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.
