Financial Emergency under Article 360 of Constitution
Financial Emergency under Article 360 of the Indian Constitution
1. What is Financial Emergency?
A Financial Emergency is one of the three types of emergencies provided under the Indian Constitution. It is the least used and most specific kind of emergency related to the financial stability or creditworthiness of the country or any part of it.
2. Text of Article 360
Article 360 states:
The President of India may, if he is satisfied that a financial emergency exists or is imminent, by a proclamation declare a financial emergency to exist.
Such proclamation must be approved by both Houses of Parliament within two months.
The proclamation can be revoked by the President at any time.
3. Effects of Financial Emergency
When a financial emergency is declared:
The Union government can give directions to States regarding financial matters.
The Union can reduce the salaries and allowances of all or any class of persons serving the State.
The Union can require the States to observe financial propriety.
The Union can direct the States on how to allocate revenues, borrowings, and expenditures.
The President can issue directions for the reduction of salaries and allowances of all or any class of persons serving the Union or a State, including judges of High Courts and the Supreme Court.
4. Purpose of Financial Emergency
To ensure the financial stability and sound credit of the Union and the States.
To regulate financial affairs in case of an impending financial crisis.
It is a precautionary measure to prevent financial chaos that might affect governance.
5. Distinctive Features
| Feature | Description |
|---|---|
| Trigger | Financial instability or imminent crisis |
| Authority to declare | President of India |
| Parliamentary approval | Mandatory within 2 months |
| Duration | Until revoked by President or Parliament |
| Powers conferred | Control over State finances, salary reductions |
| Impact on States | Reduced autonomy in financial matters |
6. Comparison with Other Emergencies
| Type of Emergency | Trigger | Impact | Example |
|---|---|---|---|
| National Emergency (Art. 352) | War, external aggression, armed rebellion | Centralizes executive powers | 1975 Emergency |
| President’s Rule (Art. 356) | Failure of constitutional machinery in a State | Central rule in State | Several occasions |
| Financial Emergency (Art. 360) | Financial instability/crisis | Control over finances | Never declared till date |
7. Has Financial Emergency Ever Been Declared?
No financial emergency has ever been declared in independent India.
The provision remains a constitutional safeguard for extreme financial crises.
8. Relevant Case Law
Since Article 360 has never been invoked, there is no direct case law on the declaration of financial emergency itself. However, related judicial pronouncements interpret the powers and safeguards regarding emergency provisions.
🏛️ R.D. Shetty v. International Airport Authority of India (1979)
The Court highlighted the need for strict adherence to constitutional procedures during emergencies, including financial emergency.
🏛️ Minerva Mills Ltd. v. Union of India (1980)
The Supreme Court reinforced the basic structure doctrine limiting arbitrary use of emergency powers.
🏛️ S.R. Bommai v. Union of India (1994)
Although dealing mainly with Article 356, the judgment laid down principles on the judicial review of emergency proclamations and emphasized constitutional safeguards.
9. Criticism and Importance
Criticism: Article 360 has been criticized for being vague and potentially harsh, as it allows the Union to reduce salaries of even judiciary members and centralize financial control.
Importance: It acts as a check on financial discipline and prevents fiscal chaos that can cripple governance.
10. Conclusion
Article 360 is a unique constitutional provision designed to address severe financial crises affecting the Union or any State. Though never invoked, its presence underscores the Constitution’s comprehensive approach to safeguarding the country’s political and economic stability.
The Article balances the need for financial control with parliamentary oversight, ensuring that emergency powers are not misused and are subject to democratic scrutiny.
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