Economy

Was there a plan behind the note ban, apex court asks govt

Krishnadas Rajagopal New Delhi | Updated on January 16, 2018 Published on December 09, 2016

The Supreme Court of India, at New Delhi, the Capital of India. Photo: Rajeev Bhatt , September 19, 2003.   -  The Hindu

Chief Justice TS Thakur

Govt asked to keep its promise on cash withdrawal limits, report back on Dec 14

If the government has assured people they can withdraw ₹24,000 of their own legitimate and taxed money a week from the bank, it should keep its promise and ensure that a system is in place, the Supreme Court told the Centre on Friday.

“You yourself said withdrawals can be up to ₹24,000 a week. This is the limit you have prescribed. Once you say people can withdraw ₹24,000, that promise must be kept,” Chief Justice of India TS Thakur told Attorney-General Mukul Rohatgi, who was appearing for the Centre.

The Bench, also comprising Justices AM Khanwilkar and DY Chandrachud, said if there was a cash crunch following the demonetisation, the government should have fixed a lower cap for withdrawal.

“People are going to the banks for ₹24,000 and they are paid ₹2,000, ₹5,000 or ₹8,000. Fix a cap of at least ₹10,000,” said Chief Justice Thakur.

“Banks say they have no cash. How can the government restrict the legitimate withdrawal of legitimate money? This is plain breach of trust,” senior advocate Kapil Sibal submitted.

The Bench asked the government to finds ways to resolve this issue without prejudice to the larger goals of demonetisation and report back to the court on December 14.

‘Was there a plan?’

At one point during the hearing, the Supreme Court asked Rohatgi whether there was a plan to demonetisation or was it done on an “impulse”.

“Was there any application of mind as to how much money will come in and how much you need to print?” Chief Justice Thakur asked.

Rohatgi replied: “Of course there was a plan. Our expectation was for ₹10-11 lakh crore to come into the system... We cannot reach our objectives to weed out black money, counterfeit currency and fight terror without demonetisation. There has to be some inconveniences.”

He said the government is not “just sitting back” and has introduced several digital incentives to alleviate public suffering.

He denied submissions that 91 people died in the aftermath of demonetisation, saying it was political propaganda. He questioned the real motives behind the PILs “filed by lawyers and district co-operative societies”.

“Ninety-one deaths do not occur when people do not have money,” Rohatgi said.

Senior advocate P Chidambaram, appearing for one of the 32 petitioners challenging the demonetisation scheme, asked how a family can subsist on ₹2,000 a week in a place like Delhi.

Rohatgi countered that each member of a family can withdraw up to ₹24000 a week. “How much more does a family need to spend in a week?” he asked.

“Not every member of a family will have a bank account. There may be cases of one bank account operated by a family of five. Banks run dry in half a day. Only 35 per cent ATMs have some money. In the seven North-Eastern States, there only some 5,000-odd ATMs,” Chidambaram responded.

The government, noted Chidambaram, seems to have no option now but to “ration money”. He said demonetised ₹500 and ₹1,000 notes worth approximately ₹12 lakh crore had been deposited back into the banking system. However, only ₹3 lakh crore new notes were in circulation.

‘Monopoly money’

He said there were four Prints — two owned by the RBI and two by the government — churning out a capacity ₹3 crore new notes a month. Full replacement would take at least six months.

Chidambaram compared the new ₹2,000 bank notes to “Monopoly money”.

The apex court further asked the government why it was not allowing district central co-operative banks to take deposits.

Rohatgi said district co-operative banks have lax system to check the inflow of black money, which was antithetical to the objective of demonetisation.

“We are not willing to relax in the case of co-operative banks,” Rohatgi submitted. He asked the court to look into the management of societies who operate accounts in these banks.

“But it is one thing to completely stop something, another to intelligently control it. You have, we believe, very capable officials who can devise a mechanism (to check fake currency). If you could embark on such a large (demonetisation) scheme, you can as well see to these small matters,” Chief Justice Thakur reacted.

Again, the court marked this issue as one to be resolved quickly.

Published on December 09, 2016
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