Rs 2,000: RBI doesn’t have power to withdraw banknotes, petitioner tells HC, court reserves verdict

The Reserve Bank of India (RBI) cannot withdraw from circulation or discontinue banknotes and only the central government is vested with such powers, the Delhi High Court was told on Tuesday.

The submission was made by the petitioner Rajneesh Bhaskar Gupta who has filed a public interest litigation (PIL) challenging the RBI’s decision to withdraw Rs 2,000 denomination currency notes from circulation.

A bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad reserved its order on the PIL after hearing the counsel for the petitioner and the RBI.

The petitioner submitted the RBI has no independent power to direct non-issuance or discontinuance of banknotes of any denominational value and this power is vested only with the Centre under section 24 (2) of the RBI Act, 1934.

Senior advocate Sandeep P Agarwal, appearing for Gupta, wanted to know as to how the RBI came to the conclusion that the life span of these notes is only 4-5 years.

“The RBI’s power is restricted only to issue and re-issue banknotes under section 22 and 27 of the RBI Act, but the period for issuing such notes is fixed by the Central government,” the senior counsel argued.

On the high court’s May 29 judgment on a PIL which had challenged the notifications by the RBI and SBI enabling exchange of Rs 2,000 banknotes without a requisition slip and identity proof, Agarwal said that was a completely different issue.

The plea was opposed by the RBI which said it was only withdrawing Rs 2,000 notes from circulation which was a “currency management exercise” and a matter of economic policy.

Senior advocate Parag P Tripathi, representing the RBI, said the high court has already dismissed another PIL on the same circular/ notification, and as per the Supreme Court’s order, a court cannot have serial PILs on the same issue.

On Monday, the high court had dismissed a plea by lawyer Ashwini Kumar Upadhyay which claimed the notifications issued by the RBI and SBI enabling exchange of Rs 2,000 currency notes without proof were arbitrary and against the laws enacted to curb corruption, saying it has been done to avoid inconvenience to citizens and the court cannot sit as an appellate authority on a policy decision.

The high court has maintained it cannot be said that the government's decision is perverse or arbitrary or it encourages black money, money laundering, profiteering or corruption.

The petition stated the RBI notification gave no other reason except “Clean Note Policy” for the “big arbitrary decision of withdrawing the Rs 2,000 denomination banknotes from circulation without analysis of the expected problems of the public at large”.

“RBI has not cleared so far what is the benefit to the RBI or National Economy after withdrawing the denomination Rs 2,000 banknote from circulation, however the hardship to the citizen of the country is very well known and seen during the demonetisation of denomination of Rs 500 and Rs 1,000 in the year 2016 and withdrawal of Rs 2,000 is not much different from previous demonetisation,” the plea said.

On May 19, the RBI had announced withdrawal of Rs 2,000 currency notes from circulation, and said existing notes in circulation can either be deposited in bank accounts or exchanged by September 30.

The bank notes in Rs 2,000 denomination will continue to be a legal tender, the RBI said in a statement.

In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, the RBI has said exchange of Rs 2,000 bank notes for currencies of other denominations can be made up to a limit of Rs 20,000 at a time at any bank starting May 23.

In a communication to chief general manager of all its local head offices, the State Bank of India (SBI) said the facility of exchange of Rs 2,000 notes by public up to a limit of Rs 20,000 at a time will be allowed without obtaining any requisition slip.

"Further, no identity proof is required to be submitted by the tenderer at the time of exchange," the communication dated May 20 said.