Was cash policy done on impulse, was mind applied? SC asks Centre

It further asked if the government had any estimate of the “gestation period” after which the problems of liquidity will be resolved.

Written by Utkarsh Anand | New Delhi | Updated: December 10, 2016 2:27 am
Supreme Court on Thursday early morning. Express Photo by Amit Mehra. 30.07.2015. It further asked if the government had any estimate of the “gestation period” after which the problems of liquidity will be resolved. Express Photo by Amit Mehra

Asking whether “minds were applied” or was demonetisation the result of an “impulse”, the Supreme Court said Friday that the policy has “shaken up the whole country” and that the central government will have to do its best to address the inconvenience caused to people.

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A bench led by Chief Justice of India T S Thakur also sought to know the factors considered by the government before demonetising old Rs 500 and Rs 1,000 notes, including estimates prepared to replace old currency, and preparations to deal with hardships of the common man.

As Attorney General Mukul Rohatgi refuted contentions over deaths of people standing in queues for withdrawing money or over the lack of new currency, the bench asked: “When you framed this policy, was any mind applied? How much money will come in and how you will deal with it? How much you will reprint? Did you have all the information? Was there a plan or was it brought in an impulse?”

It further asked if the government had any estimate of the “gestation period” after which the problems of liquidity will be resolved.

“Do you have anything on record to show what were your expectations… as to what you sought to achieve… any estimate? How much is the inflow of new currency? And the requisition? Did you have any idea of the gestation period? There has to be some estimate,” said the bench, also comprising Justices A M Khanwilkar and D Y Chandrachud.

It also asked why banks should refuse to disburse Rs 24,000 to an account-holder when the government has fixed this as the weekly withdrawal limit.

“We will assume that when you fixed this at Rs 24,000, you knew you were capable of distributing this much of money. Now, how can you not keep this promise? If an account-holder has a legitimate right to withdraw Rs 24,000, banks should not decline it. Was it not as per your estimate?” the court asked the AG.

Rohatgi responded that there were certainly some “teething troubles” but the government was taking steps to reduce the inconvenience to people.

“Eighty-six per cent of cash was in Rs 500, Rs 1,000 notes. We could not have replaced them with new currency since that would have let the cat out of the bag. The decision had to have some inconvenience to people but the government is not sitting idle, doing nothing. We have been issuing notifications to reduce the inconvenience,” he said.

Responding to a query from the bench, Rohatgi said the government had initially expected deposits to the tune of Rs 10-11 lakh crore but around Rs 12 lakh crore had already come in.

But Rohatgi opposed any court order on fixing a minimum amount a bank must give to customers and on allowing district cooperative banks to accept deposits after certain checks. “These are all in realm of fiscal policy. Will this court decide all matters of fiscal policies? This is one issue where issues of judicial review will arise,” said the AG.

At this, the bench said: “You have shaken up the entire country… so now you must be able to ensure inconvenience of the people is reduced.”

Representing a bunch of petitioners, senior lawyers Kapil Sibal, P Chidambaram, Salman Khurshid and Sanjay Hegde sought to highlight that while Rs 12 lakh crore has been taken out from the economy, only a little over Rs 3 lakh crore of new currency has been pumped in.

“They will not be able to replace note for note before six months,” said Chidambaram, while seeking a directive to ensure non-discriminatory cash flow across banks.

The lawyers also raised the issue of putting “unreasonable” restrictions on cooperative banks by not letting them either exchange the currency or accept new deposits.

But Rohatgi said that there were serious apprehensions regarding the source of money deposited in these banks by societies, which may have thousands of individuals who have not complied with KYC norms.

The bench then asked the AG to examine both aspects: mitigating inconvenience of people by letting them withdraw a fixed minimum amount, and devising a procedure to “intelligently regulate” transactions by district cooperative societies.

It fixed the matter for hearing again on December 14, when it is likely to frame the issues for consideration, including questions on the validity of notifications; authority of RBI and the government in imposing restrictions of withdrawals; substantive and procedural unreasonableness of policy decisions; and, violation of fundamental rights.

Towards the end of the proceedings, Hegde said there were reports that 91 people have lost their lives because of the demonetisation policy. Rohatgi cut him short, and said: “Not because they did not have money or food to eat. These are political overtones.”