Thursday 15 December 2016

DEMONITISATION HOW FAR LEGAL

DEMONITISATION HOW FAR LEGAL

Hello to all my readers, today i am writing this blog due to continues queries of my friends, colleagues and students about demonetisation. I am not an economist to review the policy of union government of India so my blog is going to be very different from all that available on online portal. My aim will be to test its legality and its real impact on root level without being biased or politically oriented.
As  we know 8th  November 2016 was termed as surgical strike on black money or we can say the biggest revolutionary step by our  respected Prime Minster and I really congrats him for that but lets us first peep up in to the constitutional validity of this step and then we will see its positive and negative impact. To check the constitutional validity of demonetisation by central government we will try to find the answer of some questions. which are framed by supreme court.
1)      Whether demonetisation notification of November 8 is ultra vires Section 26(2) and other provisions of the RBI Act?
 Section 26 0f RBI Act reads as
“Legal tender character of notes.—
(1) Subject to the provi­sions of sub-section (2), every bank note shall be legal tender at any place in 1[India] in payment, or on account for the amount expressed therein, and shall be guaranteed by the 2[Central Government].
(2) On recommendation of the Central Board the 2[Central Government] may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender 3[save at such office or agency of the Bank and to such extent as may be specified in the notification]”
As we see section 26(2) that central government have authority to demonetise any series of bank notes and cease them to have any legal tender. But the matter of contention is that wither the word “Series of notes”   include “complete currency or it includes only particular series of that currency. 
Indian history has never witnessed such situation ever so finding answer to this question is absolutely a new venture to supreme court. But I will like to keep my view. When ever we make some law there is always some reason behind that. If we study the history of this act than you will  find that aims of legislature  to introduce this act was to have control and maintain economic equality. And section 26(2) was aimed to control the miss use of any type of currency. So I will not be reluctant to apply Purposive rule of interpretation to 26(2) of RBI Act instead of literal interpretation.  Purposive interpretation is the Modern principle  of construction where courts tries to find out the reason for the enactment of the act or which was the mischief that law aims to over throw. So instead of giving literal interpretation to the section26(2) of  RBI Act.I will say the demonetisation is not ultra varies to the RBI Act.
2)      Does Section 26(2) of the RBI Act - under which the November 8 notification was issued - itself suffer from excessive delegation of powers and therefore ultra varies the Constitution?
Too much excessive power to Union Government brings section 26 of RBI Act(here in after section 26) on the scanner  of constitutional validity. Though this question is yet to be decided by honourable supreme court but I will love to Throw some light on this prospective. Interpreting law is the sole duty of hon’ble  supreme court but any law in India drive its power from constitution and any law not in conformity of constitution can be declare void. The limit of legislations are expressly discussed under Article 13, 245 and 246 of Indian Constitution.
 Article 13(1) provides that all laws in force in the territory of India immediately before the commencement of the constitution in so far as they are inconsistent with the provisions of Part III (fundamental rights) shall, to the extent of the contravention, be void. According to article 13(2), the state shall not make any law which takes away or abridges the rights conferred by part III (i.e the Fundamental Rights) and any law made in contravention of this clause shall, to the extent of the contravention, be void. Article 13(3) makes it clear that for this purpose, unless the context otherwise requires , law includes any ordinance, order, by – law, rule, regulation, notification, custom or usage having in the territory of India, the force of law. The legislature, thus, cannot violate the provisions of part III of the constitution granting the fundamental rights. If the parent or enabling Act is violative of the Fundamental Rights granted by part III of the constitution, it will be declared by the court as unconstitutional and void, and the subordinate or delegated legislation made under the act will also be held to be unconstitutional and void .
Article 245 makes it clear that the legislative powers of the parliament and that of the state legislatures are subject to the provisions of the constitution. Parliament may make laws for the whole or any part of the territory of India and the legislatures of a state make laws for the whole or any part of the state. No law made by the parliament shall be deemed to be invalid on the ground that it would have extra territorial operation. The state legislature can make law only for the State concerned and, therefore, the law made by the state legislature having operation outside the state would be invalid . In short, no law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation. However, the law made by the state legislature may be challenged on the ground of extra territorial operation. If the parent act is declared to be unconstitutional, then the delegated legislation made under such act would also be declared to be unconstitutional and thus, void.
Article 246 makes provisions in respect of the distribution of powers between the powers between the Parliament and the State legislatures. From article 246 and the seventh schedule, it becomes clear that the subjects have been divided into three categories – Union list, State list and Concurrent list. Parliament has exclusive power to make laws with respect to any of the matters or subjects enumerated in the Union list and of the legislature of any state has power to make laws for such state or any part thereof with respect to any of the matters or subjects enumerated in the State list. Parliament and State Legislatures both have power to make laws with respect to any of the matters or subjects enumerated in the Concurrent List, but In the case of conflict between the law made by Parliament and a law made by the State Legislature with respect to such matter or subject, the law made by Parliament shall prevail and the laws made by the State Legislature, to the extent of repugnancy. be void, unless the law made by the State Legislature has received the assent of the President.  
Section 26(2) fall in to the test of Article 13 that is wither giving excessive power to central government violets the basic structure of our constitution and take away the fundamental rights of Indians if I put it on the test of Article 19 than though it appears to be  unconstitutional at first instance but as article 19 itself is subject to matters in interest of public. As union government stating from very first day that they are doing in public interest so we can say that this law as such is not ultra varies to Indian constitution but  so much of public inconvenience  come in to the definition of public interest as per Article 19 is the question that Supreme court have to see.




3)      Whether restriction on withdrawal of legitimate funds is violative of Article 14 and 19 of the Constitution?
Prime minister announces the demonetisation of 8th November 2016 in order to curb black money and stop extra territorial terrorism problem in India. But since then justifications are changed, now it is to make India “cash less” society. The chaotic effect of demonetisation can be  seen behind out of banks and ATM’s. So many of them has lost their lives    jus in order to withdraws there legitimate funds. Prime minister rhetorically argues that poor are going to sleep and rich are going to spend sleepless night. The result can very well be seen how many rich people have you seen outside the banks, I am not saying that they were having black money. My question is, Are they not having any hard cash with them to exchange or submit. Does India already developed to that extend? If yes, than it is the discrimination made by   central government under Article 14. No doubt rule of law prevails but it should not be arbitrary. Discriminating between rich and poor is really unconstitutional. Than another argument i favour can be  that  the notification applies to all  equally and hence does fall in category of class discrimination. Yes, absolutely right but if I say it the example of colourable legislation apparently you find it that it applies on all but in realty it does not. And colourable legislation is not allowed.
Again forcing individuals not to withdraw  more than 2500/= rupees and cannot submit more than particular amount is bad example of reasonable restriction and this cannot be allowed. Than argument in favour of this can be that Article 19 provides restriction on the basis of public interest than we should keep in mind that supreme court has made clear in its so many judgements that no restriction can be read in isolation and even restriction in public interest have to pass the test of reasonableness.
From the above discussion I can conclude that restricting people to withdraw their legitimate money is voliative of Article 19 and Article 14 and hence unconstitutional.
4)      Whether November 8 notification and subsequent ones are in violation of Article 300A (right to property) of the Constitution?
Right to property was the fundamental right and which later converted in to constitutional right with 44th amendment and incorporated in form of Article 300A. Money is the property and fall in to the definition of Article 300A. Language of Article 300A is  that no person can be deprived of his property without the “Authority of law”. So the question in discussion is what the Authority of law  is for Article 300A.The term ‘law’ as defined in Article 300A is understood to mean only a legislation or a statutory rule or order. The term ‘law’ as understood by Article 300A will not include executive fiats(K.T. Plantation Pvt. Ltd. & Anr vs State Of Karnataka on  2011 SC).. The source of the ‘law’ depriving a person of his property has to be necessarily traced, through a statute, to the legislature. The question therefore is whether the relevant notification of central government ‘law’ for the purpose of Article 300A or whether the same would be struck down as having no basis in the Act. As it is very much cleared by Supreme Court that mere executive fiats cannot be authority of law for the purpose of Article 300A and hence mere notification of central government not qualified to be authority of law. The argument in favor of the government may be that Section 26(2) RBI give authority to central government for demonetisation and hence notification of demonetisation will fall within the meaning of law for aforesaid Article. Than answer to the raised question is that every law is subject to Article 21 and each law before coming in to existence have to fallow the due process of law. Due process of law for deprivation of property is law by parliament and hence notification of demonetisation fringed the basic feature of Indian Constitution and hence liable to be held unconstitutional.

Above discussed questions are my personal views and these questions are yet to be decided by Supreme Court. 

But from the aforesaid unbiased discussion we can say that central government act of demonetisation does not qualifies the constitutional validity and hence liable to be sat as side. Apart from this consistent rollback of the government is also the matter of great concerned. When Mr. Modi announces the demonetisation it says that exchange will be done till 30th December 2016 and notification still contain same date but government through various advertisement keep on changing dates. This act raised the serious question on ethical and moral behavior of the government. Legally such action of government can be challenged as violation of Doctrine of Legitimate expectation.


I will try to bring positive and negative social impact of demonetisation in my next blog.

Hope you people like this blog. Do not forget to leave your comments that gave me courage to write   better and unbiased blog every time.