Bombay HC Prima Facie Finds Inconsistencies In Two RBI Circulars Regarding Demonetisation

Bombay HC Prima Facie Finds Inconsistencies In Two RBI Circulars Regarding Demonetisation

The Bombay High Court has sought the Reserve Bank of India’s response in a petition that challenges a circular issued by the central bank on November 14. More importantly, the division bench headed by Justice AS Oka observed that prima facie there were inconsistencies between the two circulars issued.

The primary circular that was issued notifying demonetisation of 500 and 1000 rupee notes was issued on November 8, however another circular was issued on November 14. The circular prohibits district co-operative banks from allowing exchange or deposit of old 500 and 100 rupee notes.

The petition filed by Solapur District Central Co-operative bank says that by prohibiting district central co-operative banks from either providing the facility to exchange discontinued currency notes with new ones, or allowing account holders to deposit discontinued currency notes the centre has exceeded its own powers. It is also the petitioner’s contention that under Section 26(2) district co-operative banks come under the purview of the primary notification, which means these banks should have been able to exchange old notes for new ones and accept deposits of the old notes. However, by this November 14 circular the centre has circumvented the authority of the central bank.

Senior Counsel Janak Dwarkadas appeared for the petitioners and informed the bench that his client is not challenging demonetisation but the November 14 notification.

Court has now directed Additional Solicitor General Anil Singh to submit a copy of the transfer petition filed by the centre before the supreme court. The transfer petition hearing will take place on November 23.

Apart from the litigation challenging demonetisation itself, there has been litigation on part of some co-operative banks. Like in Kerala, primary cooperative banks filed writ petitions before the High Court challenging the RBI demonetisation drive and seeking currency for transactions. It is contended that the denial of transaction right for them, in exchanging currency, results in the denial of the constitutional rights of the members and violative of Articles 19 and 21 of the Constitution of India.

This article has been made possible because of financial support from Independent and Public-Spirited Media Foundation.