Financial Emergency : Concept & more [UPSC]

In this article, we will discuss the financial emergency in a simple and easy way and also look at the grounds on which it has been criticized.

National emergency ^️ and President’s Rule ^️is very important, and also notorious. This is because it has been used in the political interest more than the interest of the country. You can click on the given link to understand in detail.

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Emergency provisions of India

Emergency refers to an event or incidents that require immediate action. Such a situation can come anytime and anywhere and it can be personal, it can be social as well as national. Emergency provisions have been made in the Constitution of India to deal with the national situation . These provisions are mentioned in Article 352 to 360 in Part 18 of the Constitution.

Types of emergency and circumstances of imposition

Three types of emergency and three such circumstances have been mentioned in Part 18 of the Constitution. On whose stay an emergency can be imposed. These three are described in separate paragraphs. which is as follows-

1. Article 352 – Under this, emergency can be imposed during war, external aggression and armed rebellion. This type of emergency is called a national emergency.

2. Article 356 – Emergency can be imposed even when the constitutional machinery in the states fails. This type of emergency is called President’s rule. It is also called State Emergency and Constitutional Emergency. However, only the word ‘President’s Rule’ is mentioned in the Constitution.

3. Article 360 - An emergency which is imposed when the financial stability or credit of India is in danger. It is called a financial emergency .

National emergency ^️ and President’s Rule ^️ is very important, and also notorious. This is because it has been used in the political interest more than the interest of the country. You can click on the given link to understand in detail.

Financial emergency has not been imposed in the country till date, so very little information is available on its practical aspects.

What is a financial emergency?

Under Part 18 of the Constitution, three types of emergency are discussed from Article 352 to 360. Financial emergency is one of them.

As mentioned above, when the financial stability or creditworthiness of India is in danger, the President can declare a financial emergency in the country.

Basis for proclamation of financial emergency

Article 360 (1) empowers the President to declare a financial emergency if he is satisfied that a situation has arisen in which the financial stability or goodwill of India or any part of the territory thereof is endangered.

Through the 38th Constitutional Amendment Act 1975, Indira Gandhi ‘s government had put all three types of emergency out of judicial review. That is, the financial emergency was also out of the purview of judicial review.

It was clearly written in that Act that the satisfaction of the President to declare a financial emergency is final and conclusive and is not questionable on any ground in any court of law.

But through the 44th Constitutional Amendment Act 1978, Morarji Desai ‘s government abolished this provision and said that the satisfaction of the President is not beyond judicial review.

Parliamentary Approval and Timeline

According to Article 360(2) , the declaration of financial emergency must be approved by the Parliament within two months.

If the Lok Sabha is dissolved during the proclamation of financial emergency or if the Lok Sabha is dissolved before its approval within two months, then this declaration shall be effective for thirty days after the first sitting of the Lok Sabha, but during this period it shall be passed by the Rajya Sabha. Approval is required. Because Rajya Sabha is not dissolved. That is, if the Lok Sabha does not approve it within 30 days, then it will lapse.

Thus, once it is approved by both the Houses of Parliament, the Financial Emergency will remain in effect indefinitely until it is withdrawn. that’s because

1. Its maximum time limit has not been fixed. And

2. No further approval of Parliament is necessary for this to continue.

A resolution approving the declaration of financial emergency can be passed by either House of the Parliament by a simple majority. That is, like a national emergency, there is no need for a special majority here.

How does a financial emergency end?

It is easy enough to end a financial emergency. A declaration of financial emergency can be withdrawn or changed at any time by the President by a subsequent declaration. Such a declaration does not require any parliamentary approval.

effects of financial emergency

The effect of financial emergency has been discussed in Article 360(3) and 360(4) . which is something like this;

1. The official executive power of the Center may be expanded where the Center may direct any State to comply with the principles of financial propriety. or any other direction the President may deem fit.

2. Any such direction may refer to these provisions, such as – reduction in the salary and allowances of any or all classes of servants in the service of the State and all those passed by the State Legislature and brought for the consideration of the President Reserve money bills or other finance bills, etc.

3. The President may, during the period of emergency, issue directions for deduction of salary and allowances – (1) to all or any class of persons engaged in the service of the Center and (2) to all Judges of the Supreme Court and High Courts. .

Therefore, during the period of financial emergency, the center gets control in all the financial matters of the state.

Criticism of emergency provisions

Some members of the Constituent Assembly criticized the emergency provisions in the Constitution on the following grounds:

1. The federal effect of the constitution will be destroyed and the center will become omnipotent.
2. The powers of the states (both unitary and federal) will be completely in the hands of the central management.
3. The President will become the dictator.
4. The financial autonomy of the states will become redundant.
5. The Fundamental Rights will become meaningless and as a result the democratic foundation of the Constitution will be destroyed.

H V Kamath
I am afraid that by this single chapter we are laying the foundation of a complete state which is a police state, a state which is completely opposed to all the principles and ideals for which we have fought over the last decades. A state where the rights of freedom of hundreds of innocent women and men will always be in doubt. A kingdom wherever there is peace that it will be in the grave and in the void or the desert. It will be a day of shame and sadness when the President will exercise these powers, they will have no commonality in the constitution of any democratic country in the world.

H V Kamath

I am afraid that by this single chapter we are laying the foundation of a complete state which is a police state, a state which is completely opposed to all the principles and ideals for which we have fought over the last decades.
A state where the rights of freedom of hundreds of innocent women and men will always be in doubt.
A kingdom wherever there is peace that it will be in the grave and in the void or the desert.
It will be a day of shame and sadness when the President will exercise these powers, they will have no commonality in the constitution of any democratic country in the world.

K T Shah
A chapter on Reaction and Fall; It seems to me that the name of liberty and democracy will remain only in the Constitution.

T T Krishnamachari
Through these provisions, the President and the Executive will exercise constitutional dictatorship.

H N Kunjuru
The provisions of financial emergency pose a serious threat to the financial autonomy of the state.

However, there were supporters of these provisions in the constitution. Sir Alladi Krishnaswamy Iyer called it the life companion of the Constitution. Mahavir Tyagi said that it will act like a safety valve and help in protecting the Constitution.