Part 12 of Indian Constitution: Finance, Property, Contracts and Suits (Articles 264-300A)

Part 12 of Indian Constitution deals with finance, property, contracts, and suits. It includes provisions on taxation (Article 265), Consolidated and Contingency Funds (Articles 266–267), revenue distribution (Article 270), grants to states (Article 275), and the Finance Commission (Article 280). Article 300A ensures that no person can be deprived of property without legal authority. It also provides tax exemptions for Union and State properties in specific cases and mandates that all government revenues be credited to public accounts, with expenditure allowed only by law. Explore other important Constitutional Articles.

Part 12 of Indian Constitution Overview

Part 12 of the Indian Constitution deals with the financial and property-related framework that governs the fiscal relationship between the Union and the States. Encompassing Articles 264 to 300A, it provides a constitutional basis for matters concerning taxation, allocation and distribution of revenues, borrowing powers, custody of public funds, and inter-governmental financial transactions. Additionally, it lays down provisions regarding the ownership and succession of public property, execution of contracts, and legal proceedings involving the Union or State governments.

Download 5 Key take aways on Part 12 of Indian Constitution PDF

Part 12 of Indian Constitution is divided into four chapters:

• Chapter I focuses on financial provisions, including various taxes, funds like the Consolidated Fund and Contingency Fund, and the role of the Finance Commission.
• Chapter II covers the borrowing powers of the central and state governments.
• Chapter III addresses the succession and management of property, trade powers, contracts, and suits.
• Chapter IV contains a single article, Article 300A, which guarantees the right to property, ensuring that no person is deprived of their property except by authority of law.

Thus, Part 12 plays an important role in maintaining fiscal federalism and legal clarity regarding financial and property-related matters within the Indian Union. Following is a brief overview of the components in Part 12 of Indian Constitution:

The following are some of the Landmark Judgements that have changed the interpretation and application of Part 12 of Indian Constitution especially in matters regarding taxation, borrowing powers and governmental liability in contracts and suits:

• Kunnathat Thathunni Moopil Nair v. State of Kerala (1961): In this case the Supreme Court struck down a land tax imposed by the Kerala government, stating that the tax was discriminatory and lacked legal authority, thereby violating Article 265 under Part 12 of Indian Constitution
• P & O Steam Navigation Company v. Secretary of State for India (1861): This case set a precedent by distinguishing between sovereign and non-sovereign functions of the state. The court held that the government could be sued for acts performed in a non-sovereign capacity, such as commercial activities.
• State of Rajasthan v. Vidyawati (1962): The Supreme Court ruled that the state could be held liable for the negligence of its employees if the act was not related to sovereign functions. This judgment emphasized that the government does not enjoy immunity for wrongful acts committed during non-sovereign functions.