Guest Post: The PM CARES Fund: A Political Propaganda or a Genuine Attempt?

[This is a guest post by Charvi Devprakash]

Introduction

The Prime Minister of India tweeted, “It is my appeal to my fellow Indians, kindly contribute to the PM-CARES Fund” asking all of the citizens to do their part in creating a healthier India by contributing to the newly founded PM-CARES Fund (Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund). Within a week, reports stated that the fund had managed to collect 65 billion rupees. And now, it is claimed that the fund has crossed the 100 billion dollars mark. 

Though this meant a huge achievement for the country as a whole, as aforementioned many of them began to question why there was another fund created when there already existed the Prime Minister’s National Relief Fund (PMNRF). While some questioned its constitutional validity, others mocked the opaqueness of the fund. While on one hand where some of the citizens filed cases of Right to Information against the Prime Minister, on the other, some demanded the need for the fund to be scrutinized by the Comptroller and Auditor General of India (“CAG”) as CAG is an independent body, free of the government’s influence. While the government fought the RTI petitions by calling the fund ‘not a public authority’, some companies wondered how the PM CARES Fund came under Corporate Social Responsibility (CSR), but not the CM’s COVID Fund. 

Is the PM CARES Fund constitutionally valid?

Recently, in the case of Manohar Lal Sharma v. Narender Damodaran Modi & Ors, the Supreme Court was to hear public interest litigation (“PIL”) filed by one Manohar Lal Sharma on the matter of the constitutional validity of the PM CARES Fund. A bench comprising Chief Justice S A Bobde and Justices L Nageswara Rao and MM Shantanagoudar heard the PIL against the setting up of the PM CARES Fund through video-conferencing. The SC straight away dismissed this petition, thereby indicating that the PM CARES Fund was created in accordance with the constitutional principles. The petition intended to quash down the Fund as it is claimed to have not been formed under the constitutional guidelines as mentioned under Article 266 and 267 of the Constitution of India, 1950 that deal with the Consolidated and Contingency Fund of India respectively. 

However, here are some of the reasons how the constitutional validity of the fund could be challenged on other grounds as well. One could assail the Fund by focusing on the nature of the Fund and the requirement of the auditing to be done by the CAG as it is supposed to be a public fund and not private. Time and again, successive Central Governments have created funds like the PMNRF and PM CARES Fund under the umbrella of ‘private funds’, thereby encroaching upon and depriving the Indian citizens’ Right to Information. The petition could have also challenged the validity of the fund by bringing it within the bracket of the violation of Article 14 of the Constitution of India as the PM CARES Fund demanded or rather received preferential treatment than the other NGOs or Trusts, that haven’t enjoyed such support in the past, pertaining to the exemptions received under Foreign Contribution Regulation Act, 2010 (FCRA).

The need for Transparency

India being a democracy, bestows upon all its citizens the Right to Information under Article 19 (1) of the Constitution. The right to seek information and accountability from the Government strengthens and empowers the citizens. This freedom ensures that there is a good, transparent, accountable and responsive Government. Today, due to the various decisions taken by the Government, RTI is recognised as a fundamental tool to promote openness and responsibility within the Government. It puts people in a position of entitlement and power. 

In the case of SP Gupta v. Union of India, it was held that the people had the right to know about every public act and public transaction undertaken by public functionaries. Furthermore, in the case of People’s Union for Civil Liberties v. Union of India, the judgement of SP Gupta was extended to making Right to Information an indispensable human right necessary for making governance transparent and accountable. Adding on, in the case of State of UP v. Raj Narain, Justice Mathew expressed, 

“It is not in the interest of the public to cover with a veil of secrecy the common routine business the responsibility of officials to explain and to justify their acts is the chief safeguard against oppression and corruption.” 

Where the money is being utilised? When the taxpayers diligently and responsibly donate to a particular government body, the citizens have the right to know how the due amount is being utilized. Similarly, even in the present scenario, the citizens have a right to know, to what use is the money collected being put to, irrespective of the amount donated by each individual. This is precisely where the problem arose in the PM CARES Fund: the lack of transparency

Issue of representation and domination of one political party: The ruling party was quick enough to make a statement that the CAG will not be auditing this fund and that it will be those independent auditors who are appointed by the trust that would audit the funds. However, the committee members or the decision-makers of the fund are unrepresentative. Unlike the PMNRF that comprises the Prime Minister, President and the leader of the Opposition, PM CARES Fund only comprises the ruling party members. While the Prime Minister, in his official capacity, is the ex-officio chair of the Fund, he also has the power to nominate three members as ‘ex-officio trustees’, which in this case are the Finance Minister, Defence Minister and the Minister of Home Affairs, who all are from the same ruling party, thereby making the Fund/trust completely unaccountable and unrepresentative. Despite there not being a legal mandate for the Leader of the Opposition to be a committee member in any of these funds, it has been an unwritten ‘convention’ from centuries across countries to have the opposition party members in such funds in order to encourage opposing points of view. This makes the PM CARES Fund unrepresentative. 

The requirement of auditing by CAG: A fund this unrepresentative also makes the appointment of the independent auditors biased and unfair, which once again calls for an emphasis on CAG to audit this Fund. Although the auditors have to abide by certain set legal standards, the appointment of these auditors will be biased due to the unrepresentative nature of the committee, which might give the ruling party an upper hand in making decisions that are not completely justifiable or transparent. The same can be avoided if the committee is more representative with opposing views. The PMO has also refused to make the relevant documents of the Fund public as it does not come under the ambit of a public fund’, which means it is not controlled or substantially financed by the government and so does not come under the RTI Act. It also means that it cannot be scrutinized by government auditors like the CAG. However, the nomination of the committee members of the Fund speaks otherwise, indicating that the Fund is under complete control of the Government. Therefore, all of these actions of the Government call for the pressing need for ‘Transparency’. As aforementioned, no information has been catered to the donors of this charitable fund, as the fund is considered a ‘private trust’. This called for several RTI petitions being filed against the PMO and the government. However, most of them have been dismissed by the courts and the rest have been quashed down by the trust.

The CSR conflict and Cooperative Federalism

Another issue arising out of this fund is the preferential treatment given to the PM CARES Fund over other state government funds in terms of corporate social responsibility. An intriguing aspect here is that companies cannot file their donations towards state COVID funds under their CSR, while they can only file their donations under CSR if it is towards the PM CARES Fund. Many have questioned the validity of this clause. PM CARES Fund is the only state-owned charitable fund to have been included under CSR by amending the Indian Companies Act. Despite announcing this on a later date, the application of the amendment was retrospective in nature, thereby making all the prior corporate donations eligible under CSR. 

However, this move by the government has its own repercussions. Once the PM CARES Fund was made eligible for CSR funding, many top businesses like the TATA and Reliance donated millions of rupees as donations. This meant that it could lead to a great financial crunch among many other NGOs who majorly depended on such corporate donations. In light of the same, the Rajasthan Government filed a suit questioning as to why only PM CARES and not state COVID funds were made eligible for CSR funding. The only response was that the Union Government barred CM’s Relief Fund to be entitled to CSR donations. This is a blatant violation of Article 14 as this clearly acts as Preferential treatment towards the Central Government’s fund. This might also be an attempt to destabilize the democratic governance founded on the constitutional principle of ‘cooperative federalism’ (The need for Cooperative Federalism was highlighted previously on this blog here).

Cooperative federalism is the existence of a flexible relationship between the Centre and the states where both parties work together in harmony on subjects that concern both. This particular move of the Union on the matter of PM CARES Fund has proven to go against this principle. As a democracy believing in cooperative federalism, it is of paramount importance for the Centre to treat the states as equals and consult them on subjects that are of national concern such as the pandemic. Many state governments in the country became the target of a huge financial crunch as they had neither received the State’s GST collections nor were the residents of those states donating to the CM’s Relief Fund, merely because one could avail the CSR benefit by donating to the PM CARES Fund. This move by the Union is highly condemnable as this was the time for the state governments to be more self-reliant, financially as well as decisively and less dependent on the Centre, but that didn’t seem to happen in this scenario. If cooperative federalism was adopted and respected in its truest sense, then the entire situation would have looked quite different, with more harmonious inter-state and Centre-State relations.   

Conclusion/Suggestions

Looking at all the analysis made above, it is safe to assume that the PM CARES Fund is not only opaque and arbitrary in nature, but also discriminatory. Many NGOs and State COVID funds are at stake due to the revised provision made available to the general public in light of corporate social responsibility. To resolve this issue, some of the plausible suggestions could be:

  1. This turn of events must be put under scrutiny for being violative of Article 14 – as it creates differential treatment of two different subjects which falls under the same class of subjects.
  2. Courts must encourage and allow the PILs and the RTI applications for better transparency. Strict scrutiny of this fund must be done so as to ensure that the public’s trust is restored. 
  3. There is a pressing need for more transparency in the functionality of the fund and hence needs to be made more representative by including members from the opposition and other independent sectors.
  4. Indian Companies Act must be further amended to give the state-relief funds the same position as PM CARES Fund.
  5. Since this is a public-funded initiative, PM CARES Fund needs to come under the ambit of ‘public fund’. 

Therefore, the acceptance of these suggestions will only strengthen the citizens’ belief in the judiciary and will prove the independence of the Judiciary from the Legislature and the Executive. Lastly, COVID-19, is a global pandemic, having taken millions of lives already. This is not a time to put into action the nasty political propagandas, but a time for the entire nation to stay united and fight the virus, democratically.

[The author would like to thank Chaitanya Singh and the team of Constitutional Renaissance Blog for their valuable suggestions and comments.]

Indian Federal Structure: An Umbilical Cord between Centre and State

In this post, I will be analysing the Indian Federal Structure. The structure of the Indian Constitution is so unique that it is impossible to describe it in simple terms. Here, I will try to go through various Constituent Assembly debates and scholarly views to conclude the real ‘character of the Indian Federal Structure’.

“Personally, I do not attach any importance to the label which may be attached to it-whether you call it a Federal Constitution or a Unitary Constitution or by any other name. It makes no difference so long as the Constitution serves our purpose” – Rajendra Prasad.

The Indian Constitution is sometimes called “federal”, “Quasi-Federal”, “Sui-Generis” or “Cooperative Federalism”. But interestingly the founding fathers themselves refused to adhere to any theory or dogma about federalism. As G. Ayyangar said in the assembly, ‘India had unique problems which were not confronted other federations in history’. (CAD Vol. V, page 38). As we all know, federalism does not have any ‘stable meaning’ or definite concept. Therefore, as L.K. Maitra said the founding fathers have pursued ‘the policy of pick and choose to what would suit them best, what would the genius of the nation best’. The outcome that we see today is sui generis (unique) Constitution.

As Granville Austin says the most singular aspect of the drafting of the federal provisions was the relative absence of conflict between the ‘centralizers’ and the ‘provincialists’. There no discussion on the effect of emergency provisions, distribution of powers between centre-state or over the distribution of revenue (which we see as a problem now due to the implementation of GST). The assembly members wanted more revenue for the states but they settled that the Union should collect the money and then distribute. The federal structure, as we see today, was acceptable to most of the members of the assembly. According to Dr Ambedkar,

“Ours is a Federal Constitution inasmuch as it establishes what may be called a Dual Polity which will consist of the Union at the Centre and the States at the periphery each endowed with sovereign powers to be exercised in the field assigned to them.”

Ambedkar said the Constitution avoided ‘tight mould of federalism’ and could be ‘both unitary as well as federal according to the requirements of time and circumstances’.

Reasons for the Centralizing tendencies: A Historical Account

I. Gandhi v. Nehru?

Gandhi wanted political decentralization where the focus is on the micro-level governance as opposed to centralized government. The idea is derived from the drawback of centralized decision making at the macro governmental levels. According to Gandhi decentralization of political power is the basic requirement for the success of true democracy. The concentration of power in his view distorts all democratic values. So he thought that “possession of power makes men blind and deaf; they cannot see things which are under their very nose, and cannot hear things which invade their ears.” Thus, his linking for decentralization originates from his urge for the shrinking of the state and the deepening of the roots of democracy. He, therefore, asserted that “If India is to evolve along non-violent lines; it will have to decentralize many things. Centralization cannot be sustained and defended without adequate force”.

But the assembly had other ideas and the way in which the Assembly framed these provisions, however, it may be helpful to look at the ‘forces bearing on its decisions’. The conditions precedent to the formation of the constituent assembly urged the members to create a powerful centre to prevent the country from disintegrating. Although the Government of India Act of 1935 gave powers to the provinces, the power was always in the hands of the British (centralised). Here the report of the Joint Parliamentary Committee stated that the central government under the 1935 Act would cease to authority over the matters listed under the provincial list, but ‘in virtue of his (Governor-General) powers supervising the Governors, he will have authority to secure compliance in certain respects with directions which he may find it necessary to give’. This centralizing tendency affected India’s future, as Austin says. The Indian never, in reality, got to participate in the ‘real’ federal process as seen in the USA or Australia.

Further, Nehru said, in contradiction to Gandhi, in 1936 that, ‘it is likely that free India may be a Federal India, though in any event there must be a great deal of unitary control’. Communalism also impacted the Indian federal structure and the effect of communal tensions on plans for a federal structure is evident in the reports of Nehru and Sapru Committee. Nehru in the report said, ‘We are called upon to determine the principles of the Constitution after considering these divergent views’ before us and they recommended for centralized federal structure based on 1919 Government of India Act. In the Sapru committee, the members wanted the provinces to have the ‘residuary power’ (as opposed to Indian Constitution currently which resides this power in Centre). But after the bloodshed of partition, the second report of Union Powers Committee dated 05.07.1947 in Paragraph 2 suggested that,

“It would be injurious to the interests of the country to provide for a weak central authority which would be incapable of ensuring peace, of coordinating vital matters of common concern, and of speaking effectively for the whole country in the international sphere… the Soundest framework for our Constitution is a federation with a strong Centre.” (Page 70-71)

In the meeting of the Negotiating Committee of the Chamber of Princes and the Assembly’s States Committee (08.02.1947), Nehru said we need to deal with the situation which might happen after the partition wherein there would be economic, refugee and food crisis. The new provinces might not be able to bear the strains of the new responsibility, hence, it was feasible to adopt a strong central government which could deal with the problems.

II. Communalism: Community rights over States’ rights

The issue of communal politics since the 1920s till the independence also influenced the demand for a strong centre. The need for communal representation was more important than the bifurcation of power between the provinces (states) and the Centre. The emotional Indian, as Austin calls them, wanted community rights over the states’ rights, which were secondary and never assumed the importance they had in Australia and the USA. Even in 1919 and 1935 Acts, more reliance was placed for community rights (Muslims and Hindus) rather than rights of the provinces. The demand for the partition unified the provinces with the centre. Responsible Indian leaders, already confronted with a fragmented society, believed no new, divisive forces should be introduced.

Cooperative Federalism in India

In my opinion, the Indian state is neither quasi-federal nor completely federal. But what we have adopted is Cooperative Federal structure in which all governments has to understand an essential point that they are not independent rather interdependent and they should act for maximization of the common good [as also put forth by Professor M.P. Jain].

Even the Constituent Assembly religiously embraced ‘cooperative federalism’ which is characterized by the interdependence of federal and regional governments. According to Austin, it “produces a strong central government, yet it does not necessarily result in weak provincial governments that are largely administrative agencies for central policies”. Indian federalism has demonstrated this. Also, Geoffrey Sawer proposes that cooperative federalism has the following characteristics: (a.) Centre and States have a reasonable degree of autonomy [as seen in the distribution of lists]; (b.) Each of the parties can bargain about the terms of cooperation, and; (c.) at least if driven too hard, decline to cooperate. Although these pointers are not directly applicable to the Indian scenario, the Union and the States have shown to work in harmony in avoiding constitutional discord.

One of the benefits of this type of federal structure is, in words of Hon’ble Justice Dipak Misra, that the “national vision as set out in the Preamble to our Constitution gets realized”. The approach of the governments might be different, but the ultimate goal and objective remain the same. This will lead to the strengthening of constitutional functionalism in a Welfare state, like India.

The units of in the Constitution should stress on negotiations for achieving common goals amongst different levels of governments. According to Martin Painter, Australian proponent for Collaborative federalism, says

“The practical exigencies in fulfilling constitutionally sanctioned functions should bring all governments from different levels together as equal partners based on negotiated cooperation for achieving the common aims and resolving the outstanding problems.”

Such an approach requires continuous and seamless interaction between the Union and the State Governments. Under the Indian Constitution, we have Article 263 which establishes the Inter-state council whose duty is to “discuss subjects in which some or all of the States, or the Union and one or more of the States, have a common interest” [like COVID-19, 2020] and to “make recommendations upon any such subject and, in particular, recommendations for the better coordination of policy and action with respect to that subject”. Even the existence for Article 239AA aims for cooperative federalism between NCT of Delhi and the Union, as held in the case of NCT of Delhi v. Union of India. Further, the constitutional vision of cooperative governance is enhanced by the provision made in Article 258 under which the President may, with the consent of a State, entrust to it or to its officers, functions concerning any matter to which the power of the Union extends.

Hence, in conclusion, the Indian Constitution provides a platform for cooperation and deliberation between the states and the Union. The process by which national goals set out in the Preamble and DPSPs are achieved, not by the Union government acting alone, but by some or all of the governments and the territories acting collectively in cooperation. This should be the guiding star to them to move on the path of harmonious co-existence and interdependence.