was based on the audit conducted in conformity with the auditing standards issued by the CAG of India. 

It recorded understatement about assets. As per the disclosure made by the Government, the  cumulative total of assets at the end of the year 2014-15 was Rs 9,71,354.25 crore. It pointed out inconsistency in the disclosure pertaining to asset register. The clarification for variation in the closing and opening figures in respect of assets for financial years 2012-13 and 2013-14 was not given in the Form D-4 of relevant years, which indicated absence of transparency in disclosure.

It recorded inconsistency in figures of loans to Foreign Governments. Examination of Form D-4 disclosure revealed that a sum of Rs 9,773.73 crore was shown as loans outstanding from foreign governments at the end of 2014-15. Similar information contained in the Union Government Finance Account revealed that a sum of Rs  9,210.62 crore was outstanding as loans from foreign governments at the end of 2014-15. Thus, there was overstatement of ` 563.11 crore of loans outstanding from foreign governments in Form D-4 disclosure. It also recorded inconsistency in disclosure of grants for creation of capital assets Rule 6 of the amended FRBM Rules requires laying of a statement providing the Ministry-wise breakup of grants for creation of capital assets in Form D-6. The disclosure requires providing details of budget and revised provisions for the current financial year and BE for ensuing financial year.

Its recommendations were as under:

(i) To address the issues of inconsistency in the FRBM Act/Rules, the Government may carry out suitable amendments.
(ii) The Government should follow the format of Form D-6 as prescribed under the FRBM Rules.
(iii) Budgetary provisioning as well as their accountal need to be in harmony with the codal provisions relating to classification structure of accounts to avoid misclassification of expenditure.
(iv) The Government may transfer specific purpose levies/cess collected to the funds earmarked for the purpose.
(v) A mechanism for recognizing the result of annual operations of NSSF and its impact on the Government finances may be put in place.
(vi) To facilitate correct identification and booking of expenditure as grants on creation of capital assets, the Government may consider defining the criteria for classification of expenditure as grants for creation of capital assets and its compliance by the Ministries/Departments.
(vii) The Government may exclude such grants, which does not lead to creation of assets owned by the grantee organisations, from categorising as grants for creation of capital asset.
(viii) The Government may strengthen the process of making underlying assumptions for projection of receipt and expenditure in various fiscal policy statements to insulate them from frequent changes and to seamlessly integrate the projection in the Budget.
(ix) Necessary steps may be taken to append additional statements in the Union Government Finance Accounts as suggested by the 12th Finance Commission to ensure greater transparency in the accounts.
(x) Disclosure statements prepared under the FRBM Act and Rules made thereunder should be complete in all respect and transparent.

The conclusion of the first audit report reads: "Transparency in fiscal operations of the Government is an important ingredient to achieve the accurate target of fiscal indicators envisaged under the FRBM Act. However, it was noticed that the Government did not append additional disclosure statements as recommended by Twelfth Finance Commission to bring more transparency in its operations. There was lack of adequate transparency with regard to direct tax receipt figures. Further, the disclosures made by the Government in various Forms envisaged under the FRBM Act were not complete and at variance with other publications, such as Union Government Finance Accounts and Detailed Demands for Grants." 

The audit report was signed by Mukesh Prasad Singh, Director General of Audit, Central Government and counter signed by Shashi Kant Sharma, 12th CAG of India on July 18, 2016. Sharma is an officer of the Bihar cadre.  

Ahead of the finalisation of the very first audit report, Union Government had constituted a committee in May 2016 under the chairmanship of N. K. Singh, the former Revenue and Expenditure Secretary to comprehensively review the working of the FRBM Act over last 12 years. Singh is an officer of the Bihar cadre.  

In the Nira Radia tapes, N.K. Singh can be heard stating that he got the order of the speakers in the Rajya Sabha changed to give an edge on retroactive tax rebates to Reliance Industries Limited. On July 9, 2009, N K Singh informed Nira Radia about Pranab Mukherjee's announcement of tax benefit on the gas and its indirect withdrawal, because he made it applicable only for only for NELP-VIII. NELP refers to New Exploration Licensing Policy. 

N.K Singh said, Arun Shourie "was very, very, very critical of this whole gas thing and said in the BJP parliamentary board meeting, day before yesterday. Now whatever he said in that meeting, day before yesterday, is one aspect. But what attitude BJP will take on this whole issue of the debate on the finance bill, which is beginning from Monday, in both houses of Parliament is of vital importance. Because if a large number of opposition MPs and Samajwadi will definitely join in begin to say that Pranab Mukherjee has given a bad largesse...it will benefit only one company...then Pranab Mukherjee is in the defensive and therefore the question of extending it retrospectively goes out of the window. So this whole managing that stuff in a way and also I think, you know, Arun is speaking, Shourie is speaking as a listed speaker in the Rajya Sabha for the BJP." 

N.K.Singh claimed that they have managed to make Arun Shourie the second speaker after M.Venkaiah Naidu. Pranab Mukherjee had moved the Finance Bill, 2009 to give effect to the financial proposals of the Central Government for the financial year 2009-10 on July 29, 2009. The proceedings of the day reveal that Arun Shourie was not allowed to speak by Rajnath Singh, the President of BJP although he was asked to prepare for it. The debate commenced with Ravi Shankar Prasad, followed by Venkaiah Naidu. Later, N.K. Singh claimed that his Reliance advocacy was for national ‘energy security'.

The NELP was started in 1999. Bidding of oil blocks and gas blocks under this policy from then onwards is subject to a profit-sharing contract. In that profit-sharing contract, a contractor is given the mandate to explore and find out whether there is any commercial viability with regard to oil or gas. Whatever expenses are incurred in finding out or searching oil, they are  reimbursed. That is how there is a share of the Government and of the contractor with regard to  the profit that comes which is known as the profit petroleum. That only comes when oil or gas is commercially viable.

NELP-VIII refers to the eighth round of NELP. Under NELP-VIII, 70 areas or blocks for exploration were offered, the biggest licensing round in India. Out of these 70 blocks, 24 are deepwater blocks, 28 are shallow water blocks and 18 are onland blocks. The NELP-VIII bid was launched on April 9, 2009. The bids were opened on October 12, 2009. 76 bids were received for 36 blocks. The bids were closed on October 12, 2009. Oil and Natural Gas Corporation (ONGC) won 17 out of the 25 oil and gas blocks it had bid for along with its partners. ONGC, in partnership with certain consortia members, had submitted bids for 25 oil and gas exploration blocks and won 17 of them. Reliance Industries Limited (RIL), which had won 45 blocks in the previous round of auctions, stayed away from making any bid in the eight round except for one coal bed methane block. None of the five top global majors, namely Exxon, Shell, Chevron, Statoil and Conoco Philips had participated with bids.

The terms of reference of the FRBM Review Committee also included looking into various aspects, factors, considerations going into determining the FRBM targets; to examine the need and feasibility of having a ‘fiscal deficit range’ as the target in place of the existing fixed numbers (percentage of GDP) as fiscal deficit target and to examine the need and feasibility of aligning the fiscal expansion or contraction with credit contraction or expansion respectively in the economy. The Committee had submitted its four volume report on January 23, 2017. It was published on April 12, 2017.

The major recommendations made by the Committee included:
Repeal the existing FRBM Act, 2003 and the FRBM Rules, 2004.
Enact a new Debt and Fiscal Responsibility Act, in pursuance of the new Act, enact, and adopt the Debt and Fiscal Responsibility Rules, as per drafts suggested by the Committee.
• Adopt a prudent medium-term ceiling for general government debt of 60 per cent of GDP to be achieved by no later than financial year 2022-23. Within the overall ceiling of 60 per cent, adopt a ceiling of 40 per cent for the Centre, and the balance 20 per cent for the State.
• Adopt fiscal deficit as the key operational target consistent with achieving the medium term debt ceiling.
• The path of fiscal deficit to GDP ratio of 3.0 per cent in financial year 2017-18 to financial year 2019-20, 2.8 per cent in financial year 2020-21, 2.6 per cent in financial year 2021-22 and 2.5 per cent in financial year 2022-23 be adopted.
• Revenue deficit to GDP ratio to decline steadily by 0.25 percentage points each year with the path specified as follows: 2.3 per cent in financial year 2016-17, 2.05 per cent in financial year 2017-18, 1.8 per cent in financial year 2018-19, 1.55 per cent in financial year 2019-20, 1.30 per cent in financial year 2020-21, 1.05 per cent in financial year 2021-22 and 0.8 per cent in financial year 2022-23.
• The deviation from the stipulated fiscal deficit target shall not exceed 0.5 percentage points in a year in case of invocation of Escape Clauses.
• Constitute a Fiscal Council with the Terms and Conditions as mentioned in the Report of the Committee.
 
The report of the FRBM Review Committee defined ‘general government debt’ as "total liabilities of the Central Government and the State Government excluding inter-governmental liabilities." It had provided Draft Statement of Objects & Reasons for the Debt Management and Fiscal Responsibility Bill, 2017 and Draft Debt Management & Fiscal Responsibility Bill, 2017. It drew on the debate in the Constitutent Assembly. Besides the chairman, there were four members of the committee including Dr. Arvind Subramanian who had given a Note of Dissent against the report of the FRBM Review Committee. The other members were Rathin Roy, Director, National Institute of Public Finance and Policy, Dr. Urjit Patel, Governor, RBI and Sumit Bose, former Finance Secretary. The report  acknowledged Dr. E.A.S. Sarma as the architect of the first FRBM Act. 

The 82-page long report of the CAG of India-Report No. 32 of 2017-on the compliance of the provisions of the FRBM Act and the Rules made thereunder by the Central Government for the year ended March 2016. The report contains significant results arising from the review of compliance of the provisions of the Act. The instances mentioned in this report during the test audit are for the period 2015-16. It refers to matters relating to the period prior to and subsequent to 2015-16 are included wherever found necessary. It has been referred to as the second report.

The report records the "arrears of interest receipts from State/Union Territory Governments and other loanee entities as disclosed through Union Government Finance Accounts for financial year 2015-1616 was at variance with disclosure made through Form D-2"

It is recorded that "Ministry of Information and Broadcasting while furnishing information in respect of Form D-2, did not furnish the arrears of interest amounting to 3,753.11 crore which was receivable from Prasar Bharti and clearly appearing in Section 3 of Statement No.15 of UGFA of 2015-16." UGFA refers to Union Government Finance Accounts. CAG responded:"Ministry of Information and Broadcasting stated (February 2017) that information relating to Prasar Bharti (statutory and autonomous organisation) was not included in Form D-2 furnished to the Ministry of Finance, as information was called for only in respect of State/UT Governments, Public Sector and Departmental Commercial Undertakings. In view of the reply of the Ministry of Information and Broadcasting, the information collated and presented to the Parliament in Form D-2 by the Ministry of Finance is incomplete."

It also records the incorrect information of coal levy in arrears. It recalled that Supreme Court had cancelled (September 2014) allocation of 204 captive coal blocks and imposed additional levy @ Rs 295 per tonne on coal extracted. In the first report of CAG on FRBM (No.27 of 2016), a para on outstanding amount of coal levy amounting to Rs 3,368 crore (as on 31 March 2015) and its non-inclusion in the disclosure statement (Form D-2) pertaining to arrears of non-tax revenue was made. It was noticed that for the reporting year 2015-16, the outstanding amount of coal levy furnished to the Ministry of Finance in Form D-2 by the Ministry of Coal was incorrect, in comparison to information furnished to Audit.

The report records what Ministry of Finance stated in June 2017:"Budget Division compiles the information strictly on the basis of the information furnished by the respective Ministries/Departments. Ministry further added that Budget Division has no means to verify the authenticity of the information provided by the Ministries/Departments independently. Citing the example of inconsistent information on arrears of non-tax revenue by Ministry of Information and Broadcasting, Ministry stated that Audit itself has attested error on the part of the line Ministry. Ministry of Finance however added that efforts were being made to rectify the errors/ inconsistency." CAG responded to it saying, "Ministry of Finance, being the nodal Ministry for the administration of the FRBM Act, should issue appropriate directions to all the Ministries/Departments to ensure coordination so that correct and consistent figures are included in the prescribed disclosure forms and other linked documents.

The report records that in the Annual Financial Statement and Union Government Finance Accounts, the estimates and actual collection from Tax Revenue are reflected after taking into account the amount of refunds (including interest on refunds). Analysis of direct  tax receipt of the Union Government, revealed that substantial portion of tax collected are refunded every year. In financial year 2015-16, amount of refunds included Rs 6,886 crore as expenditure on interest on refunds. Though the amount of refunds was substantial, no information about the quantum of refunds was disclosed either in the Annual Financial Statement or in the Union Government Finance Accounts. As such, the accounts of the Government were not transparent in respect of information on Tax Revenue collections.

The Ministry stated (June 2017) that in Finance Accounts revenue receipts are categorized as ‘Tax Revenue Receipts’ and ‘Non-tax Revenue Receipts’ and figures for Direct Taxes are not shown separately. It added that in Finance  Accounts, tax collections are accounted/shown at the minor head level which are net of refunds. Refund of revenue is accounted for at one level below, viz. sub  head level.

CAG responded: "Reply of the Ministry does not address the audit concern relating to transparency in accountal of gross tax collection and refunds made therefrom in a year, although net collections are captured in the accounts. The Union Government Finance Accounts are prepared at Minor Head level, whereas the amount of refunds despite being significant are recorded at a lower level of classification and thereby refunds get obscured in this compilation. Appropriate disclosure of this information in the Union Government Finance Account or in Budget documents would address the transparency requirement as envisaged in the FRBM Act."

The details of liabilities are also reflected through Union Government Finance Accounts (UGFA) showed variation in the position of liabilities of the Government at the end of financial year 2015-16, as reflected through Receipt Budget and UGFA. The gross liabilities on account of National Small Savings, Provident Funds, Other Accounts in Public Account in the UGFA 2015-16 have been reflected as Rs 12,31,500 crore. However in Receipt Budget, the National Small Savings, Provident Funds, Other Accounts liabilities though shown on gross basis, has a variation of Rs 43,139 crore on account of non-inclusion of amount of investment of Post Office Insurance Fund through Private Fund Managers.

Responding to these findings, the Ministry stated in June 2017 that "the observation regarding variation in the amount of total liabilities is being examined and comments/reply in this regard will be communicated shortly." It is not clear whether the Ministry communicated its promised reply regarding variation in the amount of total liabilities.  

The report has recorded variation in expenditure on grants for creation of capital assets. In the Budget document, figure of actual expenditure incurred on grants for creation of capital assets appears in Budget at a Glance and Ministry-wise details thereof are appended with Expenditure Budget, Volume-I. In Union Government Finance Accounts, compiled by the Controller General of Accounts (CGA) under the Ministry of Finance, this figure appears in Appendix to Statement No. 9 as a disclosure statement. Accounts at a Glance is another document published by the CGA providing macro level overview of financial information of the Government for relevant year. While comparing the actual figure of expenditure on grants for creation of capital assets for financial year 2015-16, variation was noticed between the Budget documents and documents compiled/prepared by CGA.

The Ministry stated (June 2017) that information provided in the Budget Statement on grants for creation of capital assets was based on the inputs/information provided by various Ministries/Departments. It further submitted that Budget Division has no means to verify the authenticity of the information provided by the Ministries/Departments independently. Ministry  however intimated that efforts are being made to rectify the errors/ inconsistency.

CAG observed: "Ministry of Finance, being the nodal Ministry for the administration of the FRBM Act, should ensure that information being collected and disclosed under the Act is complete, accurate and consistent with other Government documents brought out by the various arms of the same Ministry." It is not clear whether CAG's advice has been paid heed to.  

The audit report made the following recommendations:
i. Deferment of fiscal targets needs to be carried out through appropriate amendment in the Act.
ii. The disclosure relating to liability on annuity projects may be modified  suitably to reflect the amount of unpaid annuity liability at the end of a particular financial year.
iii. An appropriate mechanism needs to be put in place by the Government to avoid instances of inconsistencies in estimation and correct reporting of components of expenditure having bearing on deficit indicators.
iv. The Government may transfer specific purpose levies/cess collected to the designated funds.
v. A mechanism for recognising the result of annual operation of NSSF and its impact on the Government finances may be put in place.
vi. Criteria for classification of expenditure as grants for creation of capital assets may be prescribed for appropriate compliance by the Ministry/Department. Assets created out of such grants but not owned by the grantee organization may be excluded from categorizing as grants for creation of capital assets.
vii. The Government may strengthen the process of making underlying assumptions for projections of receipt and expenditure in various fiscal policy statements to insulate them from frequent changes and to seamlessly integrate the projections in the Budget.
viii. The Government should ensure adequate transparency and consistency in its fiscal operations so that fiscal indicators are computed accurately and disclosure forms as mandated under the Act contain correct information.

Its recommendation reads:"The Government should ensure adequate transparency and consistency in its fiscal operations so that fiscal indicators are computed accurately and disclosure forms as mandated under the Act contain correct information."

Its conclusion reads:"Transparency in fiscal operations of the Government is an important ingredient to achieve the accurate target of fiscal indicators envisaged under the FRBM Act. However, there was lack of transparency in disclosing the deficit figures in Budget at a Glance and Annual Financial Statements. Expenditure on grants for creation of capital assets as disclosed through Union Government Finance Accounts and Expenditure Budget was at variance. Further, gross liability position of the Government shown through Union Government Finance Accounts and Receipt Budget were also at variance. Though a significant amount of refund  is made from gross direct tax collection, its depiction is obscured in the Government Finance Accounts and other publications. The disclosures made by the Government through various Forms envisaged under the FRBM Act were not complete and at variance with corresponding information contained in Union Government Finance Accounts"

The report was signed by Mukesh Prasad Singh, Director General of Audit, Central Government and counter signed by Shashi Kant Sharma, 12th CAG of India on July 14, 2017. Sharma demitted the office of CAG of India on September 24, 2017. While being in that position had assumed the office of Chairman of United Nations Board of Auditors on January 11 2017 and demitted it when he ceased to be the CAG of India.

The 89 page long report of the CAG-Report No. 20 of 2018-discusses the compliance of the provisions of FRBM Act, 2003 and the Rules made thereunder by the Union Government for the financial year 2016-17. Audit has examined a few cases of off budget financing and analyzed impact of such operations on overall fiscal operations. It has underlined that "Government has increasingly resorted to off-budget financing for revenue as well as capital spending." It pointed out that "There is mismatch between the provision under FRBM Act and corresponding provision under FRBM Rules in respect of liability targets." It observed:"The Government could not meet the mid-year fiscal deficit and Revenue deficit target of 70 per cent of Budget Estimate for the year 2016-17 even after relaxing this target twice from 45 per cent in 2004-05 to 60 per cent in 2012-13 and 70 per cent in 2015-16. Further, factors responsible for such deviation vis-à-vis expenditure and receipt, and specific corrective measures, which Government was to take in the year, were not presented in the statement to the Parliament." For some reason this report is referred to as the third report of the CAG on the compliance of the provisions of the Act and the Rules made thereunder by the Union Government for the year ended March 2017.

It records: "Taking into account the understatement of Public Account liability of 7,63,280 crore, total liability of the Central Government at the end of the financial year 2016-17 would be ` 76,69,545 crore which is 50.5 per cent of  GDP rather than 45.5 per cent against the projection of 47.10 per cent in MTFP statement 2016-17." It also records: "Misclassification of expenditure, short/non-transfer of levy/cess to earmarked funds in the Public Account from the CFI, etc. resulted in understatement of revenue expenditure at least by 50,999 crore and hence revenue deficit was understated by the same amount." It records: Refunds of 1,72,894 crore (including interest on refunds of taxes) were made from gross direct tax collection in financial year 2016-17 but no  corresponding disclosure was available in the Government accounts." It pointed out: "Disclosure statements mandated under the FRBM Act and the Rules made thereunder placed before Parliament reflected inconsistencies relating to disclosure of non-tax revenue and assets." The report was signed by Mamta Kundra, Director General of Audit, Central Government on July 25, 2018 and counter signed by the Rajiv Mehrishi, the 13th CAG of India on July 25, 2018. Just prior to the signatures is a recommendation which reads: "Government may ensure explicit disclosures of all transactions having fiscal implications and avoid presenting mis-matched figures."

The CAG's report made the following  recommendations:
(i) The Government may ensure adherence to the medium term fiscal path as specified under FRBM Act/Rules and align its annual achievements accordingly.
(ii) Mid-year benchmarks for comparison with pro-rata performance against the budget estimates should be realistic and mid-course corrections should enable achievement of year-end targets, which should be disclosed transparently to Parliament.
(iii) Government may consider putting in place a policy framework for off-budget financing, which, amongst others, should include disclosure to Parliament:
a) The rationale and objective of off-budget financing, quantum of off-budget financing and budgetary support under the same project/scheme/programme, instruments and sources of financing, means and strategy for debt servicing of off budget financing, etc.
b) Details of off budget financing undertaken during a financial year by/through all the bodies/companies substantially owned by Government; and
c) Government may consider disclosing the details of off-budget Borrowings through disclosure statements in Budget as well as in Accounts.
(iv) Government may ensure that all transfers/funds meant to be kept in the designated funds in Public Account, including those for meeting future liability, specific-purpose cesses, etc. are not kept in the Consolidated  Fund to avoid overstatement of revenue receipts.
(v) Government may lay down guidelines for treating which items created out of grants for creation of capital assets qualify as Capital Assets and expenditure only for those assets should be considered as grants for creation of capital assets.
(vi) Government may ensure explicit disclosures of all transactions having fiscal implications and avoid presenting mis-matched figures.

The 96-page long report of the CAG for the years 2017-18 and 2018-19-Report No. 6 of 2021-on the compliance of the provisions of the FRBM Act and the Rules made thereunder by the Union Government for the year ended March 2016 contained significant results arising from the review of compliance of the provisions of the Act. The instances mentioned in the report are those, which came to notice in the course of test audit for the period 2015-16. The matters relating to the period prior to and subsequent to 2015-16 were included, wherever deemed necessary. It dealt with the years ending in March 2018 and March 2019. The report was signed by Manish Kumar, Director General of Audit, Finance & Communication, CAG of India on June 30, 2021counter signed by Girish Chandra Murmu, the 14th CAG of India on July 5, 2021. Murmu was the CAG till November 20, 2024. This report has been mentioned as the second report of the CAG on the compliance of the provisions of the Act and the Rules made thereunder by the Union Government for the year ended March 2017.

Notably, just prior to the signatures is an audit summation which reads: "Audit noticed variations in RD and FD figures between those depicted in the Budget at a Glance(BAG) and those depicted in the Union Government Finance Accounts (AFS) for both years,due to netting of certain receipts and expenditure in the BAG. The balances under National Small Savings Fund (NSSF) do not explicitly disclose the substantial accumulated deficit in the fund and significant amounts loaned for funding revenue expenditure of the Government which would have to be serviced through budgetary support. Further, there were inadequacies in disclosures in Form D-2 - Arrears of Non-Tax Revenue and D-4 - Asset Register."
 
Form D-2 is one of the disclosure forms which provides details of arrears of Non-Tax Revenue (NTR). Disclosure Form D-4 relates to physical and financial assets of the Government. Receipt Budget 2020-21 provides details of assets of the Union Government as at the end of reporting year 2018-19. As per the disclosure made by the Government, the cumulative total of assets at the end of the year 2017-18 and 2018-19 was `15,10,277.64 crore and 16,99,853.14 crore respectively. During audit, errors in compilation of assets by various Ministries were also noticed. Assets were found to be overstated by `5,90,875 crore. In addition, inconsistency was noticed in figures of loans to Foreign Governments. Examination of Form D-4 revealed that a sum of 14,077.04 crore was shown as loans outstanding from Foreign Governments at the end of 2017-18. Similar information contained in the Union Government Finance Accounts (UGFA)2017-18, revealed that a sum of 13,433.02 crore was outstanding as loans from foreign Governments. Thus, there was a variation of `644.02 crore of loans outstanding from foreign Governments. Similar examination of Form D-4 for 2018-19 revealed that a sum of 14,093.67 crore was shown as loans outstanding from Foreign Governments whereas information contained in the UGFA 2018-19 revealed that a sum of 13,558.87 crore was outstanding as loans from foreign Governments. Thus, there was a variation of 534.80 crore of loans outstanding from foreign Governments. Variation in figures of closing and opening balances of assets On examination of Form D-4 appended with Receipts Budget 2019-20 and 2020-21, variations were noticed in the closing and opening balances of assets.

Significantly, opening balance of assets for 2018-19 was less by 3,116.36 crore as compared to the carry-over balance of assets at the end of 2017-18. The Ministry of Finance explained (June 2020 and December 2020) that the same was due to revision in the opening balance on account of factors such as a) inclusion of “Railway Safety Fund” by Ministry of Railway, b) omission of investment in HEFA and c) reporting of assets by additional Missions in Ministry of External Affairs. The reasons for the variation disclosed by Government lack adequate transparency as instead of an item wise quantitative reconciliation of the variation of `3,116 crore, only instances were mentioned without quantification. The Ministry further replied that footnotes are also provided below the statements to insure clarity and transparency. However, effort shall be made to insure greater comprehensiveness in the footnote of statement of asset register. HEFA refers to Higher Education Financing Agency is a joint venture of Ministry of Education, Government of India and Canara Bank for financing creation of capital assets in premier educational institutions in India. HEFA is registered under Section 8 (Not-for-profit) under the Companies Act 2013 as a Union Govt company and as Non–deposit taking Systematically Important (NBFC-ND-SI) with RBI. HEFA incorporated on May 31, 2017, is a joint venture of Ministry of Education, Government of India and Canara Bank with an agreed equity participation in the ratio of 90.91% and 09.09% respectively. 

Section 2 (a) of the FRBM Act defines "fiscal deficit". It means "the excess of total disbursements, from the Consolidated Fund of India, excluding repayment of debt, over total receipts into the Fund (excluding the debt receipts), during a financial year."

Section 2 (bc) defines "gross domestic product". It means "the sum of the gross value added by all resident production units plus that part of taxes, less subsidies, on products, which is not included in the valuation of output, during a financial year, reckoned at current market prices, as published by the Central Statistics Office from time to time." Section 2 (ca) defines "real gross domestic product". It means "gross domestic product, reckoned at constant prices, as published by the Central Statistics Office from time to time." These definitions were inserted on March 31, 2018. 

The FRBM Act was amended by Finance Act, 2018. The words “achieving sufficient revenue surplus and” omitted from the long title of the original FRBM Act by section 210 of Act 13 of 2018 with effect from March 29, 2018.

Significantly, in the Jan Vishwas Act 2023, more than 180 legal provisions were decriminalized. Now the proposed Jan Vishwas Bill 2.0 is aimed at decriminalizing more than 100 provisions in various laws.

"Bihar hardly has any factories": Economic Survey 2024-25

Drawing on a paper entitled "Where Have All the Factories Gone? Growth and Concentration of Sub-National Manufacturing Activity in India (2019)" by Krishna Ramaswamy and Data from Annual Survey of Industries for FY23, the 482-page long Economic Survey 2024-25 states:"Bihar hardly has any factories".

The Economic Survey claims that consumption patterns and choices of rural households reveals that direct benefit transfers (DBTs) is benefiting women in the target population who are obtaining loans from self-help groups (SHGs) in select districts of Bihar. This claim is based on Artha Global’s Centre for Rapid Insights (CRI)'s survey of approximately 2400 married women between the ages of 25 and 45 in rural areas, who were relatively less financially privileged, in selected districts of Bihar, Jharkhand, Madhya Pradesh, and Uttar Pradesh in November 2024. The sample population is poorer than the Indian population on average. This demographic group was chosen for study because an increased female labour force participation rate (FLFPR) has been observed among this group. As a popular target for DBTs and cash as well as loans through SHGs from both the Centre and various state governments, a survey of this group allows for an analysis of patterns of consumption due to cash transfers and loans. This claim merits scrutiny in the light of observations by scholars like Jean Dreze who have warned against turning citizens into “guinea-pigs for immature financial technologies such as the Aadhaar Payments Bridge System".

It refers to Bihar’s Mission Daksh aims to provide personalised mentoring for lagging students to achieve grade-level competencies by 2025 in the context of "Peer Teaching: A pathway to achieving foundational literacy and numeracy (FLN)".  It states that school education lays the foundation of a country's education system." The National Education Policy (NEP) 2020 stipulates that FLN is critical for education and lifelong learning success. The Department of School Education and Literacy launched the National Mission, “National Initiative for Proficiency in Reading with Understanding and Numeracy (NIPUN Bharat),” in July 2021 to ensure that every child in the country necessarily attains FLN by the end of Grade 3, by 2026-27.24 It covers three years of FLN in preschool and Grades 1, 2 and 3. Tthe education system is deploying innovative pedagogies and teaching methods to ensure that every child achieves FLN.

The Survey mentions Bihar among the States in the Indo-Gangetic Plains which are at a higher risk of climate change impacts.

The review of preliminary unaudited estimates of 27 states including Bihar for the period April - November 202424 corroborates the inference about greater reliance on share in central taxes. The Gross Tax Revenue (GTR) of the union and own tax revenue (OTR) of the states have increased at comparable pace during this period. However, the overall tax revenue position of the state governments appears better
as of November, because of increased tax devolution by the union. Among the state-specific taxes, stamps and registration, sales tax, state excise duties, and other taxes and duties registered positive growth, whereas land revenue declined, for states as a collective. It does not explain the reason for fall decline in the land revenue.  

The central government and 29 states/UTs have pre-published their draft rules under the four Labour Codes. Some of the remaining seven states/UTs have pre-published their draft rules for one or more Labour Codes.

Bihar is among the 14 States which has increased the threshold of the number of workers from 100 to 300 for prior approval of appropriate government before retrenchment/ layoff/ closure of establishments in factory/plantation/ mining sector. 

Bihar is one of the six States which has notified Fixed Term Employment under the existing Industrial Employment (Standing Orders) Act, 1946. 

Bihar is one of the 12 States which has increased the threshold from 20 workers to 50 workers for applicability of the Contract Labour (Regulation & Abolition) Act, 1970.  




Two children norm contrary to Articles 14 and 16 only in a specific case!: High Court

In Sunita Dhawan vs. State of Rajasthan (2025), Rajasthan High Court allowed the petition of a widow who sought appointment to the post of School Lecturer and held that rejection of her candidature on the sole ground of having more than two children is contrary to Articles 14 and 16 of the Constitution of India, which ensure equality and non-discrimination.

Justice Sameer Jain observed:“This Court as representative of the Sovereign as parens patriae has adopted the same standard that a reasonable and responsible parent would do.”

The petitioner, a woman candidate, in response to the advertisement of 2015 by the Rajasthan Public Service Commission (RPSC) inviting applications from eligible candidates for appointment to the position of School Lecturer had submitted her application under SC- Widow category. The petitioner passed the examination with merit. 

On scrutiny of her application form, the RPSC concluded that her candidature was ineligible because of having more than two surviving children on or after June 1, 2002.

The appellant approached the High Court.

The petitioner was the sole bread-earner of her family, with the responsibility of supporting four children, including one with a disability.
The Court recorded:“Her status as a member of the Scheduled Caste (SC) community further highlights the systemic barriers she faces, warranting judicial intervention to address her unique hardship. The petitioner’s circumstances exemplify the need for equitable and inclusive consideration in public employment opportunities."

The judgement reads: “Exercising its powers under Article 226 of the Constitution of India, this Court considers it imperative to depart from rigid procedural adherence in the interest of justice. Article 16 of the Constitution of India guarantees equality of opportunity in public employment and prohibits discrimination on various grounds, including caste and sex. The petitioner’s exclusion based on procedural requirements, despite her significant socioeconomic challenges, undermines these constitutional guarantees and necessitates judicial redress.”

The Court pointed out:, “The rejection of the petitioner’s candidature on the sole ground of having more than two children is contrary to Articles 14 and 16 of the Constitution of India, which ensure equality and non-discrimination. The petitioner’s marginalized status and meritorious standing under the widow category demand equal treatment under the law. Denying her claim disregards the principles of fairness and perpetuates systemic inequities, especially for women from vulnerable communities.”

In its conclusion, the Court clarified:“Notwithstanding anything above, it is made clear that the instant judgment is passed considering the peculiar facts and circumstances of the instant matter and henceforth, ought not to be treated as a precedent." It is apparent that  the conclusion is bizarre because it implies that the two children norm is contrary to Articles 14 and 16 only in this specific case!

Also read: Notorious Verdict? Children as Disqualification: After Haryana law on contesting panchayat elections, Rajasthan law for jobs

Elected representative changing political party ought to resign and seek people's mandate again

In K R Jayakumar v State of Kerala (2025), the High Court in its 12-page long observed: "The representatives elected in a democratic manner represent the will of the people elected. It includes the will of the political affiliation of the people who elected the representative. In other words, it is a bond between the people and the elected representative. If the elected representative wants to change his policy or political affiliation, he has to resign and face the mandate of the people again. That is the moral side of democracy. Otherwise, it will be a unilateral withdrawal from the bond executed with the people by the elected representative. It will be an insult to the will of the people. But the people can show their will to such a representative in the next election either by supporting him or by defeating him. That is the beauty of democracy. But an elected representative going against the will of the people should not be confronted physically by attacking that representative. The people can show their power through their ballot papers."

The Court also observed:"the proper manner by which a person is to be defeated in a democratic set-up is through the ballot papers and not by using weapons or by committing vandalism. In this case, both sides are trying to take the law into their own hands instead of approaching the people in a democratic manner." The order of January 29, 2025 was authored by Justice P.V.Kunhikrishnan. 




21,000 appeals pending in Patna High Court, Supreme Court seeks ad hoc judges

In Lok Prahari vs. Union of India (2025), Supreme Court's 3-judge bench of Chief Justice of India Sanjiv Khanna and Justices B.R. Gavai, and Surya Kant modified the 74-page long judgement dated April 20, 2021, by a 3-judge bench of Chief Justice of India S. A. Bobde and Justices S. K. Kaul, and Surya Kant which had activated the dormant provision under Article 224A of the Constitution of India for the appointment of ad hoc Judges to deal with the unprecedented situation arising from the backlog of cases pending in the High Courts in the face of vacancies of almost 40 per cent.  

Chief Justice Khanna bench observed that wherever case pendency exceeds 10% of the sanctioned strength in a High Court, the proposal for appointing ad-hoc judges can be adopted. He clarified that the government would have the discretion to determine the required number of such judges, ensuring that their appointments do not exceed 10% of the total sanctioned strength of the respective High Court. The order reads: "We are inclined to keep in abeyance the observations in paragraphs 43, 54, and 55 of the order dated April 28, 2021, which required that ad-hoc judge appointments should not be made unless 80% of the sanctioned strength is already working or recommended," It underlined that the requirement that vacancies should not exceed 20% would also be kept in abeyance.

It directed that each High Court may appoint 2-5 ad-hoc judges, ensuring that the number does not exceed 10% of the sanctioned strength. These ad-hoc judges will be part of benches presided over by sitting High Court judges and will primarily handle pending criminal appeals.

Chapter V of Part VI of the Constitution of India commencing from Article 214 upto Article 231 relates to the High Courts in the States. Article 217 provides for the appointment and conditions of the office of a Judge of the High Court, wherein the current age of retirement is 62 years. We may say that broadly, it is amongst the youngest ages of retirement of judges of the apex Court of a state in comparison with other democracies of the world.

Article 224 deals with the appointment of additional and acting judges. The objective as set out in the Article is to take care of any temporary increase in business of the High Court, or by reason of arrears of work therein. The appointment of an additional judge duly qualified to be the judge of a High Court has to be for a period not exceeding two years, or as the President may specify. The ground reality however, remains that while determining the strength of different High Courts, the practice that has been adopted is that about 25% of the strength consists of additional Judges. 

Article 224A which reads:

"224A. Appointment of retired Judges at sittings of High Courts-Notwithstanding anything in this Chapter, the Chief Justice of a High Court for any State, may with the previous consent of the President, request any person who has held the office of a Judge of that Court or of any other High Court to sit and act as a Judge of the High Court for that State, and every such person so requested shall, while so sitting and acting, be entitled to such allowances as the President may by order determine and have all the jurisdiction, powers, and privileges of, but shall not otherwise be deemed to be, a Judge of that High Court: Provided that nothing in this article shall be deemed to require any such person as aforesaid to sit and act as a Judge of that High Court unless he consents so to do." 

This Article begins with a non-obstante clause and was placed so that a request can be made to any person who has held the office of a Judge of that Court or of any other High Court, to sit and act as a judge of the High Court for the state. The second aspect is that while sitting and acting, such a judge would be entitled to such allowances as the President may by order determine and have all the jurisdiction, powers, and privileges of the High Court judge; but for all other purposes shall not be deemed to be a High Court judge. The proviso stipulates that consent has to be obtained from the judge concerned. 

The Court relied on the 5-judge decision in In Krishan Gopal vs. Shri Prakash Chandra & Ors (1974) wherein the Court ruled on the issue of whether a person sitting and acting as a Judge of the High Court under Article 224A of the Constitution has the jurisdiction to try an election petition under Section 80-A of the Representation of the People Act, 1951. Debate arose in the context of a judge of the Madhya Pradesh High Court who was sitting and acting as a judge of that Court under Article 224A of the Constitution, and his appointment was to last for a period of one year or till the disposal of elections petitions entrusted to him, whichever was earlier. In that context it was observed that if a person appointed under Article 224A of the Constitution was not considered to be a judge of the High Court for the purpose of jurisdiction, powers and privileges, the question of appointing such a person would never arise. 

In Justice P Venugopal vs. Union of India and Ors. (2003), it was opined that an ad hoc judge does not become a part of the High Court. There is no question of computing his pension for the period he id appointed as an ad hoc judge. 

In Union of India vs. Sankalchand Himatlal Sheth (1977), it was observed that the reason for insisting on consent was that a retired Judge cannot be compelled to work as an ad hoc judge against his consent. This is because he ceases to be a judge of the High Court on demitting office at the prescribed age and is not bound by the conditions of service.

According to National Judicial Data Grid (NJD), more than 62,000 cases are pending before High Courts as of January 25, 2025, including over 18 lakh criminal cases and more than 44,000 civil cases.

Regarding the Memorandum of Procedure (MoP) for such appointments, Chief Justice Khanna bench made it clear that the existing MoP would be followed. It kept paragraph 61 of the April 28, 2021 order in abeyance.

On January 21, 2025, the Court had acknowledged that the current stipulation requiring at least 80% of sanctioned judicial strength in High Courts to consider appointing ad hoc judges is impractical in states with high pendency. The bench proposed to modify the threshold to allow for ad hoc judges specifically to address criminal appeals. The bench recorded that Pana High Court has 21,000 appeals.

It observed: "We will have to therefore, partly modify or put in away certain Lok Prahari part, that untill and unless you have 80% of the sanction strength in the working, ad-hoc judges cannot be appointed. We will have to make this change, that the ad-hoc judges will be sitting with a condition that they will be sitting with benches which are dealing with criminal appeals, with one sitting judge as the presiding judge. So, to that extent, we require that moderation. We will have to have that. That's the reason why we have listed".

The Court has underlined: "The judgment itself says it is a continuous mandamus. It also says that it is a living constitution we will have to modify. " Chief Justice Khanna bench advised that ad hoc judges be paired with sitting judges, with the latter presiding over benches. 

Post retirement pensions cannot be withheld because of pending enquiry proceedings

In total violation of the principles of natural justice and also absolute disregard of the principles governing domestic enquiries; enjoined upon in the Bihar (Classification Control and Appeal) Rules as also the Bihar Pension Rules, after retirement, a lady teacher is yet to get her pension although in a catena of decisions of the Supreme Court and Patna High Court, it has been held that pensions cannot be withheld because of pending enquiry proceedings. 

The 29-page long judgement dated April 15, 2024 by Chief Justice K. Vinod Chandran and Justice Harish Kumar of Patna High Court set aside the  judgment dated September 26, 2023 order of withholding 100% pension, gratuity and earned leave encashment. The appellant shall be deemed to have continued in service till her superannuation. The appellant would also be entitled to pension considering her service to be continuous, subject only to any other proceeding taken. The directions for payment and interest shall be as per direction in Kamini Kumari (supra). The appellant shall also be entitled to be paid Rs. 5000/- as litigation cost.

The six petitioners namely, Neelam Kumari, Shashi Kala, Abha Rani, Ranju Bala Sharan, Bibha Rani and Subhra Rani had filed the writ against the State of Bihar through Principal Secretary, Education Department, Patna, Director, Secondary Education, Education Department, Patna and Director (Administration)- cum -Additional Secretary, Education Department, Patna.

The judgement of the High Court reads: "The present appeals are similar to that disposed of in LPA No. 1219 of 2023 (Kamini Kumari & Ors. Vs. The State of Bihar & Anr. & its analogous cases). The writ petitions from which the appeals arise, were cases in which the challenge was to the domestic enquiry proceedings initiated against teachers appointed long back, on allegations of their appointments having been made irregularly. The enquiries concluded with termination, some of which orders were once successfully challenged before this Court and again the very same consequence was visited on the teachers who were still in service; after a de novo proceedings as permitted by this Court. As against those who had retired; 100% of their pensions were withheld on the conclusion of enquiry proceedings. The domestic enquiry proceedings were initiated on the ground that the teachers who were the petitioners and the appellants, were appointed irregularly between 1980 to 1990.

In the earlier batch of writ petitions, it was noticed that in the year 1998 by reason of an order dated 18.12.1998 passed in a Public Interest Litigation; CWJC No. 9847 of 1998 (Brajesh Kumar Sinha and Ors Vs. the State of Bihar and Anr), there was a direction to the Central Bureau of Investigation to carry out investigation into the alleged irregular appointments.

The CBI submitted its report on 09.11.2004 before the Chief Secretary, State of Bihar; but no FIR was registered or any criminal proceedings were initiated. The Government slept over the matter despite receipt of the CBI report. In the year 2016, another PIL was filed numbered as CWJC No. 10002 of 2016 (Kaushal Kumar Vs. the State of Bihar and Ors) in which the State was called upon to apprise Patna High Court as to what transpired after the CBI enquiry report was filed. This led to a spate of domestic enquiry proceedings which were carried out in total violation of the principles of natural justice and also absolute disregard of the principles governing domestic enquiries; as enjoined upon in the Bihar (Classification Control and Appeal) Rules as also the Bihar Pension Rules.

A number of writ petitions were filed and a group of them in Shanti Kumari Vs. State of Bihar (CWJC No. 17904 of 2016) were disposed of on 17.01.2017 finding that the petitioners, therein, who were teachers were deprived of a reasonable opportunity to canvass their respective cases, produce relevant documents and also the binding authorities relating to domestic enquiries. The Writ Court set aside the domestic enquiry proceedings and the termination orders passed, but left liberty to the State to proceed de novo with the enquiry proceedings.

It is based on such liberty reserved that the proceedings were taken against a number of teachers, some of whom had retired by the time the proceedings were initiated.

Others who were reinstated in service by reason of the earlier writ proceedings having set aside the termination orders, were also proceeded with. Some of the writ petitions were filed against the proceedings initiated, others against the termination orders and many against the withholding of pension after retirement; which withholding was also of 100 per cent of applicable pension.

Patna High Court in Kamini Kumari (supra) found that the proceedings against retired employees were against Rule-43 (b) and Rule-139 of the Bihar Pension Rules. Reliance was also placed on the decision of the Hon’ble Supreme Court in State of Bihar Vs Md. Idrish Ansari; 1995 Supp 3 SCC 6.

Following the declaration in Md. Idrish Ansari (supra), it was held that the right of withholding of pension or any part of it permanently or for a specified period by virtue of Sub clause-(i) and (ii) of Clause-(a) of the proviso to Rule 43(b) of the Bihar Pension Rules had to necessarily satisfy two requirements. One, that it can be instituted only with the sanction of the State Government and second, it can only be with respect to an event which took place not more than four years before the institution of such proceedings. All the proceedings which were taken up against the retired employees were with respect to the irregular appointments made between 1980 to 1990 far beyond the four-year period provided. There was also no sanction obtained from the State Government in any of the cases.
7. Reliance was also placed on Rule-139 which Rule was also interpreted in Md. Idrish Ansari (supra). Rule-139 of the Bihar Pension Rules...

A order of April 28, 2022 by Justice Sanjeev Prakash reads: "Heard the parties. The case is being taken-up from defect side. Learned counsel for the petitioner is directed to submit the original petition along with attested affidavits and also remove all the defects pointed out by the Registry within two weeks from today. Considering it that this matter is covered by the judgment dated 23.02.2022 passed in C.W.J.C. No. 5489 of 2020 (Suresh Ram Vrs. The State of Bihar & Ors.) and connected matters reported in 2022 (2) B.L.J., 381 and the judgment dated 07.03.2022 passed in C.W.J.C. No. 34 of 2022 (Minakshi @ Sushre Minakshi & Anr. Vrs. The State of Bihar & Ors.), this petition is disposed of with the above terms. If an appeal is preferred before the District Appellate Authority/State Appellate Authority the same shall be taken-up at the earliest and preferably decided within a period of three months."

The order of September 26, 2023 by Justice Rajeev Ranjan Prasad reads: "No one appears for the petitioner. Two weeks’ time is granted to the petitioner to remove defects failing which this application shall stand dismissed without further reference to the Bench. If the defects stand removed within the aforesaid period, list this case on 19.10.2023."

The order of March 13, 2024 by Justice Anjani Kumar Sharan reads: "Heard learned counsel for the parties. From the perusal of the Office notes, it appears that the present writ application is already dismissed on 10.10.2023 due to non-compliance of order dated 26.09.2023. As such, no order needs to be passed."

The order of November 20, 2024 by Justice Prabhat Kumar Singh reads: "Learned counsel for the respondent/s is directed to file counter affidavit within four weeks. Reply, if any, must be filed within two weeks.  Thereafter, list this case on 18.12.2024."

A Miscellaneous Jurisdiction Case No.1369 of 2024 in Civil Writ Jurisdiction Case No.3871 of 2022 was filed on April  18, 2024 in the Court of Justice Rajeev Ranjan Prasad . It was registered on April 20, 2024.

The order of August 13, 2024 by Justice Rajeev Ranjan Prasad reads: "No one appears on behalf of the petitioner. Four weeks’ time is granted to learned counsel for the petitioner to remove the defects, failing which this application shall stand dismissed without further reference to the Bench. If the defects stand removed within the aforesaid period, list this case on 20.09.2024 under appropriate heading. "

The order of October 5, 2024 by Justice Rajeev Ranjan Prasad reads: "This application has been filed for restoration of CWJC No.3871 of 2022 which stood dismissed for default on 10.10.2023. Having regard to the submissions that there was a bonafide mistake on the part of the learned counsel for the petitioner which resulted in dismissal of the case in default, this Court directs
restoration of CWJC No.3871 of 2022 to its original file subject to the compliance of the peremptory order dated 26.09.2023 passed in the said case. This application stands allowed."




    

    

Tuesday, January 28, 2025

India ranked 61st among Digital Evolution States

Digital Intelligence Index provides insights across two scorecards: Digital Evolution and Digital Trust.

It is based on research from over twelve years (2008-2019), the third edition of Digital Evolution builds on our prior editions (2014 and 2017) to represent a data-driven evaluation of the progression of the global digital economy. It measures 90 economies. It combines 160 indicators into four key drivers: Supply Conditions, Demand Conditions, Institutional Environment, and Innovation and Change. 

The Fletcher School at Tufts University, in partnership with Mastercard has presented the Digital Intelligence Index. The current index encompasses the third edition of the Digital Evolution scorecard. 

Indian media has misreported about India's position in the Digital Intelligence Index. It did not accurately report that India is at the 61st  position among the Digital Evolution States, out of 90 ranked States, 4th among Digital Evolution Momentum States. In terms of Digital Trust Environment and Digital Trust Experience, India is ranked 32 out of 90 ranked States. 

The 78 page long report entitled "DIGITAL IN THE TIME OF COVID:Trust in the Digital Economy and Its Evolution Across 90 Economies as the Planet Paused for a Pandemic" is dated December 2020. It available at:

https://digitalplanet.tufts.edu/digital-intelligence-index-2/ 

Friday, January 24, 2025

Acquittal of murder accused Darshan Singh, Rani Kaur, improvement of witness statement under Section 161 insignificant

In Darshan Singh vs. The State of Punjab (2024), a 3-judge bench of Supreme Court held that prosecution cannot seek to prove a fact during trial through a witness which such witness had not stated to police during investigation – Evidence of that witness regarding the said improved fact is of no significance. [Para 26].

The case before the Court arose from the judgment and order dated July 23, 2009 of the Punjab & Haryana High Court in CRLA No.593-DB of 2000. 

The deceased, Amrik Kaur was married to Darshan Singh, the appellant, some time in 1988. The marriage was arranged through Melo Kaur (PW-3), the cousin sister of the deceased. The prosecution alleges that their marital relationship was strained owing largely to the fact that Darshan Singh had developed an illicit partnership with Rani Kaur (A2). Several relatives had prevailed on the appellant to put an end to his relationship with Rani Kaur, but to no avail. The illicit relationship between Darshan Singh and Rani Kaur is said to have lasted for at least three years before the fateful day. It is the case of the prosecution that on the intervening night of  May 18, 1999 and May 19, 1999, Darshan Singh and Rani Kaur, with the motive of eliminating the deceased, administered poison and intentionally caused the death of Amrik Kaur.

On these allegations, Darshan Singh and Rani Kaur were prosecuted for charges under Section 302 r/w Section 34 IPC. The Trial Court convicted both the accused persons for the offence under Section 302 r/w Section 34 and sentenced them to undergo imprisonment for life.

The Trial Court had concluded that it was a case of homicide and not suicide. It has found that the appellant had a strong motive to commit the murder of his wife. It further held that the appellant and Rani Kaur were present in the house on the intervening night of May 18, 1999 and May 19, 1999 and therefore, the burden lay on them to explain as to ‘how the body of Amrik Kaur who was alive on the night of May 18, 1999 turned into a corpse’ the next morning. The Court completely disbelieved the theory of suicide sought to be advanced on behalf of appellant. It was noted that merely because there were no injuries on the body of the deceased, that by itself would not obviate the possibility of forceful administration of the poisonous substance. On the basis of the above circumstances taken together, the Trial Court held that the prosecution has proved its case beyond reasonable doubt against the appellant and Rani Kaur.

In appeal, the High Court had agreed with the findings of the Trial Court in so far as the appellant is concerned and had acquitted Rani Kaur by extending her the benefit of doubt. It has found that there is no other evidence except the testimony of PW3 and PW4, to prove the presence of Rani Kaur on the intervening night of May 18, 1999 and May 19, 1999 at the appellant’s house.

The High Court had upheld the order of conviction and sentence, as against Darshan Singh (the appellant) and has allowed the appeal of Rani Kaur (Accused No. 2), thereby acquitting her of all charges. The State of Punjab had not challenged the acquittal of Rani Kaur by filing any special leave petition. Darshan Singh had sought special leave to appeal before the Supreme Court and leave came to be granted by order dated January 22, 2010.

In its January 2024 judgement, the Supreme Court concluded: There cannot be a gap in the chain of circumstances. When the conviction is to be based on circumstantial evidence solely, then there should not be any snap in the chain of circumstances. If there is a snap in the chain, the accused is entitled to benefit of doubt. If some of the circumstances in the chain can be explained by any other reasonable hypothesis, then also the accused is entitled to the benefit of doubt. [See: Bhimsingh Vs. State of Uttarakhand, (2015) 4 SCC 281.] Therefore, we allow this appeal and set aside the concurrent findings of conviction." The appeal was allowed. 

Supreme Court disapproves of prolonged verification process of Bar Council of India since 2015

In Bar Council of India vs. Poonam Ashok Goud (2025), a 3-judge bench of Chief Justice Sanjiv Khanna, Justices Sanjay Kumar and K V Viswanathan, disapproved of the prolonged verification process initiated by the Bar Council of India (BCI) since 2015. It's order of January 23, 2025 reads: "The Bar Council of India shall file an updated status report,indicating the States where the verification of the Advocates enrolled and on the rolls of the State Bar Councils is still pending.  The said status report will be filed within eight weeks from today with a copy to the opposite side." The Court has re-listed the in the week commencing July 21,2025.

The Supreme Court had issued notice on January, 20, 2024 in a Transfer Petitions (Civil). The case arose from decisions of Delhi High Court in WP(C)-15576-2022, and WP(C)-14780-2023, Andhra Pradesh High Court in WPSR-50755-2023 and WPSR-51695-2023 and Uttarakhand High Court in WPMS-2136-2023. 

On February, 9, 20244, BCI's case was tagged with the transfer petitions. In none of the Court's orders of there is any specific reference to fake degree of Advocates. 

The case was filed on December 29, 2023. It was registered on January 12, 2024 and verified on January 16, 2024. BCI has filed the case against eleven respondents namely, Poonam Ashok Goud, Bar Council of Telangana, Awanish Kumar, WBar Council of Delhi, Shaik Umar Basha, Union of India represented by Secretary Government of India, Bar Council of Andhra Pradesh, Arun Uniyal, 9 Bar Council of State of Uttarakhand, State of Uttarakhand and Yenumala Suresh Babu

ED raids in Patna Railway Claims Tribunal scam case

A press release dated January 23, 2025, Directorate of Enforcement (ED), Patna states that ED, Patna in connection with money laundering case related to Patna Railway Claims Tribunal scam carried out search operations at four locations related to Judge R.K. Mittal and other involved advocates in Patna, Nalanda and Mangalore. It has arrested three advocates- Bidyanand Singh, Parmanand Sinha, and Vijay Kumar on January 22, 2025 for offense of money laundering related to this scam under the provisions of Prevention of Money Laundering Act (PMLA), 2002. The accused were produced before the Special Court (PMLA). They have been sent to judicial custody. Rahul Navin is the Director of Enforcement and Yaduraj Singh is the Joint Director Patna Zonal Office.     

ED initiated investigation on the basis of FIRs registered by CBI, ACB, Patna regarding mass scale irregularity/ criminality in the death claim cases filed, processed and decided at Railway Claims Tribunal, Patna (RCT) against unknown public servants of Railway, Bidyanand Singh, Parmanand Singh, Vijay Kumar and others under various sections of IPC, 1860 and Prevention of Corruption Act, 1988. 

According to the FIRs, in pursuance of a criminal conspiracy, in accidental death claim cases, only a part of the decreed amount, actually awarded to the claimants, was received by the claimants and major chunk was siphoned off by the conspirators.

ED investigation revealed that Advocate Bidyanand Singh and his team of advocates including Advocate Parmanand Sinha and Advocate Vijay Kumar dealt around 900 cases where decrees/execution orders were issued by Judge R.K. Mittal wherein approximately Rs. 50 Crore compensation was awarded to the claimants. 

It is revealed that Advocate Bidyanand Singh and his team of advocates opened and operated the bank accounts of claimants without their knowledge and using the signatures and thumb impressions of these claimants transferred the claim amount received from the railways to their own accounts or withdrawn in cash. Later, they gave some amount to the claimants as compensation as per their will. The searches resulted in identification of assets acquired by the advocates and judge in their names and recovery of physical and digital records including signed blank bank cheques and signed blank papers by the claimants. Further investigation is under progress.

The Directorate originated on May 1, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under Foreign Exchange Regulation Act (FERA), 1947. In 1957, this Unit was renamed as ‘Enforcement Directorate’. In 1960, the administrative control of the Directorate was transferred from the Department of Economic Affairs to the Department of Revenue. FERA, 47 was repealed and replaced by FERA, 1973. For four years (1973 – 1977), the Directorate was under the administrative jurisdiction of the Department of Personnel & Administrative Reforms. FERA, 1973 was repealed and the Foreign Exchange Management Act, 1999 (FEMA) came into operation on June 1, 2000. The PMLA was enacted in 2002 and the ED was entrusted with its enforcement from July 1, 2005. The Fugitive Economic Offenders Act, 2018 (FEOA) has been enacted and ED is entrusted with its enforcement with effect from April 21, 2018. This enactments have been made under the International Anti Money Laundering regime.