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The Union Cabinet has approved an ordinance that will penalise people holding the scrapped ₹500 and ₹1,000 notes beyond March 31, 2017, and end any liability of the government and the central bank on those notes.
The decision to promulgate the Specified Bank Notes (Cessation of Liabilities) Ordinance comes two days ahead of the expiry of the December 30 deadline for depositing demonetised notes in banks.
The government had initially planned to amend the RBI Act to this effect during the Winter Session of Parliament, but took the ordinance route as the session was a washout.
Prime Minister Narendra Modi had announced the demonetisation of these currency notes on November 8. Those holding the notes beyond December 30 can deposit them in specified offices of the RBI till March 31, but will have to account for the delay.
The ordinance will make it a criminal offence to hold the scrapped notes beyond a specified limit after March 31 and will attract a monetary fine of ₹10,000 or five times the amount of cash held.
While there was no official statement, sources said a fine of at least ₹5,000 will be imposed on those providing “wrong information” while depositing the withdrawn currency notes between January 1 and March 31. The fine could go up to as much as five times the amount deposited.
Ending the liability The ordinance also ends the liability of the government and the RBI on the withdrawn notes. As the RBI gives a guarantee on all notes to pay the value of the currency to the bearer, ending the liability on the withdrawn notes will pre-empt litigation. Till now, the demonetisation of the currency notes operated only on the strength of an official notification, without any legal provision.
The ordinance clears the way for additional dividend payment from the RBI, but with over 90 per cent of the ₹15.4 lakh crore of demonetised currency deposited, the chances of this are slim.
The ordinance will come into effect after it receives assent from President Pranab Mukherjee. Since it has to be approved by Parliament within six months, the government is likely to table it in the Budget Session.
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