On 8/11/16 a four hour notice was given before taking out the currency notes of Rs 500 and 1000. In one speech 86%of the cash supply was taken out for the intention of removal of 'Black Money'. While all this sounds brilliant the hardship caused to the general population cannot be measured. News shows are showing us the plight of urban centers but none have I seen showing us the rural picture where an ATM or a back account is a greek term, where no Identification proof is being kept by the masses. We in the year 2014 have chosen a single majority party where decisions are abrupt, hasty and well unopposed in terms of votes, the character of a coalition has been lost and it seems like there is nothing to stop the ruling party with its laws that is does have in place.
Having said this is the current demonetization process done vis-a-vis the constitution?
For this lets understand the objectives of demonetization:
1) Removal of black money
2) Counterfeiting of notes
(1) Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government.
(2) On recommendation of the Central Board 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.
Section 26 A. Certain bank notes to cease to be legal tender
Notwithstanding anything contained in section 26, no bank note of the denominational value of five hundred rupees, one thousand rupees or ten thousand rupees issued before the 13th day of January, 1946, shall be legal tender in payment or on account for the amount expressed therein."
Therefore according to the abovesaid provision the Government of India can remove "any series of bank notes at any time" but it has removed two of the highest denominations in one go making 86% of the cash useless overnight. This is subject to Judicial Review as no law can be arbitrary but by the time the PIL process of courts will begin and hearings would be in order the damage would be done and reversing it would cause more damage.
Once the GOI notifies under Section 26(2) that any bank note series has ceased to be legal tender, Section 26(2) itself mandates that such bank notes can only be exchanged at an agency or office of the RBI as notified. The GOI has no power to thereafter permit such demonetized bank notes to be used for some select transactions at Government outlets or petrol pumps, or at hospitals, or at airline ticket counters or to pay GOI dues, or for farmers to buy seeds, etc.
Further under Section 26(2) of the RBI Act, the GOI does not have the power to place limitations on cash withdrawals by citizens from their bank accounts or from ATMs.
Similarly, under Section 26(2) of the RBI Act, the GOI does not have the power to limit the amount of demonetized bank notes that citizens can exchange at the RBI in cash. The notification in so far as it places these restrictions is also ultra vires Section 26(2) of the RBI Act.
Article 21 in its ambit has right to live with dignity, right to livelihood the decision comes as a clear violation of the above as to counter 0.028% of fake currency more than half the population is under threat. There is no freedom to take out your own hard-earned money for your own use. Now that everyone, labour, daily-wage workers are standing outside the banks for their money where there is no cash available also the right to live with dignity for 13 million people has gone with one executive decision.
Not everyone that has cash in his house is having it as illegitimate money. The illegitimate money holders i.e. the wilful defaulters. No provision in law holds you back from taking out your own money.
Are the objectives being complete?
1) Black money: Yes, temporarily you will fight black money that too which is in cash but what about the money in assets. The money that is held outside this country?
2) Counterfeiting: Well, till the cost of producing a single note is not reduced fake currency will go around the same way. Printing currency should have been made so difficult that it would cost more and other obstacles be there making it more difficult to print. The old notes that are fake will have an impact but as the process to make notes is same, it is just left to see when the new notes are counterfeited.
Fake currency as admitted by many officials is too difficult to recognise and hase been accounted for 0.028% of our economy and to tackle that amount the country has suffered this big a blow.
3) Corruption: In one line- according to me stashing 2000rs notes is going to be easier than 1000rs notes.
4) Cashless Economy: Well, if the idea to be a cashless economy was so pre-planned then a lot of the execution for this plan should have begun. Such as ATMs should have been constructed and made operational. Credit/Debit Card machines should have been made available. The social aspect of Indians keeping cash should have been accounted for and a mindset change should have been initiated.
For a country thats grown gradually over 70 odd years almost as a 'wise elephant' more planning was a must before enacting such a policy.
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