‘Not Demonetisation, Only Currency Management Exercise’: RBI Tells Delhi HC

The Reserve Bank of India (RBI) on Friday defended its recent decision to withdraw ₹2,000 notes from circulation, and informed the Delhi High Court that it is merely a “currency management exercise” and not demonetisation.

Senior Advocate Parag P. Tripathi made the submission before a division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad during the hearing of a public interest litigation (PIL) contesting the central bank’s decision

Opposing the plea, Tripathi advised that the matter be considered at a later date because the bench had already reserved its judgement in a similar PIL involving the impugned decision.

“This is a currency management exercise, not a demonetisation exercise. Previously, the bench reserved judgement in a case. I propose that we let that order come and then we can have it after that. The majority of what is being argued would have been considered there. It’s the pure nature of economic policy,” Tripathi stated.

Advocate Rajneesh Bhaskar Gupta has filed the PIL. The petitioner argued that the Reserve Bank of India Act gives the RBI no independent authority to make such a decision.

“The RBI has no jurisdiction over this. The RBI Act makes no provision for the RBI to make such a decision on its own. I would have understood if the decision had been made by the central government,” the petitioner stated.

After hearing the parties, the court scheduled the matter for 29 May, 2023 i.e., Monday and requested that the parties submit a brief note in the matter.

“The RBI’s counsel has informed the court that another petition with the same subject matter has been heard. He requests for listing on Monday. List on Monday,” the Court stated.

In addition to claiming that the RBI lacks independent authority under the Reserve Bank of India Act to make such decisions, the PIL also argued that the decision to withdraw the banknote only after 4-5 years of circulation within a particular deadline is “unjust, arbitrary, and contrary to public policy.”

“It is respectfully submitted that the RBI has no independent power under the Reserve Bank of India Act, 1934 to direct the non-issue or discontinuance of issue of bank notes of any denominational values, and the said power is vested only with the Central Government under section 24 (2) of the RBI Act, 1934,” Gupta stated.

The PIL claims that the impugned circular does not mention that the central government made the decision, and that the RBI has given no other reason other than “Clean Note Policy” to take such a “big arbitrary decision” of withdrawing banknotes from circulation “without analysing the expected problems of the public at large.”

“As per the provision of the RBI’s clean note policy, damaged, counterfeit, or soiled banknotes of any denomination are withdrawn from circulation and newly printed banknotes are circulated in the market but it is not happening in the present case, only denomination of ₹.2000/- is being withdrawn within a specific date or deadline and no new similar banknote is given by the RBI in circulation,” Gupta added in the PIL.

Alleging that small vendors and shops have already stopped accepting ₹ 2,000 notes, the PIL claimed that the RBI has not cleared so far that what benefit there will be to the RBI or the national economy after withdrawing the denomination of ₹2000 banknotes from circulation. However, as observed during the demonetisation of ₹ 500 and ₹ 1000 notes in 2016, the PIL argues, the difficulty caused by citizens is well recognised.

“It is respectfully submitted that the ₹2000 denomination printed in 2016 and later is in very good condition with strong safety measures and does not need to be withdrawn from circulation under the Clean Note Policy or otherwise. Furthermore, the Clean Note Policy only demands the withdrawal of damaged, counterfeit, or filthy banknotes from circulation, not all good banknotes,” Gupta argued.

The PIL further stated that crores of rupees were spent from the public exchequer on the printing of ₹ 2000 notes, which “will be wasted” as a result of the withdrawal.

“It is respectfully submitted that it cannot be ruled out that the RBI notification or circular under challenge will lead panicked citizens to line up at banks across the country in this hot weather of May/June/July, which may cause loss of many lives, similar to the period of demonetization in the year 2016 when more than 100 citizens lost their lives or wrong policy decision of demonetization of ₹1000 and ₹500 by the Centre Govt, and now the same thing is happening in the name of Clean Note Policy of RBI without any statutory power,” it further added.

In related news, the same bench earlier this week reserved judgement on a similar PIL challenging the RBI and State Bank of India’s (SBI) notifications allowing the exchange of ₹2000 currency notes without the need for any form of identity proof.

The petition was filed by BJP politician and advocate Ashwini Kumar Upadhyay, who sought to declare the notifications as arbitrary and in violation of Article 14 of the Indian Constitution. The impugned notifications were published on May 19 and 20.