The Specified Bank Notes (Cessation of Liabilities) Bill, 2017,being discussed in Parliament. The main aim of the bill was to replace the ordinance promulgated on December 30,2016 by the central government to remove Reserve Bank of India's liability and government's guarantee to honour old notes of Rs 500 & RS 1000 notes which were demonetised on November 8,2016. In light of this the provision of this act has been explained.
According to the proposed bill and under the RBI Act, 1934, RBI is responsible for issuing currency
notes, and is liable to repay the holder of a note upon demand. The
Bill states that, from December 31, 2016, RBI would no longer be
liable to repay holders of old notes of Rs 500 and Rs 1,000, the value
of these notes.Further, the old notes will no longer be guaranteed by the central government.
The bill also provides with a restriction from holding old notes i.e a person is not allowed to keep the old currency with him. It exempts some people from this prohibition including: (i) a person holding up to 10 old notes (irrespective of denomination), and (ii) a person holding up to 25 notes for the purposes of study, research or numismatics (collection or study of coins or notes). If a person further holds the old notes, except in the circumstances mentioned above, will be punishable with a fine: (i) which may extend to Rs 10,000, or (ii) five times the value of notes possessed, whichever is higher.
The proposed bill has certain loop holes as :
No window to deposit old notes before imposing penalty: The notification of November 8th
allowed old currency notes to be deposited till December 30, 2016 and
specified that people unable to deposit them till this date would be
given an opportunity later. However, the Ordinance which
came into force on December 31, 2016 made it an offence to hold old
currency notes from that day onwards and imposed a penalty. This
overnight change did not provide a window for a person holding the notes
on that day to exchange or deposit them. Therefore, not only did the
holder lose the monetary value of the notes but he was also deemed to
have committed an offence. This implies that a person who had the notes
did not have an opportunity to avoid committing an offence and
attracting a penalty.
Unclear purpose behind penalty on possessing old notes:
The purpose and the objective behind imposing a penalty for the
possession of old currency notes is unclear. One may draw a comparison
between holding an invalid currency note, and an expired cheque since
both these instruments are meant to complete transactions. Currently, a
cheque becomes invalid three months after being issued. However,
holding multiple expired cheques does not attract a penalty.
The government has specified a grace period under the Bill to allow:
(i) Indian residents who were outside India between November 9, 2016 to
December 30, 2016 to deposit these notes till March 31, 2017, and (ii)
non-residents who were outside India during this period to deposit notes
till June 30, 2017. The government may exempt any other class of
people by issuing a notification. In addition, RBI has permitted
foreign tourists to exchange Rs 5,000 per week. No other person can
exchange or deposit old notes after December 30, 2016.
This the topic of debate whether the proposed bill harms the constitutional norms.While the notification issued on November 8 specified that after
December 30, 2016, any person unable to exchange or deposit old notes
would be allowed to do so at specified RBI offices, the Bill does not
provide such a facility except in the circumstances discussed above.On may question whether this violates Article 300A of the
Constitution, which states that no person will be deprived of his
property except by law. Though this Bill will be a “law”, one may want
to think about whether its provisions meet the standards of due process
and are not arbitrary.
by Kunj Khandelwal
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