Ahmedabad: The Gujarat High Court today asked the RBI and the central government to explain their position on demonetization on a petition filed by a district cooperative bank in the state challenging the decision to ban Rs 500/1000 notes.

The division bench of chief justice R Subhash Reddy and justice V M Pancholi asked the additional solicitor general appearing on behalf of the union government and the counsel of RBI to file their replies on the writ filed by the chairman of the Bhavnagar District Co-operative Bank Ltd, Nanubhai Vaghani who has urged the court to declare the demonetization move as unconstitutional.

The court has fixed December 5, as the next date of hearing.

Mr Vaghani’s counsel B M Mangukiya, who had filed the petition on November 25, today said that the decision to scrap currency notes of Rs500 and Rs1,000 was against the provisions of law.

He pleaded before the court that the government is not vested with the power to demonetize currency notes in the manner it has done earlier this month. It claims that Section 26(2) of the Reserve Bank of India Act does not grant such powers to the government. It can only implement limited demonetization of a particular series of currency notes and that too not without recommendation from the RBI board. He contended that the currency note is a legal tender which bears a sovereign promise by the government to pay back equal amount of money in return of the tender. “Upon recall and invalidation, the government cannot say that it would pay the amount after three months. There cannot be any legal notification with regard to restraining people from withdrawing their own money from banks,” He said.

He also questioned the Centre’s decision to exclude DCCBs from the process of disbursing new currencies and banning them from accepting old currency notes. “When the government has allowed all other banks — the nationalized banks, private banks, urban co-operative banks — to make transactions with their account holders, the ban on DCCBs is a discriminatory treatment and hence in violation of Article 14 of the Constitution,” Magukiya argued and also questioned the various relaxations given to different institutions saying the notes cannot be treated as legal at one place and illegal at the other in the country.

DeshGujarat