Gangsters and mafia may get illicit money exchanged, a petition filed by advocate Ashwini Kumar Upadhyay at the Delhi High Court claims. The court reserved its verdict in the matter yesterday.
IN response to a plea at the Delhi High Court against the Reserve Bank of India’s (RBI) decision to not require any proof of identification while depositing or exchanging currency notes of ₹2000, the high court yesterday reserved its verdict. It also marked the first day of the withdrawal exercise.
The RBI submitted that the withdrawal of the said currency notes is not demonetisation, unlike the 2016 exercise, and that the decision was taken for operational convenience. The circular notifying the decision states that the purpose of introduction of ₹2000 notes had been fulfilled. The facility for depositing or exchanging will be available at all banks till September 30.
A division bench of Chief Justice Satish Chandra Sharma and Justice Subromonium Prasad had been hearing a public interest litigation (PIL) petition filed by advocate and politician Ashwini Kumar Upadhyay contending that exchanging of notes without requiring identity proof may lead to “gangsters and mafias and their henchmen (to) come and get their money exchanged”.
The May 19 circular holds that the deposition of banknotes can be done “without restrictions and subject to compliance with extant Know Your Customer (KYC) norms and other applicable statutory requirements.”
Opposing the PIL, senior advocate Parag Tripathi, appearing for the RBI, told the court that “none of the points raised by the petitioner impinge or deal with constitutional issues”, and asked the court to impose exemplary costs on Upadhyay.
In his petition, Uphayay sought a direction to the RBI to ensure that the notes are deposited only in the bank account of the depositor, so that no person could have it deposited in any third person’s account and “people having black money and disproportionate assets could be identified”.
“Why is ID proof excluded? Every poor (person) has a Jan Dhan account. [Below Poverty Line] persons are also connected to bank accounts,” Upadhayay told the court, advocating for the furnishing of government-issued identification for the deposit or exchange of the withdrawn banknotes. His petition claims that a large amount of currency has been “hoarded by separatists, terrorists, Maoists, drug smugglers, mining mafias and corrupt people“.
Meanwhile, Tripathi referred to various judgments of the Supreme Court to argue that courts are usually not inclined to interfere with matters relating to economic policy. In R.K. Garg & Ors versus Union of India & Ors (1981), the Supreme Court had observed that, “The court must defer to legislative judgment in matters relating to social and economic policies and must not interfere, unless the exercise of legislative judgment appears to be palpably arbitrary.”
Earlier this year, a Constitution bench of the Supreme Court had upheld the legal validity of the 2016 demonetisation exercise by a 4:1 majority.
‘Purpose fulfilled’: RBI
“With the fulfilment of the objective of introduction of ₹2000 denomination and availability of banknotes in other denominations in adequate quantity, printing of ₹2000 banknotes was stopped in 2018–19,”, the RBI’s May 19 circular states.
It further justifies the withdrawal of the said denomination of notes, stating that the majority of notes issued prior to March 2017 “have completed their estimated lifespan and are not observed to be commonly used for transactions anymore”.
Citing the above reasons and “in pursuance of the ‘Clean Note Policy’”, the said denomination of notes has been withdrawn.
A person may exchange banknotes up to a limit of ₹20,000 at a time. This limit has been prescribed “to minimise inconvenience to the public, to ensure operational convenience and avoid disruption of the regular activities of bank branches.” However, deposits into bank accounts can be made without restrictions subject to compliance with extant KYC norms and other applicable statutory or regulatory requirements.
In contrast to the 2016 exercise in which merely 52 days were given to exchange or deposit withdrawn banknotes, the RBI has given an extended period of 130 days this time around.
According to official estimates, the total value of ₹2,000 denomination bank notes in circulation has declined from ₹6.73 lakh crore as on March 31, 2018, accounting for 37.3 percent of the notes in circulation to ₹3.62 lakh crore, constituting only 10.8 percent of the notes in circulation on March 31, 2023.
Even as the RBI has said that ₹2000 denomination currency notes continue to be legal tender, a large number of kirana shops, retail outlets, petrol stations and transport companies are refusing to accept the said notes, leaving customers with no option but to take those notes to the bank.
The vigil on Jan Dhan Yojana and Basic Saving Bank Deposit (BSBD) accounts has been increased in view of the possibility that these could be used to receive and transfer fraudulent funds, TheHindu Business Linereported.
During the 2016 exercise, a significant amount of funds had flowed into BSBD accounts, dormant and inoperative accounts and certain other types of accounts, according to a ‘Demonetisation and Bank Deposit Growth’ study of 2017.
In a judgment delivered on January 3 this year, a Constitution Bench of the Supreme Court had upheld the 2016 demonetisation exercise by a 4:1 majority, with Justices S. Abdul Nazeer, B.R. Gavai, A.S. Bopanna and V. Ramasubramanian signing the majority judgment authored by Justice Gavai, and Justice B.V. Nagarathna dissenting. One of the questions before the Bench was whether the power available to the Union government under Section 26(2) of the RBI Act could be restricted to mean that it can be exercised only for ‘one’ or ‘some’ series of bank notes and not ‘all’ series.
Answering the above question, the Bench had held that the provisions of the RBI Act must be construed broadly and be given a purposive interpretation. The majority view stated that “[w]hen the legislature itself has provided that the Central Government would take a decision after considering the recommendation of the Central Board of the RBI, which has been assigned a primary role in matters with regard to monetary policy and management and regulation of currency, we are of the view that the legislature could not have intended to give a restricted power under sub-section (2) of Section 26 of the RBI Act.”