The Legal Charter of PM CARES is Unsound, the Government Must Frame Rules At Once

Successive governments at the Centre have treated funds like the PMNRF (and now PM CARES) as 'private' trusts, exempt from public scrutiny and accountability. This approach is bad in law, and unconstitutional.

Disasters demand novel administrative measures, often requiring heightened public spending on healthcare, subsistence allowances, and stimulus packages. For a developing economy, such measures often prove to be financially onerous, as the executive finds it difficult to mobilise funds in a short time frame. Faced with the need to help displaced persons from Pakistan after partition, an ad-hoc solution was evolved in 1948 through the creation of the Prime Minister’s National Relief Fund (PMNRF) – a fund open to direct contributions from the public. Sadly, this ad-hoc fund was never put on a proper legal footing. and now, this unsound model has been replicated by the Prime Minister’s Citizens Assistance and Relief in Emergency Situations (PM CARES) fund, for dealing with the novel coronavirus pandemic.

While many in the opposition saw the creation of PM CARES as a needless duplication of the PMNRF, the government defended its decision, citing the narrow objectives of the existing fund, which, it said, did not encompass pandemics. But asserting the bona fides of a new fund by its nomenclature alone is to judge a book by its cover. Both PMNRF and PM CARES operate mutatis mutandis, and are therefore Siamese-twins. If one can work, so can the other. But if one is infirm – as I believe it – so is the other.

Public authority vs private trust

The question of infirmity was first raised in 2016 before the Delhi high court in Aseem Takyar v. Prime Minister National Relief Fund. The petitioner claimed that the PMNRF, being a ‘public authority’, must come under the jurisdiction of the Right to Information Act.

Also Read: Would Narendra Modi Please Care to Answer Some Questions About PM-CARES?

Opposing this plea, the government took the view  that the fund, although created at the instance of public office, was not the product of any executive instruction or order, and therefore operates in the nature of a ‘private trust’ with high constitutional functionaries as ex officio ‘trustees’. Although this official reasoning was rejected and the petitioner’s plea accepted by the single bench, the consequential split among the division bench in the appeal (2018) meant the matter did not attain finality and so the PMNRFs status as a ‘public authority’ has still not been settled.

Even as ‘private’ trust, the public has right to know

Ironically, the government’s stand that the PMNRF – and by extension, PM CARES – are in the nature of ‘private trusts’ still cannot justify the the denial of information to the public under other provisions of law.

Section 19 of the Indian Trusts Act mandates the trustees to present full and accurate information of the amount and state of the trust property to the beneficiaries. Because any ‘private trusts’ the prime minister heads are created for the benefit of the public at large, every citizen is a constructive beneficiary; hence the ‘private trust’ is a ‘public charity’ under Section 92 of the Code of Civil Procedure.

Consequently, such ‘public charities’ are amenable to judicial administration upon application by two or more members of the public. Hence a decree can be sought seeking alteration in the composition of trustees, directing disclosure of trust accounts, or even redirecting trust property cy-pres.

Notwithstanding this, the sweeping ‘privacy’ protection extended to such funds is legally suspect as it enables the government to run an account immune from the constitutional rigours of parliamentary regulation under Article 283, exempt from audit by the Comptroller and Auditor-General under Article 151, and fair public disclosure under Article 19 (1)(a) of the constitution.

An effort was made earlier this month in Manohar Lal Sharma v. Narender Damodardash Modi & Ors. (2020)  to assail PM CARES on the ground that the fund was created without following constitutional procedures dealing with the Consolidated Fund of India and Contingency Fund of India. However, the petition was summarily dismissed by the Supreme Court as lacking merit. Ostensibly, the petitioner jumped the gun in seeking a declaration of unconstitutionality, without first demonstrating that the fund was not ‘private’, and was therefore bound by constitutional rigour. However, a careful consideration of the law and constitution yields a different appraisal of the controversy altogether.

‘Private’ veils masks public fund

The ‘private’ nature of such funds is a straw man that can be assailed on three broad principles.

First, the mere ‘receipt’ of deposits into a ‘private trust’ does not change the fact that they were raised on the basis of public office. Because such trusts are established by public officials, funds invited on the basis of public notice and subject to the ex officio control of public office, they gain a conspicuous public character. Additionally, their very nomenclature – a “Prime Minister’s” fund – imparts them with the unequivocal impression of being governmental creatures. Hence, the ‘private’ character of such trusts is a mere ruse that veils the public character of the raising and administration of such funds.

Secondly, appointing cabinet members as trustees to administer the funds impermissibly expands the scope of ministerial office in excess of the mandate determined by the constitution. Such positions are held ex officio, being attached to the public office, and therefore not of a private character. Moreover, the deep and pervasive control of these funds by cabinet members as ex officio trustees yields an unflinching ‘state’ character, amenable to the writ jurisdiction of the courts.

Thirdly, the choicest exemptions granted under fiscal laws and public expenditure on advertisements to incentivise collection is suggestive of a conflict of interest, if done for a ‘private trust’. This conflict becomes conspicuous in light of the various notifications creating an automatic opt-in for the salaries of public employees to be directed into such ‘private trusts’. More odiously, it allows for public officials to raise private funds, through inducement of public office – which may invite claims of moral perversion or lapse of integrity.

Parliament’s oversight a must

As far as the constitution is concerned, the executive cannot spend what the legislature cannot vote upon; therefore, all monies must be regulated by the vote of parliament. Under Article 283 of the constitution, three distinct heads are envisioned – the Consolidated Fund of India, the Contingency Fund of India, and public accounts.  There exists no other head under which monies can be received by the Union.

The Consolidated Fund under Article 266 (1) is the repository of all revenue and capital receipts, a Contingency Fund under Article 267 is an imprest for unforeseen expenditures, and a public account under Article 266 (2) is the residuary corpus under government deposit. Article 266 (2) read with 284 (a) provides that monies received or deposited with the government, other than revenues or public monies raised, are payable into a public account. Therefore, monies not per se under the ownership of the government, but deposited under its administration are constitutive of a public account. Hence, public donations, deposited on representation of public office and administered through a deep and pervasive governmental control, invariably fall under Article 266 (2).

Also Read: Donations to CM Relief Fund Cannot Be Counted as CSR: Corporate Affairs Ministry

Incidentally, such an understanding fits in seamlessly with the character of these funds as ‘trusts’. Under Sections 5, 6, and 8 of the Indian Trusts Act, the trustees merely hold and administer the trust property for the ultimate transfer to the beneficiaries. Therefore, in case of funds such as PMNRF and PM CARES, once the trusteeship is de facto transposed to the state, the trust property is de jure transposed as a public account under Article 266 (2) of the constitution.

Ostensibly, the rationale behind creating such ‘trusts’ has been to maximise operational flexibility during crises. However, unlike the Consolidated Fund of India, which requires an ex ante vote, and the Contingency Fund of India, which requires an ex post vote, a public account is operationally exempt from routine legislative rigours. Therefore, administrative expediency that crises like a national disaster or a pandemic require does not run antagonistic to the constitutional framework.

From a financial perspective, funds in a public account result in net gains to the government on account of the interest rate difference between what it pays on its domestic borrowings and the interest it is able to earn on the amount lying unspent in such funds. For instance, the PMNRF alone has an accumulated unspent balance of Rs 3,800 crore as on 3March 31, 2019, which at a modest arbitrage of 2% would yield Rs 76 crore per annum.

The need of the hour is to regularise all such funds by framing appropriate rules for their administration under Article 283 of the constitution. Although Haryana has notified the Haryana Corona Relief Fund Rules 2020 in the Government Gazette, it has left ambiguous whether the fund will be administered as a public account. It is hoped that steps would be taken by the prime minister to regularise all such funds as a public account through appropriate rules.

Shreenath A. Khemka practices law at the Punjab & Haryana High Court