The Gujarat High Court on Tuesday sought response from the Reserve Bank of India (RBI) and the central government on a petition moved by Bhavnagar District Cooperative Bank challenging the legal validity of demonetising Rs 500 and Rs 1,000 notes and the notification issued by RBI banning district cooperative banks from accepting or exchanging old notes. The cooperative bank has also prayed to allow it to exchange Rs 113 crore lying with it.
The division bench, led by Chief Justice R Subhash Reddy, raised some questions on the issue of farmers who are largely dependent on cooperative banks in the absence of mainstream banking. The petitioner’s lawyer, Babu Mangukia, told the bench that “farmers have been hit hard”.
The bench sought response from Assistant Solicitor General Devang Vyas, stating that if these banks have licences issued by the RBI, how can they be banned from banking. The court ordered Vyas to get the instructions from the central government as well as the apex court on the petition and posted the hearing on December 5. On December 2, the Supreme Court is slated to hear several petitions on demonetisation.
The petition has been moved by Bhavnagar District Cooperative Bank through its chairman Nanubhai Vitthalbhai Vaghani, who has mentioned in the petition that RBI has issued notices to all 18 Gujarat-based District Central Cooperative Banks (DCCBs), asking them not to accept and exchange demonetised notes. The petition prays that RBI be directed “to accept the notes of Rs 113 crore lying collected by the petitioner no.1 bank in their chest with the direction that same may be immediately substituted with new currency notes…”
According to the petition, the cooperative bank operates in Bhavnagar, Amreli, Gadhda and Botad taluka of Botad district. It Gujarat HC seeks RBI, Centre’s response on plea challenging ban on district co-op banks says that the bank is loosing the interest of about Rs 76 crore. “All branches of the petitioner are non-functional. As on today, since there is no currency notes available with the petitioner no.1 bank, no farmers are approaching any of the branches of the petitioner no.1 bank.” It says that 90 branches of the bank are defunct because of demonetisation.
Incidentally, after the division bench, headed by Chief Justice R Subhash Reddy, ordered Assistant Solicitor General Devang Vyas to take instruction from central as well as RBI on the petition, the petitioner’s lawyer B M Mangukia orally told the bench that there was severe cash crunch in the rural area. A bit agitated, Mangukia told the bench, “What kind of demonetisation is this? I can’t withdraw my own deposits. The SBI branch in the High Court premises keep running out of cash.” After hearing this, the Chief Justice, in a lighter vein, pointing at Vyas and remarked, “You make sure that cash is available in the bank for the salary.”