CA Priyesh Agrawal
Government of India vide notification 2652 dated November 08, 2016 has withdrawn the “Legal Tender” status of Rs. 500/- &Rs. 1000/- Bank Notes (hereinafter referred as “specified bank notes”) from 09/11/2016. This is the normal understanding of every person. India is standing outside Banks & ATMs for exchanging the cash. Through this article the writer tries to point a certain mistake in the said notification which would have an incurable impact.

Relevant Extracts from said notification.

Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as the said Act), the Central Government hereby declares that the specified bank notes shall cease to be legal tender with effect from the 9th November, 2016 to the extent specified below,namely:—

(1) Every banking company defined under the Banking Regulation Act, 1949 (10 of 1949) and every Government Treasury shall complete and forward a return showing the details of specified bank notes held by it at the close of business as on the 8th November, 2016, not later than 13:00 hours on the 10th November, 2016 to the designated Regional Office of the Reserve Bank of India (hereinafter referred to as the Reserve Bank) in the format specified by it.

 Immediately after forwarding the return referred to in sub-paragraph (1), the specified bank notes shall be remitted to the linked or nearest currency chest, or the branch or office of the Reserve Bank, for credit to their accounts.

(ii) The specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks for a period up to and including the 30th December, 2016, subject to the following conditions,namely:—

(i)………….

(ii)…………..”

In the above extract, the words “ that the specified bank notes shall cease to be legal tender with effect from the 9th November, 2016 to the extent specified below, namely:—”are of relevance for discussion.

The said words under the rule of literal interpretation shall mean that the specified bank notes shall not been used for payment purpose from 09/11/2016 as specified below. However after reading the whole notification I had not found any specified purpose for which Government had restricted the payment through specified bank notes. Instead the Government mentioned the process of exchange and other process for conversion of specified bank notes. Which gives a rise to question that –

“To What Extent the specified bank notes shall not be a legal tender from 09/11/2016?”

The above question is required to answered by the Government. I would also like to bring in light other notification no.2653 dated 08/11/2016, which gives a support to the above question because therein the Government had specifically covered certain payments for which the specified bank notes shall be considered as a legal tender. The relevant extract –

“Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve

Bank of India Act, 1934 (2 of 1934), the Central Government hereby declares that the specified bank notesshall not be ceased to be legal tender, with effect from the 9th November, 2016 until the 11th November,2016, to the extent of transactions specified below, namely:—

(a) for making payments in Government hospitals for medical treatment and pharmacies in Government hospitals for buying medicines with doctor’s prescription;

(b) at railway ticketing counters, ticket counters of Government or Public Sector Undertakings buses and airline ticketing counters at airports for purchase of tickets;

(c) ………..”

When both the notifications are read keeping side by side, the fault in Notification No. 2652 is clear that the Government had not defined the extent of operation of said clause in the notification. Since the extent of operation itself is missing, the writer is of view that the specified bank notes can be used as a legal tender until the Government defines the extent of operation of said clause.

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8 responses to “500/1000 Rs. Bank Notes, Still A Legal Tender?”

  1. k c agarwal says:

    As per notification, note of Rs1000.00 and Rs500.00
    are no legal tender from 9.11.2016, then , how the payment for certain transaction are being allowed from not being legal tender. Whether there is no value of notification

  2. Deepak Dang says:

    I found that a no. of PILs & other petitions are before various honorable HC & SCI along with both notifications of the Government.
    The honorable HC of Calcutta refused to stay its operation but advised to make all arrangements of distribution channels. The same concern is given by honorable SCI & advise to report on 25th of Nov. 2016. Here again, operation is not stayed.
    Both the notifications & further notifications of the Govt. are very clear about exceptions & period. Once a currency note is declared not a “valid legal tender” all transactions are void, which were done against the notifications with subsequent amendments. Therefore it attracts penal provisions as per various laws in force.
    “ALL LAWS HAVE SOME TECHNICAL FLAWS. HONORABLE SCI & HCs EXPLAIN IT IN THE LIGHT OF ITS INTENTION & CLARIFICATION SUBMITTED BY THE GOVT.”

  3. chandel r.s. says:

    So far as filing PIL is concerned, I personally feel that it is premature, unless some case is built, as it is matter of interpretation of law and it requires elaboration.

  4. chandel r.s. says:

    Then what must be the correct language of notification, as per the writer. I agree and think that a phrase ‘for all the purposes except, as mentioned below’ should have been mentioned.

  5. prakaash says:

    I will appreciate if you CA Priyesh could file PIL regarding this “flawed notification” as he calls it. Let the honourable Courts decide.

    Thanks

  6. vswami says:

    OFFHAND
    Conclusion in the write-up that, -“Since the extent of operation itself is missing, the writer is of view that the specified bank notes can be used as a legal tender until the Government defines the extent of operation of said clause.”

    On the first blush, per tentative reading and one’s independent understanding, the writer’s view, – to say the least, -is extremely puzzling/ mind-boggling ! and is quite contrary to what has been the otherwise common understanding of one and all concerned, even remotely.
    Law cum economic experts, at large, with experience and exposure in ‘interpretation’ of, besides any law, a government notification of this kind, for the common good, will require to meticulously go through and enlighten with their well considered views. Particularly on the point of most concern namely, whether at all it could be regarded to be an instance in which the intent of the government is, as of now, not at all clear but is wanting in clarity in any respect.

  7. Kamal Kumar Bandopadhyay says:

    I don’t find any flaw in the notification of the Government. The entire thing has to be examined with the overall aspects and purpose of the Government. The intention of the Govt. is very clear to ensure to receive back the demonetised currency as much as could be. There may be a probability that the common man even after 09th Nov;2016 may use the demonetised money with their own risk for transaction which subsequently attract the Income Tax department due to consequential deposit of the money.

    • Priyesh Agrawal says:

      Sir,
      As per my understanding law having a vauge meaning shall be turned down as void. The notification should have clearly stated that specified bank notes shall cease to be legal tender from…..
      And there after the process for Exchange should have been provided.

      The notification itself is confusing. You are requested to read it in light of earlier law of 1978.

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