The government was well within the constitutional powers vested in it while demonetising old Rs 500 and Rs 1,000 currency notes, the finance ministry said in affidavit filed with the Supreme Court on Thursday.
The apex court is expected to hear a petition on Friday, December 2 on the government's demonetisation drive and the right of citizens to own currency.
The government has cited Section 26 (2) of the RBI Act wherein it can on the recommendation of the central bank board declare that the ‘existing series' of the value of Rs 500 and Rs 1,000 as not being legal tenders from midnight of November 8, 2016.
Section 26 of the Reserve Bank Of India Act reads:
Legal tender character of notes (1) Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in India in payment, or on account for the amount expressed therein, and shall be guaranteed by the Central Government. (2) On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender save at such office or agency of the Bank and to such extent as may be specified in the notification.The government submitted to Supreme Court that in May 2016, the RBI had submitted designs of new series of 500 and 2000 currency notes. It further stated that “The central board of the RBI had recommended Government for the cancellation of the legal tender of Rs 500 and Rs 1000 with effect from the expiry of November 8, 2016.”
Read: Helpless And Cashless In Thane: Workers Suffer As Businesses Struggle On Pay Day
The government has also countered the argument that it is infringing on the right of the public to own money. In the reply filed in the Supreme Court, it said, “There is a clear distinction between the ‘'regulation'' and ‘'deprivation''. In the present case, the public is not ‘'deprived'' from using the money or the value of the legal tender possessed by them. They can still use their money by use of cheques, e-transfer, etc...''
It further added that the certain limits imposed are the reasonable restrictions which have been imposed for the time being in form of limited withdrawal or exchange.
In order to explain its rationale behind introducing Rs 2,000 currency notes, the government cited factors such as the eroding value of money in purchasing power parity (PPP) terms, increase in disposable income and GDP, lower cost of printing of bank notes and ease of carrying cash. The Centre submitted that the present value of Rs 1,000 currency note has eroded by 59.4 percent in PPP terms.
Around 8,000 ATMs are being re-calibrated every day and the government expects 92 percent of all machines to be re-calibrated by the end of December, according to the affidavit.
The government has once again emphasised factors such as curbing terror financing, eliminating black money, and promoting digital payments as the key factors that influenced its decision to demonetise old currency notes.
The Supreme Court is hearing a batch of petitions on the constitutional validity of the government's decision and the inconvenience caused to citizens as a result. The court will also consider the transfer of all petitions on demonetisation, filed in different courts, to one single court.
Read: Tracking The Demonetisation Math
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