As the SC today referred the petitions against 2016 De-monetization by the Modi Government to a Constitutional Bench of five Judges, it is worth recalling, that the last time the Court took 18 years to decide on whether or not the move to de-monetize high-end notes was legal; that is between 1978 when the decision was taken and 1996 when the judgement was delivered
In 1978, the Morarji Desai-led Janata government carried out the second move at de-monetization of the higher currency, the Rs 1,000, Rs. 5,000 and Rs 10,000 notes, a move that affected only 5-6 per cent of the Indian population. That move of the government, too was aimed at tackling unaccounted wealth. Black Money.
The 2016 De-Monetization move, that barred the Rs 500 and Rs 1,000 note from being legal tender, overnight, has affected 96 per cent of the Indian population
1978: The 1978 move was brought in through an Ordinance, that was deliberated in Parliament and became a Law [High Denomination Bank Notes (Demonetisation) Act, 1978]. The move made through the declaration of an Ordinance on January 16, 1978 gave, in the first instance, three days (till January 19, 1978) and thereafter till January 24, 1978 time to owners of high-end currency notes to deposit these into bank accounts.
2016: The 2016 Notification was taken in greater secrecy through a Notification that has been found to have violated several sections of the Law
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1978: The 1978 move too was challenged in the Supreme Court and a five member bench finally justified the government’s move. In 1996, that is eighteen years later. The challenge was to sections 3,4,7 and 8 of the High Denomination Bank Notes (Demonetisation) Act, 1978. The Judgement of Justices Kuldip Singh, MM Punchhi, NP Singh, MK Mukherjee and S Saghir Ahmad was delivered on August 9,1996 and may be read here.
2016: On December 16, 2016, the Supreme Court of India, while refusing to interfere with the Centre’s policy on de-monetization ‘at this stage’ referred the issues of legality of the policy to a five judge Constitution bench. It rather mildly asked the government to ‘try its best to honour the commitment of weekly withdrawal of Rs 24,000 per person.”
In past weeks, since the de-monetization disaster hit India, the SC has made sharp remarks while heaing a batch of petitions that had raised people’s expectations that the highest court would rise in defence of a large sections of Indians rendered at the mercy of a capricious government, by a short-sighted policy of the government.
On November 18, the Supreme Court hearing the matter had said, “We Will Have Riots, Countrywide Situation after Notes Ban Serious,” Chief Justice of India TS Thakur had made this remark while hearing a bunch of petitions challenging the ban on Rs. 500 and Rs. 1,000 notes indicate the magnitude of the problem. At that stage the court refused to stay petitions filed by citizens in various Courts. Today, a month and eight days later, the Court’s final order quashed proceedings in all courts and asked petitioners to approach the Supreme Court. December 16 order of the Court was disappointing in more ways than one.
2016 Decision Discriminatory: Unequal access to money
The limits on cash withdrawal and exchange were such that a person with a bank account could withdraw Rs.24,000 per week and almost a lakh a month, while a person without a bank account could exchange only Rs.4,000, which was further reduced to Rs.2,000 as a onetime transaction. This is in spite of people with bank accounts being able to issue cheques or do online or other cashless transactions in addition to these limits, while the poor were expected to fit their entire expenses into the meagre few thousand they could exchange – this would mean trying to fit house rent, groceries, electricity bill and more into two thousand rupees. In effect, the message was “Jio ya maro” (a pun on one of the Fintech apps being by Reliance Jio). Open a bank account and go cashless or perish .
Additionally, rural India does not appear to have got as much cash to their banks at all . District co-operative banks are not allowed to exchange notes, basically meaning that those with accounts only in district co-operative banks are as good as unbanked, with incomes from sale of farm produce in old notes and no way to get them exchanged. Further, corrupt rural banks are trying to raise the cash the government and RBI aren’t sending them by extorting farmers to pay loans with inflated interest. Metros appear to be getting almost all the cash available (and still not getting enough) – likely in an attempt to manipulate public opinion by resolving the problems of those with most voice and most easily accessible to news media.
Shifting Sands: Don’t crowd the banks, there is plenty of time
The government even took out ads on buses saying this. Modi’s speech said that the limits on exchange of notes were to be removed after the November 24. Instead, exchange of notes was stopped on the November 24. This has completely removed access for exchange of notes from the unbanked poor. In theory they can open bank accounts, but most banks are too busy to open accounts at this point and ask them to come a month later – by which time he bank would not be accepting their old notes.
There are several other issues, not least behind the serious violations of the law that this decision unraveled. As serious has been the ignorance of the cash base of India’s economy and the impact that this has had on farmer, daily wage earners and small businesses.
