Law and You > Constitutional Law > Financial Emergency (Article 360)

Chapter XVIII of the Constitution deals with the powers of the president to act in an emergency, whereby the security of India (or any part thereof) is threatened. This part has been the subject of most acrimonious attacks by the critics in the history of Independent India. During the framing of the constitution, this part had witnessed the most agitated scenes and debates in the Constituent assembly. The definition of ’emergency’ is left to the president, but it is clear that apart from external aggression and internal disturbance, it also includes economic depression and financial crisis. Emergency provisions in India are borrowed from Weimar Constitution of Germany. In this article, we shall discuss provisions related to financial emergency.

The Indian Constitution gives President the authority to declare three types of emergencies. These are-

• National Emergency (Article 352)
• State Emergency (Article 356)
• Financial Emergency (Article 360)

Article 360:

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)
   (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 PART XIX MISCELLANEOUS

Proclamation of Financial Emergency:

Article 360 provides that if the President is satisfied that the financial stability or credit of India or any of its part is in danger, he may declare a state of Financial Emergency. Like the other two types of emergencies, it has also to be approved by the Parliament. It must be approved by both Houses of Parliament within two months. Financial Emergency can operate as long as the situation demands and may be revoked by a subsequent proclamation.

Revocation of Financial Emergency:

Without any parliament approval the President can revoke the financial emergency at anytime.

Duration of Financial Emergency:

The proclamation will cease to be in force in a period of two months unless it is approved by both House of Parliament.

If at the time of proclamation, the Lok Sabha is dissolved it may be approved by the Rajya Sabha and then approved by the Lok Sabha after elections within 30 days from its first sitting. If not so approved the proclamation ceases to exist.

Approval of Financial Emergency:

The Financial Emergency proclamation should be approved by the both houses of the parliament with simple majority within 2 months. If approved the emergency continues for an indefinite period. Once approved it remains in force till revoked by the President. But if the Lok Sabha is dissolved during the period of two months and resolution is approved by the Rajya Sabha, but not by the Lok Sabha the proclamation shall cease to operate at the expiry of 30 days from the date on which the new Lok Sabha sits unless before the expiry of 30 days a resolution approving proclamation is passed by the Lok Sabha.

Effects of Financial Emergency:

During the period such Proclamation is in operation, the executive authority of the Union extends to the giving of directions to any State to observe such canons of financial propriety as may be specified in the directions, any such directions may also include:

• A provision required the reduction of salaries and allowances of all or any class of person serving a State or the Union. President may issue directions for reducing the salaries and allowances of persons serving the Union including the Supreme Court and the High Court judges. [Art. 360(4) (a) (i), 360 (4)]
• All the money bills or financial bills or those which involve expenditure from the State Consolidated Fund, shall be reserved for the President’s consideration after being passed by the State Legislature [Art. 360(4)(a)(ii)]

Judicial Review:

• No court was to have jurisdiction to entertain any question, on any ground, regarding the validity of  a declaration made by proclamation by the President to the effect stated in Art. 360(1)
• The continued operation of such proclamation
• This provision has now been deleted by the 44th Amendment of the Constitution.

No financial Emergency was declared till now though there was a Financial Crisis in 1991.

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