Baffled Over Black Money? Ordinance on Old Notes Won’t Help Either

The ordinance on old notes has ample scope of abuse on the lines of Sec 66A of IT Act, writes Alok Prasanna Kumar.

Possessing more than 10 demonetised Rs 500 and Rs 1,000 notes is now in the league of doing drugs, possessing guns, nuclear weapons, consuming alcohol and beef, as it’s now a punishable offence (or at least after 31 March 2017).

The initial, insane and bizarre proposal of a possible jail term for having such notes has been mercifully junked and the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 only proposes a fine of Rs 10,000 or five times the value of the notes seized, whichever is higher. In a rare concession to hobbyists and researchers, the law allows them to hold 25 such notes for research purposes.

This isn’t the first time that the possession of demonetised notes has been prohibited. The 1978 law, which demonetised Rs 1,000, Rs 5,000 and Rs 10,000 notes, had also prohibited the possession of such notes but did not impose any criminal penalty on anyone in possession of such notes.

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Flip-Flops Continue

Of the many assaults that demonetisation has unleashed on the rule of law and good governance in India, this has to be the most egregious. We’ve had more than 60 notifications issued by the Reserve Bank of India in the 50 days since it’s been announced; the government has gone back on its promise to permit exchanges and to deposit the demonetised notes with no limits up to 30 December.

The incessant flip-flops, the constant changes in rules, applied and followed with no consistency between two bank branches, let alone across the country suggests a fundamental breakdown in governance.

With the Supreme Court having washed its hands off the task of deciding the legality of the whole exercise by referring nine questions to the Constitution bench (which will be constituted long after the questions cease to have any relevance), we have been left at the mercy of whatever an increasingly discredited RBI and Finance Ministry decide to unleash upon us.

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Problem With Ordinance on Old Notes

The fundamental problem with this ordinance though is that it confuses the concept of black money. It conflates black money with cash, making it seem that almost all cash is basically black money – that anyone in possession of more than ten demonetised notes is hoarding black money. Never mind that a law abiding citizen may have obtained these notes lawfully, had paid taxes on her income and intended to use these notes for a purely lawful purpose.

The new ordinance deems her a criminal and imposes a hefty fine on her anyway. If the large bulk of the persons who are affected by the law are not even doing the thing that the law seeks to put an end, you have to question the wisdom of the whole exercise in the first place.

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Draconian Law on the Lines of Section 66A

The potential for misuse of this law is enormous. No obvious procedural safeguards against such abuse have been provided for. More so when the object whose possession has been criminalised was one in wide circulation and can easily be secreted on to another person without her knowledge. Given the state of dysfunction of India’s police forces and judiciary, this ordinance has given unscrupulous officers another law to weaponise for purposes of corruption and extortion.

Like Section 66A of the Information Technology Act, 2000, which was used (and shockingly, continues to be used despite having been struck down by the Supreme Court) as a tool for harassment and intimidation, this too provides ample scope for such abuse.

Why this had to be done is not entirely clear. If the justification offered is that the liabilities of RBI in respect of the demonetised notes need to be extinguished, the same could have been done with a simple amendment to the RBI Act. In fact, the ordinance does as much, but still imposes a criminal liability for possessing the demonetised notes. The question therefore remains unanswered.

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‘Pond Being Drained to Kill the Crocodiles’

In one sense, Sitaram Yechury’s initial analogy to explain demonetisation (first made in a speech in Parliament and now a WhatsApp favourite) – like a pond being drained to kill the crocodiles but killing all the fish in the process – aptly describes this move as well. Intended perhaps to catch those hoarders of unaccounted for cash, it will be used to entrap and punish ordinary citizens.

It is also not clear what was the urgency that required this law to be passed as an ordinance before the budget session was slated to begin in January, much before the operative part of the law comes into effect anyway. If the ordinance fails to get cleared in the Parliament, will it be constantly re-promulgated as the Enemy Property (Amendment and Validation) Ordinance has been?

It is more than mildly disturbing when routine and perfectly harmless acts are criminalised in secret. The confusion over the contents of this ordinance, whether there would be jail terms, when it would take effect, who would be exempt, et al, and the absence of any public discussion on the need and desirability of this law has no place in a country, which claims to be a rule of law abiding constitutional democracy.

(Alok Prasanna Kumar is an advocate based in Bengaluru and can be reached @alokpi. Views expressed here are purely personal and do not reflect the views of any organisation.)

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