“No single member of the executive should be permitted to traipse within the boundaries of (that) power”: SC
The Supreme Court this week ruled that some sections of the Appropriation Bill 2013 (which lists out state expenditure for next year) are inconsistent with the Constitution.
The 3-judge bench comprising Justices Shiranee Tilakawardane, Priyasath Dep and S. Eva Wanasundera noted that clause 7(b)) of the bill contravenes the full control of public finance which belongs rightfully to Parliament in terms of Article 148, and only Parliament, and no single member of the “executive should be permitted to traipse within the boundaries of that power”.
It said provisions contained in clause 2(1) (b) and 7(b) of the Appropriation Bill contravenes Article 148 of the Constitution and is therefore inconsistent with the Constitution.
The ruling came on the back of a conflict between the Executive and the Judiciary, leading to the impeachment of the Chief Justice Shirani Bandaranayake.
Here are extracts of the ruling:
The Petitions of the Petitioner and Intervenient Petitioner were taken up for hearing together without objection. It was agreed at the outset of the arguments that it is of paramount importance that the inalienable sovereignty of the people must be exercised by Parliament under the doctrine of public trust in terms of Article 4(a) of the Constitution. In particular, due and proper fiscal accountability must be viewed as the bedrock of good governance by any Government, and must at all times be balanced and viewed through the lens of intra and intergenera responsibility and equity.
This Court also agrees with the submissions that this Court would not be bound by earlier decisions on the several Appropriations Bills that have come from 1987, on similar provisions of law, but such would certainly have a persuasive value in interpretations made by this Court and perhaps differed to only in situations where the Court feels that a matter has not been duly considered or where such could be distinguished in fact and law.
Accountability
In practice, fiscal accountability can only be assured by a process where Parliamentary control is exercised in full in a transparent manner where matters are placed in the public domain, enhancing the credibility of the process through patent disclosures and public debate on its implications. It is in this backdrop that this Court analyses the Bill and considers whether any of its provisions alienates or circumvents the control of public finance by Parliament as envisaged by Article 148 of the Constitution, especially in view of the fact that the Appropriation Act is the principal legislation concerning public finance.
In terms of clause 2(1), the Bill, recognizes expenditure estimated at Rs 1335 billion. Clause 2(1) (b) authorizes the raising of loans, whether in or outside Sri Lanka, not exceeding Rs 1295 billion. Counsel for the Petitioners submitted that in raising the loans up to Rs 1295 billion, there appears to be an abdication of all controls or checks by Parliament as it does not require the prior review of the terms and conditions on which the loans are obtained, including the rates of interest paid in raising these foreign loans. In their written submissions Counsel for the Petitioners adverted to the mismanagement of public finance concerning the “Petrol hedging Saga...” , and claimed that the alleged “misuse of the powers by public officers, “left the people of Sri Lanka to foot the Bill.” Counsel also drew the attention of Court to the clear distinction that exists between mere authorisation after a loan had been finalised, and the real intention of the Constitution that Parliament should exercise full control and scrutinise the terms and conditions of loans, prior to the finalization of the loan, up to the envisaged ceiling of Rs 1295 billion.
This Court finds that the use of the term “hereby authorised’, appears to be limited only to prescribing a ceiling of Rs 1295 billion for the raising of loans, and does not contemplate Parliamentary supervision, scrutiny or control of either the terms of the loans, the interest payable or the period of repayment. We find therefore that clause 2(1)(b) constitutes an abdication of the power of control by Parliament over fiscal matters, especially the control over the source of the finances which creates a debt of the Republic, as envisaged under the terms of Article 148 of the Constitution.
The State in its submission, referred to several legislation including reporting requirements under the Financial Management (Responsibility) Act, No.3 of 2003 (hereinafter referred to as the Act). However upon careful perusal of reports submitted to this Court which have already been submitted under the Act, it does not appear that these reports provide adequate information about the terms on which such loans are obtained including interest rates, from whom they are obtained, terms of repayment or other details to disclose transparency. Only if such adequate information is provided prior to obtaining these loans, would there be a comprehensive opportunity to Parliament to scrutinise and exercise full control over public finance. This anomaly could be rectified if the impugned clause is amended to read, that prior to the obtaining of the loan, the terms of such loan must be approved by Parliament. If not this Court is of the view that clause 2(1) (b) would be unconstitutional as under its scheme, Parliament would fail to exercise the due and full financial control envisioned under Article 148. This is particularly required as such loans have not just the intra generational but also the inter-generational impact and is contrary to the doctrine of public trust which assures the people of a nation, both a measure of transparency and strong fiscal accountability.
Transfer of funds
Clause 5 permits the transfer of funds allocated to the Recurrent Expenditure of any Programme under any Head in the First Schedule of the Bill, that have not been expended or are not likely to be expended, to the Capital Expenditure under that Programme or Capital or Recurrent Expenditure under any other Program under the same Head by order of the Secretary to the Treasury, Deputy Secretary to the Treasury, or the Director General of the National Budget, who may be authorised by the Secretary to the Treasury.
Micro manage
Parliament is not expected to micro manage the finances of Government. This is not the spirit of the Constitution. Consecutive Governments with their individual policies must not be deterred from their commitment to the road map that determines the implementation of policy and strategy that they sincerely believe would develop the nation and which affects the Government’s fiscal performance, of course always mindful of the framework of the doctrine of public trust, which requires that accountability must be assured at all times. The budgetary innovations contemplated under clause 5 of the Bill, may sometimes be needed for sustainable development. Similar
Clause 5 permits the transfer of funds allocated to the Recurrent Expenditure of any Program under any Head in the First Schedule of the Bill, that have not been expended or are not likely to be expended, to the Capital Expenditure under that Program or Capital or Recurrent Expenditure under any other Program under the same Head by order of the Secretary to the Treasury, Deputy Secretary to the Treasury, or the Director General of the National Budget, who may be authorized by the Secretary to the Treasury.
analogous provisions have been passed in previous Appropriation Bills.
Additionally, by the painstaking submissions of many documents the Learned Deputy Solicitor General, Court was assured that all movement of money under clause 5(1) of the Bill is governed by the Financial Regulations(FR), especially those contained in FR 66. In particular the transfer of funds is pursuant to a written request from the Head of Department to the National Budget Department. It must be mentioned that it is prudent for funds to be transferred only if there are stated reasonable grounds for such transfer as envisaged in ordinary administrative procedure, as assured by the treasury officers present in Court, and such procedure would regulate any arbitrary or capricious transfers and ensure transparency when such transfers are made between the Recurrent Expenditure and Capital Expenditure, arid obviate any personal and perhaps unjustified criticism. This Court finds that such a mechanism would ensure and safeguard a quantum of transparency required under the doctrine of Public Trust under which all powers must be exercised.
Unfettered power
Strong submissions were made by the Counsel for the Petitioners with regard to the unfettered powers granted in terms of clause 7 of the said Bill. It alleged that the impugned clause 7(b) will permit the Minister to withdraw sums alloca- ted for a specific purpose and/or from the Consolidated Fund, at his will with no controls whatsoever. As an example he argued that the Rs. 561,740,000 allocated in the First Schedule of the Bill, Head No. 126, Ministry of Education, as Recurrent expenses under the Occupational Activities programme, which had been approved by Parliament, could be withdrawn at the discretion of the Minister of Finance on the basis that he “is satisfied” that it is required to meet any authorised expenditure.
This clause does not give any limits, or conditions, such as urgent need or national crisis which may to some extent warrant such actions; nor does it require the prior sanction of Parliament.
This Court finds that clause 7 of the Bill, presents a direct challenge to the onus on Parliament to have “full control” over public finance as protected by Article 148 of the Constitution.
It places an unfettered power in the hands of such Finance Minister which does not accord with the spirit and letter of the Constitution which assures full control of public finance with Parliament. The scope and ambit of this clause contrasts strongly with clauses 8 and 9 of the Bill, which mandates that Parliamentary prior approval was needed even for a relatively lesser and smaller category, namely that of advances to public officers in the Third Schedule of the Bill, bringing this provision to accord with the fundamental tenet that Parliament is mandated to be in full control of public finance.
Accordingly, this Court finds no justification whatsoever to warrant a unilateral decision by a Minister of Finance over public finance outside Parliamentary control.
This Court therefore determines that clause 7(b)) of said Bill in effect, contravenes the full control of public finance which belongs rightfully to Parliament in terms of Article 148, and only Parliament, and no single member of the executive should be permitted to traipse within the boundaries of that power.
Suren Fernando, Attorney at law appeared for the petitioner; J.C. Welliamuna, Attorney’ at law appeared for the Intervenient Petitioner; Ms Indika Demuni de Silva Deputy Solicitor General with Mr Nerrin PulIe Senior State Counsel and Suren Gnanaraj State Counsel appeared for the Attorney General.