The Gujarat High Court on Tuesday sought replies from the Centre and RBI on a petition challenging the legality of their notifications banning district central co-operative banks (DCCBs) from exchanging defunct notes and disbursing short-term loans to farmers. A division bench of Chief Justice R Subhash Reddy and Justice V M Pancholi today asked the government pleader to seek instructions from the two defendants and posted the matter for further hearing on December 5.
The petitioners, Bhavnagar District Co-operative Bank (BDCB) and its chairman Nanubhai Vanani, also sought quashing of the notification dated November 8 declaring demonetisation of currency notes of Rs 500 and Rs 1,000.
It said RBI notification barring DBBCs from exchanging defunct currency notes and restricting account holders, mainly farmers, from withdrawing cash beyond Rs 10,000 was “without any authority of law.”
Restriction on dispensing short-term loans to farmers has broken their line of finance for raising crops because of which “farmers would be ruined and they would not be able to purchase their seeds, fertilisers, pesticides etc,” it said, claiming that DCCBs should be treated at par with any other banks as per the RBI guidelines.
Petitioner’s lawyer B M Mangukiya also told the court that a close look at sub-section (2) of section 26 of the RBI Act shows that only a certain number of notes of certain series can be demonetised in one go and not the entire stock.
BDCB currently has about 2,55,000 account holders and caters to 825 villages of Bhavnagar, Amreli and Botad districts, with 625 primary cooperative societies dispensing agricultural credits through the bank, it said.
The court, in an oral direction, asked RBI and government counsel to ensure there was enough cash in all banks by December 5 to help people withdraw their salaries.
“The action of the respondents is ex-facie illegal, arbitrary and ultravires in view of the fact that no power has been conferred on the Centre under the provisions of RBI Act. The said actions are illegal, arbitrary, ultravires and violative of articles 14, 19 and 21 of the Constitution of India,” the petitioner’s lawyer said.
The petitioner has also sought high court’s direction to RBI to accept Rs 113 crore in demonetised notes lying in the bank’s chest and replace it immediately with new bills.
Farmers in Gujarat are protesting the RBI ban on DCCBs exchanging or depositing demonetised notes.
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