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Demonetizing Rs 500 and Rs 1,000 Currency Notes did not violate Fundamental Rights of People, Centre tells Supreme Court

It has only imposed reasonable restrictions in pursuance to its objective of eliminating black money and counterfeit currency, claims govt

People standing outside ATM (representative Image), VOA
New Delhi, Dec 2, 2016: The central government on Thursday said that its decision to demonetize Rs 500 and Rs 1,000 currency notes did not violate the fundamental rights of the people as it has only imposed “reasonable restrictions” in pursuance to its objective of eliminating black money and counterfeit currency.

“The respondents (Centre’s) act of cancelling legal tender character of existing series of Rs 500 and Rs 1m000 bank notes is only a reasonable restriction and regulatory in nature. Merely because there is restriction on the public to use the old high denomination notes, the regulation cannot be held to be illegal or unreasonable restriction as there is no infringement of fundamental rights for the citizens,” it said in its reply filed before the apex court.

The government cited the Section 26 (2) of the Reserve Bank of India Act, 1934, to defend its decision.

The section says: “On recommendation of the Central Board the (Central Government) may, by notification … , declare that, with effect from such date … , any series of bank notes of any denomination shall cease to be legal tender ….”

It also defended its decision to introduce Rs 2,000 denomination currency notes, saying that it was done in view of the erosion in the purchasing power of the rupee on account of inflation.

Pointing out that currency note of Rs 1,000 denomination was reintroduced in year 2000, the Centre said: “Barring short-lived exceptions, Indian has consistently seen moderate to high inflation since then, thus progressively eroding the value of money in purchasing power parity (PPP) terms,”

The government said this in its affidavit filed by the Union Finance Ministry before the apex court which is set to hear a batch of petitions challenging the decision to demonetise Rs 500 and Rs 1,000 currency notes.

The court will also hear the government’s plea seeking the transfer of cases filed before different high courts and subordinate court challenging the demonetisation either to top court itself or Delhi High Court.

Making a distinction between regulation and deprivation, the government on Thursday said no one has been deprived from using the notes of different denomination or issuing cheques or e-transfer. All that has happened, that too for a limited period, is the restriction on the withdrawal of the money from their accounts.

The government has also sought to describe these restrictions as “reasonable”.

This appears to be the government’s response to senior counsel Kapil Sibal, appearing for one the petitioners before the top court, asking under what law people could be restricted from withdrawing their own money from their bank account.

As in its first affidavit, the government on Thursday give details of the steps it had taken to ameliorate the hardships being faced by the people and to encourage them to take recourse to cashless transactions. (IANS)

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The Answer to The Impending Questions On Demonetization Are Here

While it did broaden the country’s tax base, it was a nightmare for the immense, cash-dependent informal economy.

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Indian Currency. Pixabay

Nearly all of the currency removed from circulation in a surprise 2016 attempt to root out illegal hoards of cash came back into the financial system, Resever Bank of India  has announced, indicating the move did little to slow the underground economy.

Prime Minister of India, Narendra Modi’s currency decree, which was designed to destroy the value of billions of dollars in untaxed cash stockpiles, caused an economic slowdown and months of financial chaos for tens of millions of people or demonetization.

Modi announced in a November 2016 TV address that all 500-rupee and 1,000-rupee notes, then worth about $7.50 and $15, would be withdrawn immediately from circulation. The banned notes could be deposited into bank accounts but the government also said it would investigate deposits over 250,000 rupees, or about $3,700. The government eventually released new currency notes worth 500 and 2,000 rupees.


An activist of Congress party hold the banned 500 and 1000 rupee notes.


In theory, the decree meant corrupt politicians and businesspeople would suddenly find themselves sitting on billions of dollars in worthless currency, known here as “black money.”

“A few people are spreading corruption for their own benefit,” Modi said in the surprise nighttime speech announcement of the order. “There is a time when you realize that you have to bring some change in society, and this is our time.”

But even as the decree caused turmoil for those in India who have always depended on cash — the poor and middle class, and millions of small traders — the rich found ways around the currency switch. In the months after the decree, businesspeople said that even large amounts of banned currency notes could be traded on the black market, though middlemen charged heavy fees.

Prime Minister Narendra Modi along with mayor, flickr

The reserve bank of India report said in its Wednesday report that 99.3 percent of the $217 billion in notes withdrawn from circulation had come back into the economy. Some officials had originally predicted that number could be as low as 60 percent.

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“Frankly, I think demonetization was a mistake,” said Gurcharan Das, a writer and the former head of Proctor & Gamble in India. He said that while it did broaden the country’s tax base, it was a nightmare for the immense, cash-dependent informal economy.

“You can’t overnight change that in a country which is poor and illiterate. Therefore, for me it’s not only an economic failure but a moral failure as well,” Das said. (VOA)