The Supreme Court upheld the Constitutional validity of the Member of Parliament Local Area Development scheme under which members of Parliament are allocated Rs 2 crore annually for development of their constituencies.
"We hold that the MPLAD scheme is valid," a five-judge Constitution bench headed by Chief Justice K G Balakrishnan said in a unanimous verdict.
"There is no reason for us to interfere in the scheme," the bench also comprising Justices R V Raveendran, D K Jain, P Sathasivam and J M Panchal said.
The bench, however, said improvement could be made in the working of the scheme.
The bench said the mere allegations that the funds are prone to be misused cannot be a ground for scrapping the scheme.
It said that both Lok Sabha and Rajya Sabha have standing committees to monitor the scheme and there are various levels of accountability for its implementation.
The apex court said the scheme has benefited the local area development by way of providing water, electricity, infrastructure, library and sports facilities.
It rejected the contention of the opponents of the scheme that it gives an unfair advantage to the sitting MPs against their political rivals.
The bench said there is no reason to believe that the MPLADS cannot be implemented and monitored by the district authorities. The scheme is for the public interest and public purpose.
The court said it was satisfied that under the scheme, there is no violation of separation of power.
Interpreting Articles 282 of the Constitution, the bench said that Parliament validly holds power to disburse funds for the scheme.
The scheme had come under judicial scrutiny after a sting operation in 2005 showed some MPs allegedly demanding money from contractors to award work for projects under MPLAD scheme.
The expose had led to the expulsion of members from both Houses of Parliament.
The MPLAD scheme had been in the news in 2006 due to allegations that trusts run by the then Election Commissioner Navin Chawla's family got funds from the scheme.
A three-judge bench on July 12, 2006, had referred the matter to a five-judge Constitution Bench observing that important questions of law needed to be settled.
The scheme was first challenged in 1999 by Jammu and Kashmir National Panthers Party chief Bhim Singh and a non-governmental organisation, Common Cause, alleging that in the absence of any guidelines, the funds allocated under the scheme were misused by MPs.
Later, petitions were also filed in various high courts and on the Centre's intervention all the petitions were transferred to the apex court.
Attorney General G E Vahanvati, who was then solicitor general, had submitted that MPLAD Scheme is also a welfare measure implemented with the assistance of the local authorities like other schemes Jawahar Rozgar Yojna, Indira Gandhi Old Age Pension Scheme and Integrated Child Development Scheme.
The funds under the MPLAD scheme were directly released by the Centre to the district authorities and it did not go directly in the hands of the MP, he had submitted.
The Centre had defended the scheme, saying that it had the authority of law to release money under it as funds were withdrawn from the Consolidated Fund of India by passing the Appropriation Bill.
The opponents of the scheme had alleged it was violative of Article 14 of the Constitution (Right to Equality) as it gave arbitrary powers to an MP without there being proper checks and balances, monitoring and accountability regarding the money being spent under it.
NGO Lok Sevak Sangh had contended that the scheme gives an unfair advantage to serving MPs over their rival candidates in elections.
The NGO had said the powers exercised or enjoyed by the MPs by virtue of MPLAD scheme results in discrimination between various sections of society in allocation of work.It was argued that though there is a provision in the guidelines that an MP who does not want to use his funds may withdraw from the scheme, it has not been done by any of them.