Bombay HC dismisses PIL challenging constitutional validity of Market Stabilisation Scheme

09 June 2009

The Bombay High Court has dismissed a public interest litigation filed by RS Kelkar of Pune challenging the constitutional validity of the government's Market Stabilisation Scheme (MSS), started in March 2004 in agreement with the Reserve Bank of India (RBI).

The MSS provided for issue of treasury bills and/or dated securities by the government in addition to their normal market borrowing programme up to an annual aggregate ceiling. Amounts, thus, raised were to be credited to and held in a separate identifiable cash account with the RBI titled 'MSS Account' and were not to be pumped back into the economy or utilised for any purpose other than for redemption and for buy-back of treasury bills and/or dated securities.

The exchange gain or loss arising from the transaction of foreign currency assets and liabilities of the RBI were to be accounted for in the Currency and Gold Revaluation Account (CGRA) operated by the RBI and forming part of its audited balance-sheet.

Audit of RBI not being with the CAG, this account was not audited by the CAG. Contending that the amount in the MSS account was kept out of the Consolidated Fund of India and that the CAG had failed in its duty to conduct necessary audit, the petitioner prayed for issuance of direction to the RBI to transfer the amount to the Consolidated Fund of India and to the CAG for auditing the accounts of the RBI and also to estimate the profit or loss to the country on account of depletion in the CGRA and interest on the scheme.

The government denied that the amount in MSS account does not form part of the Consolidated Fund of India. The CAG also stated that receipts and disbursements under the MSS are duly budgeted by the government in the receipt and expenditure budget which is subject to parliamentary control and the accounts of ministry of finance and appropriation account of the government are audited at 'regular frequency'.

After examination of the of the rival contentions, the division bench of Chief Justice Swatanter Kumar and Justice DY Chandrachud dismissed the submissions of the petitioner.