The Currency Ban Is Not Backed by the Law, Says Indira Jaising

Citing Section 26(2) of RBI Act and the lack of an Ordinance, Jaising has questioned the legality of note ban.

Indira Jaising argues that demonetisation of Rs 500 and Rs 1,000 notes is not entirely legal. (Photo Courtesy: Facebook/Indira Jaising)

Prime Minister Narendra Modi’s decision to ban Rs 500 and Rs 1,000 wasn’t backed by law, writes Indira Jaising in an insightful column published in National Herald. The former Additional Solicitor General of India and senior advocate has questioned the legality of the decision on the basis of the following three points:

1. The RBI Act allows the government to withdraw a ‘series’ of a particular currency, not the entire denomination.

2. By failing to introduce an ordinance or passing a law in Parliament, the government had failed to justify the removal of “movable property”, which in this case are the Rs 500 and Rs 1,000 notes belonging to the citizens.

3. There is no law or rule under the RBI Act which disallows a citizen from accessing his/her taxed money. This is in reference to Rs 2,000 withdrawal limit.

Can Remove a “Series” of Notes, Not the Entire Denomination

Source: National Herald (Photo: The Quint)

Demonetisation of 500 and 1,000 rupee notes by an executive fiat appears to a first of its kind procedure and raises fundamental questions on the authority and jurisdiction of the executive to do what the legislature has not permitted.  

Indira Jaising in the <i>National Herald</i> article

Deprivation of Property Can Only be Done by Law

Jaising also questions the legal authority of demonetisation through Article 300A, which states that “No person can be deprived of his property except by authority of law.”

Source: National Herald (Photo: The Quint)

So, demonetisation implies extinguishing public debt in the hands of someone who has a demonetised note, which cannot be done without the authority of law.

Why Wasn’t an Ordinance Enacted?

Source: National Herald (Photo: The Quint)

Citing the 1978 demonetisation, Jaising asks why the current government did not introduce the note ban through an Ordinance. She argues that one possibility could be the reluctance of the government to debate the issue in Parliament.

(The piece quoted here was originally published in the National Herald on 18 November 2016 and can be accessed here.)