Recommendations of the Finance Commission

Draft Article 261, Draft Constitution of India 1948

The President shall cause every recommendation made by the Finance Commission under the foregoing provisions of this Chapter together with an explanatory memorandum as to the action taken thereon to be laid before Parliament.

Article 281, Constitution of India 1950

The President shall cause every recommendation made by the Finance Commission under the provisions of this Constitution together with an explanatory memorandum as to the action taken thereon to be laid before each House of Parliament.

Draft Article 261 (Article 281, Constitution of India 1950) was discussed on 10 August 1949. It provided that the President must submit a report before Parliament with the recommendations of the Finance Commission and an explanation on the President’s action on revenue distribution between Union and States under the provisions of the Constitution.

The Chairman of the Drafting Committee proposed an amendment to this Draft Article stating that the report should be submitted before both houses of Parliament – instead of ‘Parliament’. The Assembly accepted this amendment without debate.

Another Member proposed an amendment to empower Parliament to then decide on distribution of revenue after the report is submitted by the President. He wanted Parliament to make the final decision on distribution of revenue between the Union and States to avoid giving the President wide powers. A member supporting this view recommended adding a clause to the Draft Article – empowering Parliament to make amendments to the report submitted by the President, if required and the report as ratified by Parliament would then become law. More members came in support these proposals as they believed the concerns of the States should be addressed through their representatives in Parliament.

However, there was opposition, Members who opposed these amendments stated that Draft Article 261 did not grant the President any additional powers – it merely laid down the procedure for enforcing the President’s decision under other provisions. Addressing the concern of some members that the Finance Commission had wide powers, they clarified that the recommendations of the Finance Commission were not binding on the President.

After prolonged debate on this issue, the Assembly rejected these amendments proposed to give Parliament more power in this matter.

The Draft Article, as amended, was adopted on 10 August 1949.