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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL/CRIMINAL ORIGINAL/APPELLATE JURISDICTION

WRIT PETITION (CIVIL) No.906/2016

Vivek Narayan Sharma …Petitioner(s)

Vs.

Union of India Respondent(s)

WITH W.P.(C) Nos.908/2016,913/2016,916/2016,

WP© D.No.37946/2016, W.P.(C) No.929/2016, W.P. (C)No.930/2016, 943/2016,W.P.(Crl.) No.162/2016, W.P.(C)

No.951/2016,952/2016,953/2016,954/2016,958/2016,957/2016, T.P.(C)No.2018-2022/2016,W.P.(C)No.971/2016,972/2016, SLP©

No.35356/2016,  T.P.(C)No.2030-2038/2016, W.P.(C)No.978/2016, W.P.(C)D.No.40114/2016,W.P.(C) No.944/2016,

SLP©No.35805/2016,W.P.(C)No.996/2016,997/2016, T.P.(C)No.1958-1967/2016  &  T.P.(C)No.1982-1996/2016,  W.P.(C) Nos. 1006/2016, 1008/2016, 1009/2016, 1010/2016, 1011/2016 and SLP(C) No. 36757/2016

O R D E R

Writ Petitions are admitted.  

Issue notice on the Writ Petitions, special leave petitions and

other applications. The respondents may file reply affidavit within

six weeks. Rejoinder, if any, within three weeks thereafter.

We have heard the learned counsel  for  the parties  at  some

length. In our opinion, the following important questions fall for our

consideration in this batch of petitions:

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(i) Whether the notification dated 8th November 2016 is ultra vires Section 26(2) and Sections 7,17,23,24,29 and 42 of the Reserve Bank of India Act, 1934;

(ii) Does the notification contravene the provisions of Article 300(A) of the Constitution;

(iii) Assuming that  the notification has been validly  issued under the Reserve Bank of India Act, 1934 whether it is ultra vires Articles 14 and 19 of the Constitution;

(iv) Whether the limit on withdrawal of cash from the funds deposited  in  bank  accounts  has  no  basis  in  law  and violates Articles 14,19 and 21;

(v) Whether  the  implementation  of  the  impugned notification(s) suffers from procedural and/or substantive unreasonableness  and thereby violates  Articles  14 and 19 and, if so, to what effect?

(vi) In  the  event  that  Section  26(2)  is  held  to  permit demonetization, does it suffer from excessive delegation of  legislative  power thereby rendering it  ultra vires the Constitution;

(vii) What is the scope of judicial review in matters relating to fiscal and economic policy of the Government;

(viii) Whether  a  petition  by  a  political  party  on  the  issues raised is maintainable under Article 32; and

(ix) Whether  District  Co-operative  Banks  have  been discriminated against by excluding them from accepting deposits and exchanging demonetized notes.

Keeping  in  view  the  general  public  importance  and  the  far

reaching  implications  which  the  answers  to  the  questions  may

have,  we consider it  proper  to direct that  the matters  be placed

before  the  larger  Bench  of  five  Judges  for  an  authoritative

pronouncement.   The Registry shall accordingly place the papers

before  Hon’ble  the  Chief  Justice  for  constituting  an  appropriate

Bench.

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We may  now  advert  to  the  issues  which  are  of  immediate

concern.  The  first  issue  is  about  the  restriction  placed  on  the

District  Cooperative  Banks  to  accept  deposits  or  exchange  of

demonetized  currency  of  Rs.500/-  and  Rs.1000/-.  Two  broad

aspects  have  been  presented  before  us.  The  first  is  about  the

complete exclusion of the District Cooperative Banks from accepting

deposits or exchanging demonetized notes. The second is about the

avoidable  financial  stress  on  the  District  Cooperative  Banks

because of freezing the deposited demonetized notes received by the

District Cooperative Banks between 11th and 14th November 2016,

which  is  stated  to  be  around  Rs.8000/-Crore  (Rupees  Eight

Thousand Crore).  

The first point whether the decision of the Authority to forbid

the  District  Cooperative  Banks  from  accepting  deposits  and

exchanging demonetized notes, may require detailed hearing. It is

only  upon acceptance of  challenge to that  decision,  that  the bar

placed on the District Cooperative Banks can be lifted. We are not

inclined  to  suspend  that  bar  as  an  interim  measure.   This  is

especially  when  the  decision  is  the  outcome  of  financial  policy

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which  the  respondents  claim  to  have  adopted  on  the  basis  of

experience.   In  particular,  an  apprehension  has  been  expressed

about  the  possibility  of  demonetized  notes  being  converted  or

exchanged  without  proper  audit,  control  or  supervision.   The

District  Cooperative  Banks,  it  has  been  urged,  are  not  directly

under  the  control  of  the  Reserve  Bank  of  India  but  within  the

purview  of  NABARD.  The  dispensation  provided  by  NABARD is,

according to the Attorney General, not in conformity with the strict

regime provided under the provisions of  Banking Regulation Act,

1949 and the Reserve Bank of India Act, 1934.

Reverting to the second aspect, of District Cooperative Banks

being precluded from utilizing the demonetized notes deposited with

them between 11th to 14th November 2016 (when it was so permitted

by the Reserve bank of  India),  the learned Attorney General  has

invited  our  attention to  the  written instructions  received by him

from the Under Secretary to the Government of  India dated 14th

December 2016.  The relevant extract of the said letter reads thus:  

   “In this regard, it is to inform that as regards

the  deposits  of  Specified  Bank  Notes  (SBNs)

collected by DCCBs, the RBI has recommended

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that the SBNs collected by the DCCBs between

10th and 14th November 2016 may be exchanged

with their linked currency chests after a 100%

audit of the veracity of the KYC documents of

the  SBN  depositing  customers  of  DCCB  is

conducted by NABARD, the supervisor and to

the  extent  of  such  verified  SBNs  only.   For

SBNs deposited by Primary Agricultural Credit

Societies (PACS) also, similar 100% audit of the

KYC documents of  the members of  the PACS

should  be conducted by  NABARD and to  the

extent  of  such  verified  SBNs  only,  exchange

value  will  be  given  by  the  linked  currency

chest.  In either case, the linked currency chest

will  subject  those  SBNs  to  usual  checks,

especially relating to finding out FICN.”  

For  that  purpose,  suitable  Notification  can  be  issued  by  the

Competent  Authority  within  two  days.  We  commend  to  the

Competent Authority to do so.   

Learned counsel for the District Cooperative Banks, however,

submitted that  the  Reserve  Bank of  India  must  assure  that  the

entire  amount  offered  by  the  District  Cooperative  Banks  for

exchange after due verification in the form of demonetized notes,

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will be duly replaced by commensurate amount of legal tender notes

contemporaneously. The learned Attorney General on instructions

submitted that the policy of replacement of legal tender notes as

applicable to Public Sector Banks and other Banks will be applied

even  in  the  case  of  District  Cooperative  Banks  for  exchange  of

demonetized currency with the legal tender currency. We accept the

assurance given by the learned Attorney General in this behalf.

The other broad point was about extending the time limit for

exemption for use of demonetized currency notes of Rs.500/- and

Rs.1000/-  at  specified  counters  as  per  the  relevant  Notifications

issued in that behalf by the Reserve Bank of India. It was contended

that the exemption period provided in the concerned notification is

expiring.  Hence, it will not be possible to deposit the demonetized

notes at specified counters thereafter,  even in case of  emergency

situation like hospitalization,  travel by Railway or Air etc.  In our

opinion, whether the exemption period should be extended or not

must be best left to the judgment of the Government of the day with

a hope that the Government will be responsive and sensitive to the

problems encountered by the common man. Accordingly, we decline

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to issue any interim direction to the Government in the matter of

extending  the  period  of  exemption  and  leave  it  open  to  the

Government to take appropriate decision in that behalf, as may be

advised.

The other serious grievance made by the petitioners is about

the  denial  of  right  to  withdraw  the  prescribed  amount  of

Rs.24,000/- per week per account holder, in spite of  Notification

issued by the Reserve Bank of India permitting such withdrawal. It

was submitted that if the Government has issued such Notification

after due consideration, it is obliged to ensure that its commitment

made  under  the  said  Notification  is  implemented  without  any

exception. The ground reality, however, contends learned counsel,

is that the Banks are refusing to pay full amount of Rs.24,000/- per

account  holder  per  week  on  the  ground  of  non-availability  of

enough volume of legal tender currency. According to the learned

Attorney General, the Government has already made it amply clear

that it would take around 50 days time to streamline the cash flow.

That period is still not exhausted. He submits that as of now the

Reserve  Bank  of  India  has  been  able  to  infuse  around

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Rs.5,00,000/-Crore (Five Lakh Crore) of the new legal tender notes

in the form of Rs.500/- and Rs.2,000/-. That is almost over 40% of

the amount of demonetized notes already deposited with the Banks.

Further, the Authorities are working to the best of their ability to

defuse the crisis of cash flow situation by printing new notes. It is

further  submitted  that  for  the  nature  of  decision  taken  by  the

Government -  to unearth the black money or unaccounted money

and to dry up the terror fund and defeat the attempt of circulation

of large scale counterfeit  currency, maintaining complete secrecy of

such  a  decision  was  imperative.  For  that  reason,  new  currency

notes could not be printed well in advance. He submits that the old

demonetized notes will be replaced by new legal tender notes in the

form  of  Rs.500/-  and  Rs.2000/-  progressively  in  right  earnest.

Considering the stand taken by the learned Attorney General, we

may commend to the Authorities to fulfill their commitment made

in  terms  of  the  stated  Notification  permitting  withdrawal  of

Rs.24,000/- per account holder of the Bank per week to the extent

possible and review that decision periodically and take necessary

corrective measures in that behalf.

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In  our  opinion,  besides  the  observations  made  hitherto,  no

other direction can be given at this stage by way of an interim relief.

That takes us to the Transfer Petitions filed by the Union of

India for withdrawing all Writ Petitions/proceedings pending in the

various High Courts across the country and to hear those cases

along with the Writ Petitions pending in this Court. In our opinion,

it  would  be  just  and  proper  to  withdraw  all  the  Writ

Petitions/proceedings pending in different High Courts across the

country and to be heard by this Court along with the Writ Petitions

which are already pending in this  Court  raising same or similar

issues, to avoid multiplicity of hearing and conflicting decisions on

the  same  subject  matter.  Accordingly,  we  issue  notice  in  the

respective Transfer Petitions and by way of interim direction, stay

the  further  proceedings  of  the  Writ  Petitions/proceedings  in  the

concerned High Court.  

We further direct that if any other Writ Petitions/proceedings

are pending in any High Court,  further hearing of  those matters

shall also remain stayed in terms of this order.  

We further direct that no other Court shall entertain, hear or

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decide any Writ Petition/proceedings on the issue or in relation to

or  arising  from  the  decision  of  the  Government  of  India  to

demonetize the old notes of Rs.500/- and Rs.1000/-, as the entire

issue in relation thereto is pending consideration before this Court

in the present proceedings.   

We make it clear that petitioners before the High Court(s) or

any other Court in India in respect of proceedings already instituted

on the subject matter under consideration before this Court, will be

free to intervene in the Writ Petitions pending consideration before

this Court on the subject matter of demonetization of old currency

notes of Rs.500/- and Rs.1000/-, if so advised.

The Registry shall place the matter before the Chief Justice

for further orders.

…………………………….CJI.

………………………………..J. (A.M.Khanwilkar)

…………………………………J. (Dr.D.Y.Chandrachud)

New Delhi,         Dated: 16th December, 2016