Note ban: SC puts some key questions to Centre

New Delhi: The Supreme Court on Friday sought the Centre’s views on issues like whether district cooperative banks could be allowed to accept deposits in demonetised notes with stringent regulations and why banks were unable to allow the minimum weekly withdrawal of Rs 24,000 to their customers.

During the hearing, the Centre accused some advocates of politicising the issue in the garb of PILs, and the bench headed by Chief Justice T.S. Thakur also expressed its dismay over lawyers breaching the court’s decorum by trying to outshout each other.

As the high-decibel hearing was on, the bench, that also comprised Justices A.M. Khanwilkar and D.Y. Chandrachud, said though demonetisation had been done with long-term beneficial aims, its immediate concern was to ease the inconvenience of people and asked attorney-general Mukul Rohatgi to apprise it on December 14 on some issues relating to district cooperative banks and the non-adherence to the weekly withdrawal limits by banks.

Further, the bench sought to know the government’s view on the demand to extend the order for hospitals to accept fees and other payments in the demonetised notes.

Keeping in mind that the law under which the November 8 notification was issued for demonetisation had been challenged, the bench proposed to frame legal questions and told Mr Rohatgi that since a detailed and long hearing would be needed, he should ponder over whether this can be referred to a five-judge Constitution Bench.

The bench said it would take a decision on December 14 on the Centre’s plea that proceedings in different high courts on petitions relating to demonetisation be stayed and transferred either to the Supreme Court or one of the high courts for adjudication.

“Every day new petitions are being filed in the Supreme Court and in high courts. The high courts are adjourning the case for one day or two days... Law officers are being asked to appear,” Mr Rohatgi said, and asked the bench to consider staying the proceedings in the high courts.

The bench also considered submissions by senior advocate Kapil Sibal, appearing for one of the petitioners opposing the demonetisation, and the attorney-general in framing legal issues to be deliberated upon by it in future hearings.

“We can straightaway frame the questions. The first one can be: whether the November 8 notification is ultra-vires to Section 26 (2) (power to demonetise) of the Reserve Bank of India Act,” the bench said. Indicating that it was “open to the idea of sending the matters to a five-judge bench”, the bench said the second question could be whether the demonetisation “falls foul of” Article 300A, that says no person shall be deprived of his/her property without a provision in law. Also, whether the decision is unconstitutional as it violates Article 14 (equality before the law) and Article 19(1)(g) (freedom to practice any profession and occupation) under the Constitution, it said.

Accepting Mr Sibal’s suggestion, the bench said the question was whether the restriction on withdrawal of “legitimate and taxed money” by banks was violative of the fundamental rights.

“Whether district cooperative banks have been discriminated against by the denial of permission to accept deposits,” the bench posed. Mr Sibal said he had also challenged the validity of the RBI Act’s provision on the ground of “excessive delegation of power” to demonetise currency notes.

Then came the attorney-general’s suggestion, who said that one question was “what is the scope of judicial review in matters of fiscal/economic policy”. The bench accepted the suggestion. Raising the issue of the CPI(M) filing the PIL, Mr Rohatgi said another question was “can a political party file a public interest litigation (case)?”

The bench, during the hearing, asked the attorney-general about the benefits and objectives of demonetisation. He said, referring to the November 8 notification, that it was to fight black money, ill-gotten money used for terrorist financing and curbing fake currency. He said the Rs 500 and Rs 1,000 currency notes constituted 86 per cent of the total currency and it was kept secret to make demonetisation effective. “It was not possible to print ten lakh crore currency in advance and recalibrate all ATMs in advance. The cat would have been out of the bag. There is bound to have been some kind of inconvenience,” Mr Rohatgi said.

He referred to the Centre’s recent decision to incentivise digital transactions and said people would benefit if they pay for rail and air tickets and other services digitally. Mr Rohatgi said around 12 lakh crore demonetised currency notes had come back into the banking system. He said that economic policy decisions shouldn’t be judicially reviewed.

While Mr Rohatgi was making submissions, senior advocate and former finance minister P. Chidambaram said there were only four lakh crore new currency notes that were pumped in and since there are only four printing press of the RBI and the Centre, it was not possible to substitute the demonetised currency notes before at least six to seven months. Mr Chidambaram, Mr Sibal and former external affairs minister and senior advocate Salman Khurshid, appearing for different clients, were quite vocal and critical of the Centre’s demonetisation.

Mr Chidambaram said the government was “rationing” currency distribution as the shortfall would continue for quite some time. He raised the issue of district cooperative banks that were barred from accepting deposits in old demonetised notes and said lakhs of people, specially farmers, were suffering due to this. “I don’t see any farmers here. This is all bogey,” the attorney-general responded curtly.

When the bench sought to know about the feasibility of allowing cooperative banks to accept deposits with stricter regulations, Mr Rohatgi said it cannot be done as there are several practical impediments. Dealing with some of these impediments, he said accounts with the cooperative banks were not “KYC (know your customer) compliant” and as societies are the account holders, it will be difficult to ascertain which individual member had deposited what amount. Instead of the RBI, cooperative banks are regulated by the National Bank for Agriculture and Rural Development (Nabard), and it was “common knowledge who runs these banks in various states”, Mr Rohatgi said.

As the lawyers tried to outshout each other to be heard, the CJI expressed his dismay, saying: “I have served 23 years on the bench and have never seen such unruly behaviour by advocates.” The CJI said it was his last week as a judge and he would be “going with a heavy heart” that lawyers behaved in such a manner on sensitive issues like demonetisation. The bench then cited the example of Mr Chidambaram waiting patiently for his turn, and said “you should all look at him”.