VIVEK NARAYAN SHARMA Vs. UNION OF INDIA
Section 19 - Protection of certain rights regarding freedom of speech etc
Supreme Court of India (Full Bench (FB)- Three Judge)
Writ Petition (Civil), 906 of 2016, Judgment Date: Dec 16, 2016
Whether the notification dated 8th November 2016 is ultra vires Section
26(2) and Sections 7,17,23,24,29 and 42 of the Reserve Bank of India Act,
1934;
Does the notification contravene the provisions of Article 300(A) of the
Constitution;
Assuming that the notification has been validly issued under the Reserve
Bank of India Act, 1934 whether it is ultra vires Articles 14 and 19 of the
Constitution;
Whether the limit on withdrawal of cash from the funds deposited in bank
accounts has no basis in law and violates Articles 14,19 and 21;
Whether the implementation of the impugned notification(s) suffers from
procedural and/or substantive unreasonableness and thereby violates
Articles 14 and 19 and, if so, to what effect?
In the event that Section 26(2) is held to permit demonetization, does it
suffer from excessive delegation of legislative power thereby rendering it
ultra vires the Constitution;
What is the scope of judicial review in matters relating to fiscal and
economic policy of the Government;
Whether a petition by a political party on the issues raised is
maintainable under Article 32; and
Whether District Co-operative Banks have been discriminated against by
excluding them from accepting deposits and exchanging demonetized notes.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL/CRIMINAL ORIGINAL/APPELLATE JURISDICTION
WRIT PETITION (CIVIL) No.906/2016
Vivek Narayan Sharma …Petitioner(s)
Vs.
Union of India Respondent(s)
WITH
W.P.(C) Nos.908/2016,913/2016,916/2016,
WP© D.No.37946/2016, W.P.(C) No.929/2016, W.P.(C)No.930/2016,
943/2016,W.P.(Crl.) No.162/2016, W.P.(C)
No.951/2016,952/2016,953/2016,954/2016,958/2016,957/2016,T.P.(C)No.2018-
2022/2016,W.P.(C)No.971/2016,972/2016, SLP© No.35356/2016, T.P.(C)No.2030-
2038/2016, W.P.(C)No.978/2016, W.P.(C)D.No.40114/2016,W.P.(C) No.944/2016,
SLP©No.35805/2016,W.P.(C)No.996/2016,997/2016,
T.P.(C)No.1958-1967/2016 & T.P.(C)No.1982-1996/2016, W.P.(C) Nos.
1006/2016, 1008/2016, 1009/2016, 1010/2016, 1011/2016 and SLP(C) No.
36757/2016
O R D E R
Writ Petitions are admitted.
Issue notice on the Writ Petitions, special leave petitions and other
applications. The respondents may file reply affidavit within six weeks.
Rejoinder, if any, within three weeks thereafter.
We have heard the learned counsel for the parties at some length. In our
opinion, the following important questions fall for our consideration in
this batch of petitions:
Whether the notification dated 8th November 2016 is ultra vires Section
26(2) and Sections 7,17,23,24,29 and 42 of the Reserve Bank of India Act,
1934;
Does the notification contravene the provisions of Article 300(A) of the
Constitution;
Assuming that the notification has been validly issued under the Reserve
Bank of India Act, 1934 whether it is ultra vires Articles 14 and 19 of the
Constitution;
Whether the limit on withdrawal of cash from the funds deposited in bank
accounts has no basis in law and violates Articles 14,19 and 21;
Whether the implementation of the impugned notification(s) suffers from
procedural and/or substantive unreasonableness and thereby violates
Articles 14 and 19 and, if so, to what effect?
In the event that Section 26(2) is held to permit demonetization, does it
suffer from excessive delegation of legislative power thereby rendering it
ultra vires the Constitution;
What is the scope of judicial review in matters relating to fiscal and
economic policy of the Government;
Whether a petition by a political party on the issues raised is
maintainable under Article 32; and
Whether District Co-operative Banks have been discriminated against by
excluding them from accepting deposits and exchanging demonetized notes.
Keeping in view the general public importance and the far reaching
implications which the answers to the questions may have, we consider it
proper to direct that the matters be placed before the larger Bench of five
Judges for an authoritative pronouncement. The Registry shall
accordingly place the papers before Hon’ble the Chief Justice for
constituting an appropriate Bench.
We may now advert to the issues which are of immediate concern. The
first issue is about the restriction placed on the District Cooperative
Banks to accept deposits or exchange of demonetized currency of Rs.500/-
and Rs.1000/-. Two broad aspects have been presented before us. The first
is about the complete exclusion of the District Cooperative Banks from
accepting deposits or exchanging demonetized notes. The second is about the
avoidable financial stress on the District Cooperative Banks because of
freezing the deposited demonetized notes received by the District
Cooperative Banks between 11th and 14th November 2016, which is stated to
be around Rs.8000/-Crore (Rupees Eight Thousand Crore).
The first point whether the decision of the Authority to forbid the
District Cooperative Banks from accepting deposits and exchanging
demonetized notes, may require detailed hearing. It is only upon acceptance
of challenge to that decision, that the bar placed on the District
Cooperative Banks can be lifted. We are not inclined to suspend that bar as
an interim measure. This is especially when the decision is the outcome of
financial policy which the respondents claim to have adopted on the basis
of experience. In particular, an apprehension has been expressed about the
possibility of demonetized notes being converted or exchanged without
proper audit, control or supervision. The District Cooperative Banks, it
has been urged, are not directly under the control of the Reserve Bank of
India but within the purview of NABARD. The dispensation provided by NABARD
is, according to the Attorney General, not in conformity with the strict
regime provided under the provisions of Banking Regulation Act, 1949 and
the Reserve Bank of India Act, 1934.
Reverting to the second aspect, of District Cooperative Banks being
precluded from utilizing the demonetized notes deposited with them between
11th to 14th November 2016 (when it was so permitted by the Reserve bank of
India), the learned Attorney General has invited our attention to the
written instructions received by him from the Under Secretary to the
Government of India dated 14th December 2016. The relevant extract of the
said letter reads thus:
“In this regard, it is to inform that as regards the deposits of
Specified Bank Notes (SBNs) collected by DCCBs, the RBI has recommended
that the SBNs collected by the DCCBs between 10th and 14th November 2016
may be exchanged with their linked currency chests after a 100% audit of
the veracity of the KYC documents of the SBN depositing customers of DCCB
is conducted by NABARD, the supervisor and to the extent of such verified
SBNs only. For SBNs deposited by Primary Agricultural Credit Societies
(PACS) also, similar 100% audit of the KYC documents of the members of the
PACS should be conducted by NABARD and to the extent of such verified SBNs
only, exchange value will be given by the linked currency chest. In either
case, the linked currency chest will subject those SBNs to usual checks,
especially relating to finding out FICN.”
For that purpose, suitable Notification can be issued by the Competent
Authority within two days. We commend to the Competent Authority to do so.
Learned counsel for the District Cooperative Banks, however, submitted that
the Reserve Bank of India must assure that the entire amount offered by the
District Cooperative Banks for exchange after due verification in the form
of demonetized notes, will be duly replaced by commensurate amount of legal
tender notes contemporaneously. The learned Attorney General on
instructions submitted that the policy of replacement of legal tender notes
as applicable to Public Sector Banks and other Banks will be applied even
in the case of District Cooperative Banks for exchange of demonetized
currency with the legal tender currency. We accept the assurance given by
the learned Attorney General in this behalf.
The other broad point was about extending the time limit for
exemption for use of demonetized currency notes of Rs.500/- and Rs.1000/-
at specified counters as per the relevant Notifications issued in that
behalf by the Reserve Bank of India. It was contended that the exemption
period provided in the concerned notification is expiring. Hence, it will
not be possible to deposit the demonetized notes at specified counters
thereafter, even in case of emergency situation like hospitalization,
travel by Railway or Air etc. In our opinion, whether the exemption period
should be extended or not must be best left to the judgment of the
Government of the day with a hope that the Government will be responsive
and sensitive to the problems encountered by the common man. Accordingly,
we decline to issue any interim direction to the Government in the matter
of extending the period of exemption and leave it open to the Government to
take appropriate decision in that behalf, as may be advised.
The other serious grievance made by the petitioners is about the
denial of right to withdraw the prescribed amount of Rs.24,000/- per week
per account holder, in spite of Notification issued by the Reserve Bank of
India permitting such withdrawal. It was submitted that if the Government
has issued such Notification after due consideration, it is obliged to
ensure that its commitment made under the said Notification is implemented
without any exception. The ground reality, however, contends learned
counsel, is that the Banks are refusing to pay full amount of Rs.24,000/-
per account holder per week on the ground of non-availability of enough
volume of legal tender currency. According to the learned Attorney General,
the Government has already made it amply clear that it would take around 50
days time to streamline the cash flow. That period is still not exhausted.
He submits that as of now the Reserve Bank of India has been able to infuse
around Rs.5,00,000/-Crore (Five Lakh Crore) of the new legal tender notes
in the form of Rs.500/- and Rs.2,000/-. That is almost over 40% of the
amount of demonetized notes already deposited with the Banks. Further, the
Authorities are working to the best of their ability to defuse the crisis
of cash flow situation by printing new notes. It is further submitted that
for the nature of decision taken by the Government - to unearth the black
money or unaccounted money and to dry up the terror fund and defeat the
attempt of circulation of large scale counterfeit currency, maintaining
complete secrecy of such a decision was imperative. For that reason, new
currency notes could not be printed well in advance. He submits that the
old demonetized notes will be replaced by new legal tender notes in the
form of Rs.500/- and Rs.2000/- progressively in right earnest. Considering
the stand taken by the learned Attorney General, we may commend to the
Authorities to fulfill their commitment made in terms of the stated
Notification permitting withdrawal of Rs.24,000/- per account holder of the
Bank per week to the extent possible and review that decision periodically
and take necessary corrective measures in that behalf.
In our opinion, besides the observations made hitherto, no other
direction can be given at this stage by way of an interim relief.
That takes us to the Transfer Petitions filed by the Union of India
for withdrawing all Writ Petitions/proceedings pending in the various High
Courts across the country and to hear those cases along with the Writ
Petitions pending in this Court. In our opinion, it would be just and
proper to withdraw all the Writ Petitions/proceedings pending in different
High Courts across the country and to be heard by this Court along with the
Writ Petitions which are already pending in this Court raising same or
similar issues, to avoid multiplicity of hearing and conflicting decisions
on the same subject matter. Accordingly, we issue notice in the respective
Transfer Petitions and by way of interim direction, stay the further
proceedings of the Writ Petitions/proceedings in the concerned High Court.
We further direct that if any
other Writ Petitions/proceedings are pending in any High Court, further
hearing of those matters shall also remain stayed in terms of this order.
We further direct that no other Court shall entertain,
hear or decide any Writ Petition/proceedings on the issue or in relation to
or arising from the decision of the Government of India to demonetize the
old notes of Rs.500/- and Rs.1000/-, as the entire issue in relation
thereto is pending consideration before this Court in the present
proceedings.
We make it clear that petitioners before the High Court(s) or any
other Court in India in respect of proceedings already instituted on the
subject matter under consideration before this Court, will be free to
intervene in the Writ Petitions pending consideration before this Court on
the subject matter of demonetization of old currency notes of Rs.500/- and
Rs.1000/-, if so advised.
The Registry shall place the matter before the Chief Justice for further
orders.
…………………………….CJI.
………………………………..J.
(A.M.Khanwilkar)
…………………………………J.
(Dr.D.Y.Chandrachud)
New Delhi,
Dated: 16th December, 2016
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