Article 116 of the Indian Constitution: Votes on Account, Votes of Credit, and Exceptional Grants

Article 116 of the Indian Constitution deals with specific financial procedures that allow the Parliament (specifically the Lok Sabha) to make grants outside the normal annual budgetary process under certain circumstances. These provisions ensure the smooth functioning of the government and enable it to respond to unforeseen situations or special needs, even when the complete budget for the year has not been passed or for purposes not covered by the regular budget.

These procedures are crucial for maintaining financial continuity and flexibility in the government’s operations. They represent powers vested in the Lok Sabha to authorise expenditure for specific purposes or periods, separate from the comprehensive annual financial statement and subsequent appropriation bill.

Original Text

116. Votes on account, votes of credit and exceptional grants.

(1) Notwithstanding anything in the foregoing provisions of this Chapter, the House of the People shall have power— (a) to make any grant in advance in respect of the estimated expenditure for a part of any financial year pending the completion of the procedures prescribed in article 113 and article 114 for the voting of such grant and the passing of the law in relation to the appropriation of moneys out of the Consolidated Fund of India; (b) to make a grant for meeting an unexpected demand upon the resources of India when, on account of the magnitude or the indefinite character of the service, the demand cannot be stated with the details ordinarily given in an annual financial statement; (c) to make an exceptional grant which forms no part of the current service of any financial year;

and Parliament shall have power to authorise by law the withdrawal of moneys from the Consolidated Fund of India for the purposes for which the said grants are made.

(2) The provisions of articles 113 and 114 shall have effect in relation to the making of any grant under clause (1) and to any law to be made under that clause as they have effect in relation to the making of any grant and the making of any law with respect to the annual financial statement and the expenditure of moneys out of the Consolidated Fund of India.

Detailed Explanation

Article 116 provides for three special types of grants that the Lok Sabha (House of the People) can make, overriding the typical annual budgetary cycle outlined in Articles 113 and 114. These are designed to address specific needs that cannot be fully met or awaited until the regular budget process is complete.

1. Votes on Account (Article 116(1)(a)): This is the most common use of Article 116. The process of discussing and passing the Union Budget, including voting on demands for grants and passing the Appropriation Bill, takes time, usually extending into the new financial year (which starts on April 1st). To ensure the government can continue its expenditure and essential services during this interim period (typically for two to four months), the Lok Sabha is empowered to make a ‘grant in advance’ for a part of the financial year. This grant is usually equivalent to one-sixth of the total estimated expenditure for the full year for each demand for grant. After the vote on account is passed by the Lok Sabha, an Appropriation (Vote on Account) Bill is introduced and passed by Parliament, authorising the withdrawal of money from the Consolidated Fund of India. This ensures government machinery does not come to a standstill on April 1st. Once the full budget is passed later in the year, a regular Appropriation Bill is passed, which incorporates the expenditure already authorised by the vote on account.

2. Votes of Credit (Article 116(1)(b)): This provision deals with unforeseen and urgent demands on the country’s resources that arise unexpectedly. These demands are typically large in magnitude or indefinite in nature, making it impossible to provide the usual detailed breakdown in the annual financial statement or even a supplementary demand for grant. Examples could include expenditure needed for responding to a major natural disaster, war, or any other national emergency where the costs are initially uncertain or extremely high. A vote of credit allows Parliament to authorise a lump sum amount to be withdrawn from the Consolidated Fund to meet such a demand. Like other grants, this requires a vote in the Lok Sabha and subsequent authorisation through an Appropriation Bill.

3. Exceptional Grants (Article 116(1)(c)): This clause covers grants made for a special or exceptional purpose that is not part of the ongoing or current service of any financial year. Unlike regular grants or supplementary grants which relate to existing services, exceptional grants are for unique purposes that fall outside the usual scope of government expenditure or are one-off requirements. The exact nature of “exceptional purpose” is not strictly defined in the Constitution, leaving scope for parliamentary discretion, but it generally implies expenditure for reasons not provided for in the normal budget. Similar to other grants, an exceptional grant, once voted by the Lok Sabha, requires an Appropriation Bill to authorise the withdrawal of funds.

Clause (2) of Article 116 clarifies that the procedural requirements laid down for regular grants and appropriation bills in Articles 113 (Procedure in Parliament with respect to estimates) and 114 (Appropriation Bills) also apply to the grants made under Article 116(1) and the corresponding authorisation of withdrawal of moneys from the Consolidated Fund. This means that these special grants must also be presented to and voted upon by the Lok Sabha (as per Article 113) and subsequently included in an Appropriation Bill passed by Parliament (as per Article 114) before funds can be withdrawn from the Consolidated Fund.

Detailed Notes

• Article 116 empowers the Lok Sabha to make special grants besides the annual budget.
• Covers three types of grants: Votes on Account, Votes of Credit, and Exceptional Grants.
• Votes on Account (VoA):
  • Grant made in advance for a part of the financial year.
  • Needed because the annual budget process takes time to complete (voting on demands, passing Appropriation Bill).
  • Ensures continuity of government expenditure from April 1st until the full budget is passed.
  • Usually covers 2-4 months’ estimated expenditure.
  • Typically, one-sixth of the total estimated demand for the year.
• Votes of Credit (VoC):
  • Grant for meeting an unexpected demand on India’s resources.
  • Used when the demand is of magnitude or indefinite character, preventing detailed estimation in the annual budget.
  • Used for emergencies like war, disasters, or situations with uncertain high costs.
  • Authorises a lump sum amount.
• Exceptional Grants (EG):
  • Grant for an exceptional purpose.
  • The purpose forms no part of the current service of any financial year.
  • For special, one-off needs not covered by the regular budget or supplementary grants.
• For all grants under Article 116(1), Parliament must authorise the withdrawal of moneys from the Consolidated Fund of India by law (an Appropriation Bill).
• Article 116(2) mandates that procedures in Articles 113 (voting on demands in Lok Sabha) and 114 (passing Appropriation Bill) apply equally to grants and laws made under Article 116(1).
• All three types of grants require voting by the Lok Sabha.
• Withdrawal of funds requires an Appropriation Bill passed by both Houses of Parliament.
• These provisions ensure financial flexibility and continuity for the government under specific circumstances outside the normal budget cycle.

Additional Comments

• Votes on Account are a necessity due to the practical timeline of the budget process. A government cannot spend from the Consolidated Fund without parliamentary authorisation, and passing the full budget before April 1st is typically not feasible.
• The Appropriation (Vote on Account) Bill, passed based on the Vote on Account, is a specific type of Appropriation Bill limited to the funds and period covered by the vote on account.
• Votes of Credit are used very rarely, only under extraordinary circumstances where the nature and scale of expenditure are highly unpredictable.
• Exceptional Grants are also uncommon and are for purposes distinctly outside the normal, recurring government activities.
• The power under Article 116 is vested in the Lok Sabha, reflecting its primacy in financial matters, similar to the voting of demands for grants under Article 113.
• While the Lok Sabha votes on the grant, the final authority to withdraw money from the Consolidated Fund rests with Parliament through the passage of an Appropriation Bill, ensuring Rajya Sabha also has a role in the legislative aspect, though not in voting on the specific grants.
• Supplementary, additional, or excess grants (Article 115) cover situations where funds needed for existing services exceed the amount originally granted or where new services arise during the financial year, but these are different from the types of grants under Article 116.

Summary

Article 116 of the Indian Constitution empowers the Lok Sabha to sanction specific types of grants beyond the normal annual budget. These include Votes on Account, enabling government expenditure during the period the main budget is being passed; Votes of Credit, for meeting unexpected, large, or indefinite demands arising from emergencies or unforeseen events; and Exceptional Grants, for unique purposes outside the scope of the regular financial year’s services. Clause (2) ensures that the parliamentary procedures for obtaining grants and authorising expenditure from the Consolidated Fund, as outlined in Articles 113 and 114, apply to these special grants as well, requiring a vote in the Lok Sabha and subsequent authorisation through an Appropriation Bill passed by Parliament. These provisions are vital for the financial flexibility and operational continuity of the Union government.