Demonetisation| Prime Minister's Statement On Deadline For Note Exchange Won't Create Promissory Estoppel : Centre, RBI Tell Supreme Court

In his speech on November 8, 2016, Prime Minister Narendra Modi had said that those who, for some reason, were unable to deposit their old banknotes by the close of banking hours on December 30 would still be allowed to go to specified offices of the Reserve Bank till March 31 of the next year and deposit the notes after submitting a declaration form. By a notification, a 'grace period' was provided that extended up to March 31, 2017, for residents of India and up to June 30, 2017, for non-residents. However, this facility for exchanging the demonetised currency notes was made available only to such citizens who were not in India during the period from November 9 to December 30, 2016. On the final day of the demonetisation hearing, the Attorney-General for India, R. Venkataramani, echoed the sentiment of the counsel for the Reserve Bank and told the Constitution Bench, "There cannot be an argument of estoppel on the Prime Minister's statement. It was also made at a time when the notification had not yet been issued." He added, "In any case, the Prime Minister had said 'someone, for some reason'. This meant a good reason, legally acceptable reason, or legitimate reason." "Can the state sit back and say a non-resident Indian who failed to avail of the opportunity because he refused to forego the benefits derived from his residential status had a good enough reason?" the Attorney-General asked sarcastically.

In the same vein, Gupta argued, "The November 8 notification, which is the law, said the exchange period would end in December. It was irrelevant what liabilities and guarantees existed. The notification is what matters." He asked, "The petitioner came back to the country in February, when he could have returned in November. What was he doing in the two months?" "This is an absolutely callous submission on part of the Reserve Bank," Divan hotly responded.

On behalf of the Reserve Bank, it was further submitted that the Central Government and the legislature, in their wisdom, had decided against extending the window for exchanging old currency notes to prevent abuse of the process. Gupta also emphasised that under the extant mechanism, anyone who attempted to actuate such an exchange would be prosecuted for holding demonetised notes in contravention of the law. Justice Nagarathna asked how the government or the central bank planned to address situations such as the one faced by a petitioner who sought to exchange her husband's savings unearthed only after the window was closed. Gupta bluntly admitted, "It would be very difficult to deal with every situation like this."

Senior Advocate Shyam Divan also spoke about the 'yawning gap' of persons facing genuine hardships who had not been covered by the grace period introduced to exchange demonetised banknotes. The main thrust of his argument was that the common people, such as the petitioner whom he represented, had around twenty-four hours to exchange the old currency notes since they had been led to believe that the exchange period would be extended. Such an understanding was predicated on the repeated assurances made by the Prime Minister, government bureau, finance ministry, press bureau, and Reserve Bank on various occasions, the senior counsel said. Divan contended, "The liability of the Reserve Bank and the statutory guarantee of the central government with respect to the demonetised banknotes lingered beyond November 8. On November 8, their legal tender status was withdrawn immediately and instantaneously, but the promise of the central government to honour the notes persisted. That is why, they provided for a window when the banknotes could be exchanged." Both the liability and the guarantee were finally extinguished on December 31, 2016 when the Special Bank Notes (Cessation of Liabilities) Ordinance came into force. To illustrate this point, he took the court through several circulars and notifications issued by various government agencies. "Broadly, the representation was that end of December was not going to be a hard stop with respect to the exchange of notes. This hard stop, therefore, was completely unreasonable, unjust, and manifestly arbitrary. And, my submissions are not based on the hope of extension, but only on the assurances received," Divan strongly asserted.

He further urged the court to direct the central government and the Reserve Bank of India to formulate a 'general scheme' to ameliorate their situation. "Since on this issue, this court has blocked the recourse to Article 226, which is an inexpensive remedy available locally to common people, it would be desirable to direct the government to formulate a general scheme. Since the access has been blocked by this court, it should act ex debito justitiae and ensure relief is not given only to the petitioners who have approached this court," he submitted. Vehemently opposing this, Gupta said that it would be improper for the court to issue a writ of mandamus directing the Government or the  Central Bank to formulate a scheme allowing a large class of persons to exchange the demonetised banknotes almost six years after the expiry of the time limit. He also pointed out that the line of argument adopted by the opposing counsel was a slippery slope. He said, "This will not stop with non-resident Indians who have left money in India. Every individual who thinks he can make out a case will demand a writ of mandamus. The deadline will vanish forever." The Attorney-General, too, had cautioned the court against attempting to devise an alternative norm, on the pretext of alleviating hardships. "The court should not enter into this because it amounts to a fundamental alteration of the nature of the law," the top law officer had said.

After Divan, Gupta, and Venkataramani concluded, the Bench heard the brief submissions made by other counsel representing petitioners aggrieved by the Centre's move to withdraw 86.4 per cent of the currency in one fell swoop. Directing the parties to furnish their written statements within two days, the Bench reserved its judgement. Notably, the Union of India and the Reserve Bank were also directed to produce the relevant records that they had been accused by the petitioners of withholding. Since Justice Nazeer, who is heading the Constitution Bench, is set to retire on January 4, the highly awaited judgement will likely be pronounced this month.

Case Title

Vivek Narayan Sharma v. Union Of India [WP (C) No. 906/2016] and other connected matters

Reports of previous hearings :