Vivek Narayan Sharma v. Union of India
ORDER
I. Writ Petitions are admitted.
2. Issue notice on the Writ Petitions, special leave petitions and
other applications. The respondents may file reply affidavit within six
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weeks. Rejoinder, if any, within three weeks thereafter. E
3. We have heard the learned counsel for the parties at some
length. In our opinion, the following important questions fall for our
consideration in this batch of petitions:
(i) Whether the notification dated 8th November 2016 is ultra vi res
Section 26(2)and Sections 7, 17,23,24,29 and 42 of the Reserve F
Bank of India Act, 1934;
(ii) Does the notification contravene the provisions of Article
300(A) of the Constitution;
(iii) Assuming that the notification has been val idly issued under
the Reserve Bank of India Act, 1934 whether it is ultra vires
Articles 14 and 19 of the Constitution;
(iv) Whether the limit on withdrawal of cash from the funds
deposited in bank accounts has no basis in law and violates
Articles 14, 19 and 21;
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(v) Whether the implementation of the impugned notification(s)
suffers from procedural and/or substantive unreasonableness
and thereby violates Articles 14 and 19 and, if so, to what
effect?
(vi) In the event that Section 26(2) is held to permit demonetization,
does it suffer from excessive delegation oflegislative power
thereby rendering it ultra vires the Constitution;
(vii)What is the scope of judicial review in matters relating to
fiscal and economic policy of the Government;
(viii) Whether a petition by a political party on the issues raised is
maintainable under Article 32; and
(ix)Whether District Co-operative Banks have been discriminated
against by excluding them from accepting deposits and
exchanging demonetized notes.
4. Keeping in view the general public imp011ance and the far
reaching implications which the answers to the questions may have, we
consider it proper to direct that the matters be placed before the larger
Bench of five Judges for an authoritative pronouncement. The Registry
shall accordingly place the papers before Hon 'ble the Chief Justice for
constituting an appropriate Bench.
5. We may now advert to the issues which are of immediate
concern. The first issue is about the restriction placed on the District
Cooperative Banks to accept deposits or exchange of demonetized
currency of Rs.500/- and Rs. I 0001-. Two broad aspects have been
presented before us. The first is about the complete exclusion of the
District Cooperative Banks from accepting deposits or exc11anging
demonetized notes. The second is about the avoidable financial stress
on the District Cooperative Banks because of freezing the deposited
demonetized notes received by the District Cooperative Banks between
11th and 14th November 2016, which is stated to be around Rs.8000/
Crore (Rupees Eight Thousand Crore).
6. The first point whether the decision of the Authority to forbid
the District Cooperative Banks from accepting deposits and exchanging
demonetized notes, may require detailed hearing. It is only upon
acceptance of challenge to that decision, that the bar placed on the District
Cooperative Banks can be lifted. We are not inclined to suspend that bar
VIVEK NARAYAN SHARMA v. UNION OF INDIA
as an interim measure. This is especially when the decision is the outcome
of financial policy which the respondents claim to have adopted on the
basis of experience. In particular, an apprehension has been expressed
about the possibility of demonetized notes being converted or exchanged
without proper audit, control or supervision. The District !=ooperative
Banks, it has been urged, are not directly under the control of the Reserve
Bank oflndia but within the purview ofNABARD. The dispensation
provided by NABARD is, according to the Attorney General, not in
conformity with the strict regime provided under the provisions of Banking
Regulation Act, 1949 and the Reserve Bank oflndia Act, 1934.
7. Reverting to the second aspect, of District Cooperative Banks
being precluded from utilizing the demonetized notes deposited with them
between 1 lth to 14th November 2016 (when it was so permitted by the
Reserve bank of India), the learned Attorney General has invited our
attention to the written instructions received by him from the Under
Secretary to the Government oflndia dated 14th December 2016. The
relevant extract of the said letter reads thus:
"In this regard, it is to inform that as regards the deposits of
Specified Bank Notes (SBNs) collected by DCCBs, the RBI has
recommended that the SBNs collected by the DCCBs between
I 0th and 14th November 2016 may be exchanged with their linked
currency chests after a I 00% audit of the veracity of the KYC
documents of the SBN depositing customers of DCCB is
conducted by NAB ARD, the supervisor and to the extent of such
verified SBNs only. For SBNs deposited by Primary Agricultural
Credit Societies (PACS) also, similar 100% audit of the K YC
documents of the members of the PACS should be conducted by
NABARD and to the extent of such verified SBNs only, exchange
value will be given by the linked currency chest. In either case,
the linked currency chest will subject those SBNs to usual checks,
especially relating to finding out FICN ."
For that purpose, suitable Notification can be issued by the
Competent Authority within two days. We commend to the Competent
Authority to do so.
8. Learned counsel for the District Cooperative Banks, however,
submitted that the Reserve Bank of India must assure that the entire
amount offered by the District Cooperative Banks for exchange after
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due verification in the form of demonetized notes, will be duly replaced
by commensurate amount oflegal tender notes contemporaneously. The
learned Attorney General on instructions submitted that the policy of
replacement of legal tender notes as applicable to Public Sector Banks
and other Banks will be applied even in the case of District Cooperative
Banks for exchange of demonetized currency with the legal tender
currency. We accept the assurance given by the learned Attorney General
in this behalf.
9. The other broad point was about extending the time limit for
exemption for use of demonetized currency notes of Rs.500/- and
Rs. I 000/- at specified counters as per the relevant Notifications issued
in that behalf by the Reserve Bank of India. It was contended that the
exemption period provided in the concerned notification is expiring.
Hence, it will not be possible to deposit the demonetized notes at specified
counters thereafter, even in case ofemergency situation like hospitalization,
travel by Railway or Air etc. In our opinion, whether the exemption
period should be extended or not must be best left to the judgment of the
Government of the day with a hope that the Government will be responsive
and sensitive to the problems encountered by the common man.
Accordingly, we decline to issue any interim direction to the Government
in the matter of extending the period of exemption and leave it open to
the Government to take appropriate decision in that behalf, as may be
advised.
I 0. The other serious grievance made by the petitioners is about
the denial ofright to withdraw the prescribed amount of Rs.24,000/-per
week per account holder, in spite of Notification issul::d by the Reserve
Bank of India permitting such withdrawal. It was submitted that if the
Government has issued such Notification after due consideration, it is
obliged to ensure that its commitment made under the said Notification
is implemented without any exception. The ground reality, however,
contends learned counsel, is that the Banks are refusing to pay full amount
of Rs.24,000/- per account holder per week on the ground of non
availability of enough volume oflegal tender currency. According to the
learned Attorney General, the Government has already made it amply
clear that it would take around 50 days time to stream I ine the cash flow.
That period is still not exhausted. He submits that as of now the Reserve
Bank of India has been able to infuse around Rs.5,00,000/-Crore (Five
Lakh Crore) of the new legal tender notes in the form of Rs.500/- and
VlVEK NARAYAN SHARMA v. UNION OF INDIA
Rs.2,000/-. That is almost over 40% of the amount of demonetized notes
already deposited with the Banks. Further, the Authorities are working
to the best of their ability to defuse the crisis of cash flow situation by
printing new notes. It is further submitted that for the nature of decision
taken by the Government - to unearth the black money or unaccounted
money and to dry up the terror fund and defeat the attempt of circulation
of large- scale counterfeit currency, maintaining complete secrecy of
such a d~cision was imperative. For that reason, new currency notes
could not be printed well in advance. He submits that the old demonetized
notes will be replaced by new legal tender notes in the form ofRs.500/
and Rs.2000/- progressively in right earnest. Considering the stand taken
by the learned Attorney General, we may commend to the Authorities to
fulfill their commitment made in terms of the stated Notification pennitting
withdrawal of Rs.24,000/- per account holder of the Bank per week to
the extent possible and review that decision periodically and take
necessary corrective measures in that behalf.
11. In our opinion, besides the observations made hitherto, no other
direction can be given at this stage by way of an interim relief.
12. That takes us to the Transfer Petitions filed by the Union of
India for withdrawing all Writ Petitions/proceedings pending in the various
High Courts across the country and to hear those cases along with the
Writ Petitions pending in this Court. In our opinion, it would be just and
proper to withdraw all the Writ Petitions/proceedings pending in different
High Courts across the country and to be heard by this Court along with
the Writ Petitions which are already pending in this Court raising same
or similar issues, to avoid multiplicity of hearing and conflicting decisions
on the same subject matter. Accordingly, we issue notice in the respective
Transfer Petitions and by way of interim direction, stay the further
proceedings of the Writ Petitions/proceedings in the concerned High
Court.
13. We further direct that if any other Writ Petitions/proceedings
are pending in any High Court, further hearing of those matters shall
also remain stayed in terms of this order. We further direct that no other
Court shall entertain, hear or decide any Writ Petition/proceedings on
the issue or in relation to or arising from the decision of the Government
of India to demonetize the old notes of Rs.500/- and Rs. I 000/-, as the
entire issue in relation thereto is pending consideration before this Court
in the present proceedings.
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14. We make it clear that petitioners before the High Court(s) or
any other Court in India in respect of proceedings already instituted on
the subject matter under consideration before this Court, will be free to
intervene in the Writ Petitions pending consideration before this Court
on the subject matter of demonetization of old currency notes ofRs.500/
and Rs. I 000/-, if so advised.
15. The Registry shall place the matter before the Chief Justice
for further orders.
Nidhi Jain Matter referred to CJJ.