Constitution Of India
Part 12
Part XII governs financial relations, property, contracts, and legal liabilities involving the State. It lays out how revenue is raised and distributed, and provides for institutions like the Finance Commission. It also includes provisions that define the nature of property rights within the constitutional framework.
The included articles point to fiscal federalism and the evolving understanding of property within constitutional law.
Article 280
The Finance Commission is one of the most important Commissions in the Indian Constitution, designed to ensure a balanced and fair distribution of financial resources between the Union and the States. Its origin can be traced back to Draft Article 260 of the 1948 Draft Constitution, which was eventually renumbered as Article 280 in the Constitution of India, 1950. The Constituent Assembly debated this provision on 9 and 10 August 1949, raising crucial questions about the nature of Indian federalism, the discretion of the President, and the scope of the Commission’s powers.
Under the draft, the President was to constitute a Finance Commission at the expiration of every five years. The Commission would consist of a Chairman and four other members, all appointed by the President, with Parliament empowered to determine the qualifications and procedures
for appointment. Its primary task was to make recommendations to the President regarding the distribution of the net proceeds of taxes between the Union and the States, the principles governing grants-in-aid to States, and the continuance or modification of financial agreements between the Union and certain States.
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During the Assembly debates, the Drafting Committee, led by Dr. B. R. Ambedkar, introduced two significant changes on the floor. First, it proposed that the President should set up the Commission within two years of the commencement of the Constitution, instead of waiting five years. This prevented unnecessary delays in establishing fiscal arrangements. Second, it replaced the phrase “revenues of India” with “Consolidated Fund of India,” providing clearer constitutional alignment. Both amendments were accepted by the Assembly without much opposition.
Another set of debates centred on the scope of the Finance Commission’s powers. Some members argued that the Commission should not be allowed to alter the fixed percentages of revenue distribution between the Union and the States, citing the example of the Australian Finance Commission, where such disputes had created friction. They feared that allowing the Finance Commission to recommend changes could destabilise existing arrangements. However, this concern was countered by others who pointed out that the Finance Commission was an advisory body. Its recommendations would not be binding on the President, who retained the discretion to accept or reject them. The Chairman of the Drafting Committee, Dr. B. R. Ambedkar, also clarified that the Commission’s recommendations were intended to guide the President and provide a rational basis for financial decisions that could otherwise invite criticism from the States. With this assurance, the proposal to restrict the Finance Commission’s powers was rejected.
The Constituent Assembly adopted the amended Draft Article on 10 August 1949 after settling the key debates. Article 280, as it stood in 1950, mandated that the President constitute a Finance Commission within two years of the Constitution’s commencement and thereafter every five years. Its role was to recommend the distribution of taxes, principles of grants-in-aid, and other financial matters referred to it by the President.
Over time, the Finance Commission’s role evolved to meet the needs of India’s growing democracy and its decentralised governance structure. In 1992, through the 73rd and 74th Constitutional Amendments, Article 280 was expanded to require the Finance Commission to also make recommendations on measures to augment the Consolidated Fund of a State to support the finances of Panchayats and Municipalities, based on the recommendations of the State Finance Commissions. This addition firmly integrated the third tier of governance into India’s financial federalism.
Today, the Finance Commission continues to play a critical role in sustaining India’s cooperative federalism. It balances the fiscal needs of the Union and the States, addresses disparities in development, and strengthens the financial autonomy of local bodies. The debates around Draft Article 260 remind us that while the Commission’s recommendations are advisory, the institution itself embodies a constitutional commitment to fairness, accountability, and financial stability.
Article 300A
Article 300A is a crucial article that was added through the 44th Constitutional Amendment Act of 1978. The Article is related to the right to property and states that no person shall be deprived of their property unless the government takes it through a valid law passed in the Legislature. Article 300A in the Indian Constitution was a result of a larger tussle caused by the right to property. Before Article 300A, Article 31, which was a fundamental right, dealt with the question of property. However, it proved to be a hurdle in various land-related policies of the central government. The problematic nature of this article can be gauged from the fact that in the very first year of the republic, the First Amendment Act was passed, which was regarding Article 31.
Article 31, titled ‘Right to Property’, was enshrined in the Indian Constitution of 1950 as a fundamental right. By making property a fundamental right, the constitution framers ensured that private property could be safeguarded by the government from arbitrary taking. According to the omitted article, no person shall be deprived, and if the state acquires private land, it should provide adequate compensation for the acquisition. The Indian Government, in its initial years, was aggressively working for Land reforms and land redistribution. For this purpose, it acquired land from landlords. However, these landlords challenged such acquisition on the grounds of violation of the right to life and liberty. To get rid of this, the Parliament passed the First Amendment Act, which clearly stated that no tenancy laws shall be challenged in the Supreme Court. Also, land taken for public work cannot be challenged on the grounds of violation of the Right to life and liberty.
This amendment itself, however, was challenged in Shankari Prasad versus Union of India, 1951. The petitioner argues that Parliament cannot make changes in the basic structure, such as fundamental rights. However, the Supreme Court held a decision in favour of the central government. Still, property acquisition continued to be challenged on the grounds of inadequate compensation. The Parliament passed the 4th Amendment in 1955, which modified Article 31 and stated that the property acquisition done for public work shall not be challenged on the grounds of inadequate compensation. The 17th Amendment in 1964 added various new acts in the 9th schedule, preventing them from being challenged in Court.
The 25th Amendment was significant as it curtailed property rights to a large extent. It kept the property acquisition outside judicial review as well as enforced that Fundamental Rights can be violated for implementing directive principles aimed at social-economic justice. Breakthrough came with the 44th Amendment, which declared the Right to Property as a constitutional and legal right rather than a fundamental right. This resulted in the facilitation of property acquisition for public works.
Presently, the article states that no person shall be deprived of their property without any valid law for the acquisition. Thus, the government cannot take the property arbitrarily without any legal backing. However, since it ceased to be a fundamental right, it no longer could be challenged on the grounds of the Right to life and liberty. The Government can acquire property under Article 300A by providing adequate compensation, which is to be defined by laws such as the Right to Fair Compensation and Transparency in Land Acquisition, 2013.
Some of the landmark cases where the Supreme Court upheld the right to property of individuals are the State of Haryana versus Mukesh Kumaar (2011), Hari Krishna Mandir Trust versus State of Maharashtra (2020), and B.K. Ravichandran versus Union of India (2020). In all these cases, the Supreme Court held that the government cannot take private property on the grounds of public work without having a legal procedure for it. These legal procedures, other than adequate compensation, include giving prior notice regarding property acquisition and the right to be heard.