Free Press Journal

Does demonetisation move violate RBI Act?


New Delhi :  The Supreme Court will examine on Tuesday whether the surprise scrapping of the currency notes of Rs 500 and Rs 1,000 denomination violates the Reserve Bank of India (RBI) Act.  The challenge to the government notification and Prime Minister Modi’s announcement on TV has been made in a Public Interest Litigation (PIL) filed by advocate Sangam Lal Pandey of Uttar Pradesh, claiming that the government did not give reasonable time to the public to exchange these notes.

Attorney General Mukul Rohatgi has already filed a caveat to hear the government before entertaining the PIL. In any case, the attorney general will get the precedent if he appears before the court to argue before Pandey gets the floor.

The Bench of Justices Anil R. Dave, Rohinton Fali Nariman and A. M. Khanwilkar on Thursday agreed to hear the PIL, but with a rider that Pandey should first get it listed by the Registry.  Section 26(2) of the RBI Act says: “On recommendation of the Central Board (of RBI) the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender save at such office or agency of the Bank and to such extent as may be specified in the notification.”

Legal luminaries say the Act is quite clear that the demonetisation has to be “with effect from such date as may be specified in the notification” and not with immediate effect as done by the Modi Government on Tuesday night.

They say the Act would have used the words “with immediate effect” if the demonetisation has to coincide with the date of the notification.  The PIL has sought either quashing of the notification or a direction to the Centre to grant a “reasonable time frame” to the citizens to exchange the currency notes instead of forcing the country’s entire population drop at the banks” doors to get the old notes changed.