Madras High Court dismisses challenge to LIC IPO

The Madras High Court on Monday refused to entertain a petition challenging the decision of the Central government to trade 5 percent of its shareholding in Life Insurance Corporation (LIC) through Initial Public Offering (IPO) [L Ponnammal v Union of India]..The petitioner L Ponnammal had challenged the provisions of the Finance Act, 2021 (2021 Act) and Life Insurance Corporation (LIC) Act, 1956 for being ultra vires Article 110 of the Constitution of India for enactment of the amendments by way of the 2021 Act as money bill. Chief Justice Munishwar Nath Bhandari and Justice D Bharatha Chakravarthy while dismissing the petition for being devoid of merits advised against inference into the implementation of a public interest policy by way of legislation reasoning that, “it directly impacts the economic growth of the country and interference therein may have far reaching consequences, because the receipt of money into the Consolidated Fund of India is to be used for the development of the country.”.- The petition challenged the two acts on the ground that the subject-matter would not fall within the definition of "Money Bills";- The respondent opposed the plea on the ground that amendment was with a purpose to receive money in the Consolidated Fund of India thus, was not violative of Article 110;- The Court that since the purpose was to receive the money into the Consolidated Fund, it fell within the purview of Article 110;- Further, precedent was relied on to conclude that Money Bill cannot be construed in a restrictive sense;- Thus, finding no constitutional illegality, the petition was dismissed..The petitioner, a policyholder of the LIC, challenged the provisions on the ground that they were introduced by way of a Money Bill under Article 110 of the Constitution of India, even though the amendment did not fall in the category of Money Bill..The amendment of 2021 was classified by the Speaker of the Lok Sabha under Article 110 of the Constitution as a Money Bill. A certificate for the same was issued by the Speaker even though the Finance Bill contained matters other than those specified in sub-clauses (a) to (f) of clause (1) of Article 110 of the Constitution of India.The petitioner’s challenge was essentially on the ground that the amendments would result in a reduction in the share of surplus allocated to participating policyholders..The petitioner emphasised that a bill was a Money Bill if it "only" contained provisions dealing with all or any of the subject-matters given therein. Thus, the certificate was wrongly issued..The respondent, on the other hand, submitted that the decision of the Central government was approved by the parliament to trade 5% of its shareholding in LIC through IPO, thus the amendment was valid and there was no constitutional bar in bringing an IPO.In fact, it was stated that the purpose of amendment was to receive money in the Consolidated Fund of India to be used for the development of the country which is why the Finance Act fell within the realm of Article 110 of the Constitution of India.Further, the government submitted that the process and procedure for certifying the Finance Bill as a Money Bill was complied with and, therefore, there was no constitutional illegality..The Court, elaborated at length, the legislative developments, amendments to provisions of the LIC Act and the executive developments.To discuss the scope of the money bill, the Court relied on the judgment of the Supreme Court in Justice KS Puttaswamy (Retd) v. Union Of India and Rojer Mathew v. South Indian Bank Limited , both of which held that the expression "Money Bill" could not be construed in a restrictive sense and that the wisdom of the Speaker of the Lok Sabha must be valued, except where it was blatantly violative of the Constitutional scheme..Further, testing the constitutional validity of the case independent of these judgments the Court took note of the fact that the amendment was brought in to allow the Central government to float the IPO and receive money into the Consolidated Fund of India. Thus, it was concluded that the amendments were saved by Article 110(1)(g) because payment of money into the Consolidated Fund or the Contingency Fund of India was covered by Article 110(1)(c) of the Constitution.“We are, therefore, of the view that the amendment in the case on hand falls within the purview of Article 110 of the Constitution of India.”.The Bench also said that a bare reading of provision made it clear that on the issue of whether a Bill was a Money Bill or not, the decision of the speaker was final. However, the petitioner had not challenged the decision of the speaker.“In the absence of challenge to the decision of the Speaker of the House of the People, it became final in view of Article 110(3) of the Constitution of India and if challenge to the amendment is accepted, then we would be going against the mandate of Article 110(3) of the Constitution of India with a challenge to the certification by the Speaker of the House of the People,” the High Court opined..Therefore, taking note that the process for certifying the Finance Bill as a Money Bill was duly complied with and it was not a case where allegation of constitutional fraud was made, the petition was dismissed..Advocates Abhishek Jebaraj and SG Arul Mozhi Selvan appeared for the petitioner while the Respondents were represented by Additional Solicitor General N Venkataraman, Senior Advocate Satish Parasaran and advocates Prasad Vijayakumar and B Deepak Narayanan..[Read Judgment]

Madras High Court dismisses challenge to LIC IPO

Shagun Suryam

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