Provisions as to financial emergency
(1) If the President is satisfied that a situation has arisen whereby the financial stability or credit of India or of any part of the territory thereof is threatened, he may by a Proclamation make a declaration to that effect.
(2) A Proclamation issued under clause (1) —
(a) may be revoked or varied by a subsequent Proclamation;
(b) shall be laid before each House of Parliament;
(c) shall cease to operate at the expiration of two months, unless before the expiration of that period it has been approved by resolutions of both Houses of Parliament:
Provided that if any such Proclamation is issued at a time when the House of the People has been dissolved or the dissolution of the House of the People takes place during the period of two months referred to in subclause (c), and if a resolution approving the Proclamation has been passed by the Council of States, but no resolution with respect to such Proclamation has been passed by the House of the People before the expiration of that period, the Proclamation shall cease to operate at the expiration of thirty days from the date on which the House of the People first sits after its reconstitution unless before the expiration of the said period of thirty days a resolution approving the Proclamation has been also passed by the House of the People.
(3) During the period any such Proclamation as is mentioned in clause (1) is in operation, the executive authority of the Union shall extend to the giving of directions to any State to observe such canons of financial propriety as may be specified in the directions, and to the giving of such other directions as the President may deem necessary and adequate for the purpose.
(4) Notwithstanding anything in this Constitution —
(a) any such direction may include —
(i) a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a State;
(ii) a provision requiring all Money Bills or other Bills to which the provisions of article 207 apply to be reserved for the consideration of the President after they are passed by the Legislature of the State;
(b) it shall be competent for the President during the period any Proclamation issued under this article is in operation to issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union including the Judges of the Supreme Court and the High Courts.
VERSION 1
Article 360, Constitution of India 1950
(1) If the President is satisfied that a situation has arisen whereby the financial stability or credit of India or of any part of the territory thereof is threatened, he may by a Proclamation make a declaration to that effect.
(2) The provisions of clause (2) of article 352 shall apply in relation to a Proclamation issued under this article as they apply in relation to a Proclamation of Emergency issued under article 352.
(3) During the period any such Proclamation as is mentioned in clause (1) is in operation, the executive authority of the Union shall extend to the giving of directions to any State to observe such canons of financial propriety as may be specified in the directions, and to the giving of such other directions as the President may deem necessary and adequate for the purpose.
(4) Notwithstanding anything in this Constitution—
(a) any such direction may include—
(i) a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a State;
(ii) a provision requiring all Money Bills or other Bills to which the provisions of article 207 apply to be reserved for the consideration of the President after they are passed by the Legislature of the State;
(b) it shall be competent for the President during the period any Proclamation issued under this article is in operation to issue directions for the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of the Union including the Judges of the Supreme Court and the High Courts.
SUMMARY
Draft Article 280-A was absent in the Draft Constitution of India 1948. It was introduced by the Drafting Committee Chairman in the Assembly on 16 October 1949.
Draft Article 280-A gave the President the power to declare a financial emergency and partly suspend India’s federal structure if he or she believed that India’s financial stability was being threatened. The Union Executive was empowered to issue directions to State Executive(s) to undertake certain financial measures. If these directions are not followed, the President could impose President’s rule in the State(s).
The Drafting Committee Chairman told the house that the Draft Article was inspired by the 1930 National Recovery Act. This Act gave the U.S. President extraordinary powers to deal with the financial crisis caused by the Great Depression. The U.S. Supreme Court struck it down as unconstitutional – leaving the U.S. President toothless in the face of financial doom. Draft Article 280-A, the Chairman argued, was aimed at avoiding such a situation by constitutionally guaranteeing the President sufficient powers to deal with a financial emergency.
Most Assembly members felt that the President’s powers under the Draft Article were too wide, unjustified and infantilized states. A number of amendments were moved which wanted to reduce the President’s powers. One Member singled out President’s power to reduce salaries, reserve State bills and impose President’s rule as being excessive. He argued that a mere ‘threat to financial stability and credit’ did not justify the President’s emergency powers. Another Member felt that the Draft Article appeared to not trust the states’ ability and initiative to deal with a financial emergency.
A small group of members came in support of the Draft Article and even asked for more powers for the President. A Member wanted the President to legislate on State List matters as if they were in the Concurrent List. Another Member moved an amendment to suspend India’s federal structure and provincial autonomy in toto for the duration of a financial emergency.
Towards the end of the debate, a Drafting Committee member defended the Draft Article. He assured the Assembly that the Union has no interest in interfering with State autonomy. He pointed out that the financial affairs of the States and the Union were intimately linked: a financial crisis even in a single State could affect the financial integrity of the entire country and vice-versa. Therefore, any financial crisis required a Union led response and temporary intrusions into the executive power of the States.
All the amendments were put to vote, but were rejected by the Assembly.
The original Draft Article moved by the Drafting Committee Chairman was adopted by the Assembly on the same day.