‘Not Demonetisation, Only Currency Management Exercise’: RBI To Delhi High Court On Decision To Withdraw Rs 2,000 Currency Notes From Circulation

The Reserve Bank of India on Friday defended its recent decision to withdraw Rs 2,000 notes from circulation and informed the Delhi High Court that it is only a “currency management exercise” and not demonetisation.

Senior Advocate Parag P. Tripathi made the submission before a division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad during the hearing of a public interest litigation challenging the decision of the central bank.

Opposing the plea, Tripathi suggested that the matter be heard on a later date as the bench has already reserved its judgment in a similar PIL related to the impugned decision.

“This is a currency management exercise and not demonetisation. The bench has earlier reserved judgment in a matter. I am suggesting that let that order come and we can have it after that. Most of what is being contended would have been dealt with it there. It is a pure nature of economic policy,” Tripathi said.

The PIL has been filed by Advocate Rajneesh Bhaskar Gupta. The petitioner has contended that RBI has no independent power under the Reserve Bank of India Act to take such decision.

“This is beyond the jurisdiction of the RBI. There is no provision in the RBI Act saying that RBI can take such a decision independently. I would have understood if the central government had taken the decision,” the petitioner said.

After hearing the parties, the court listed the matter on Monday and asked the parties to submit short note in the matter.

“Counsel for the RBI has informed the court that another petition with same subject matter has been heard. He prays for listing on Monday. List on Monday," the court said.

Besides arguing that the RBI has no independent power under the Reserve Bank of India Act to take such decision, the PIL also contends that the decision of withdrawal of the banknote only after 4-5 years of circulation within specific deadline is "unjust, arbitrary and against the public policy".

"It is respectfully submitted that the Respondent no.1 i.e. RBI has no independent power under the Reserve Bank of India Act, 1934 to direct the non-issue or the discontinuance of issue of bank notes of any denominational values and the said power is vested only with the Central Government under section 24 (2) of the RBI Act, 1934," Gupta has said.

Submitting that the impugned circular does not mention that central government has taken the decision, the PIL submits that no other reason except 'Clean Note Policy' has been given by the RBI to take such a "big arbitrary decision" of withdrawing the banknotes from circulation "without analysing the expected problems of the public at large".

"As per the provision of clean note policy of RBI, damaged, counterfeit, or soiled banknote of any denomination is withdrawn from circulation and newly printed banknotes are circulated in the marked but it is not happening in the present case, only denomination of Rs.2000/- is being withdrawn within a specific date/deadline and no new similar banknote is given by the RBI in circulation," Gupta has further said in the PIL.

Alleging that small vendors and shopkeepers have already stopped taking Rs 2,000 note, the PIL submits that RBI has not cleared so far that what is the benefit to the RBI or National Economy after withdrawing the denomination of Rs.2000 banknote from circulation. However, the PIL adds, the hardship faced by the citizens is very well known as seen during demonetisation of Rs 500 and Rs 1000 notes in 2016.

"It is respectfully submitted that denomination of Rs.2000 printed in the year 2016 and later on is in very good condition with strong safety measures and need not required to be withdrawn from the circulation under Clean Note Policy or otherwise. Moreover, Clean Note Policy only requires withdrawal of damaged, counterfeit, or soiled notes from circulation and not all good banknotes," Gupta has argued.

The PIL further states that crores of rupees have been spent from public exchequer on the printing of Rs 2000 notes and the same "will be wasted" due to such withdrawal.

"It is respectfully submitted that it could not be ruled out that RBI notification/Circular under challenge will be leading panicked citizens to line up at banks across the country in this hot weather of May/June/July which may cause loss of many life like the period of demonetization in the year 2016 when more than 100 citizens lost their life i'or wrong policy decision of demonetization of Rs. 1OOO and Rs.500 by the Centre Govt, and now the same thing is happening in the name of Clean Note Policy of RBI without any statutory power."

In a related news, the same bench earlier this week reserved judgment on a similar PIL challenging RBI and State Bank of India's notifications that permit exchange of Rs. 2000 currency notes without requirement of any identity proof.

The plea was moved by BJP leader and Advocate Ashwini Kumar Upadhyay seeking to declare the notifications as arbitrary and against Article 14 of Constitution of India. The impugned notifications were published on May 19 and 20.

Title: RAJNEESH BHASKAR GUPTA versus Reserve Bank of India & Anr.