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On November 8th, Mr.Narendra Modi’s Central Government launched a sudden and a historically unprecedented demonetisation of Rs.500/Rs.1000 notes. The preparation until then was said to be fundamentally ‘secretive’ and known to none except the Prime Minister and the Governor of the Reserve Bank. All the ensuing pain, deaths, economic distress, social upheaval and starvation brought about by this demonetisation is claimed to be ‘inevitable’ as the whole operation was meant to be executed secretively and therefore, left very little room for planning.

However, you only have to see the Notification launching this demonetisation; you will realise, shockingly, that the country has been lied to. The Notification says that this demonetisation is to give effect to the recommendation of the Central Board of the Reserve Bank of India. And, as a matter of fact, this Central Board of the Reserve  Bank of India comprises private businessmen from the corporate world!

The November 8th Notification is hosted on the website of the Finance Ministry: http://finmin.nic.in/172521.pdf. This Notification begins with the words:

“Whereas, the Central Board of Directors of the Reserve Bank of India (hereinafter referred to as the Board) has recommended that bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees (hereinafter referred to as specified bank notes) shall be ceased to be legal tender;…”

The bold part speaks of the ‘Central Board of Directors of the Reserve Bank of India’, and the underlined part speaks of the recommendation made by this Board – to demonetise all existing series of notes of Rs.500 and Rs.1000. We could now see who all are part of this Central Board. However, for the legally minded, a paragraph more of information would be helpful.

The November 8th Notification then 1) says that the Central Government is thereby acting on the said recommendation of the said Central Board made under Section 26(2) of the Reserve Bank of India Act, 1934 (‘RBI Act’) and 2) proceeds to demonetise the existing series of Rs.500 and Rs.1000 notes. You could easily guess now that Section 26(2) of the RBI Act 1) authorises the Central Board of the Reserve Bank of India to make a recommendation to the Central Government to demonetise any series of existing notes and, 2) the Central Government is consequently authorised to act on that recommendation. You would be right. This is the very process now adopted by the Central Government and is described in the November 8th Notification.

The Central Board of the Reserve Bank of India (‘RBI’) is constituted under Section 8 of the RBI Act. Full text of the RBI Act – though not updated is still reliable for our purpose - may be found on the website of the RBI at: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf. This Central Board is comprised of 21 individuals of whom 4 are bound to be from the private sector. (Sections 8, 9 and 10 of the RBI Act). The website of the RBI does not list out all of the directors of its Central Board. However, it does list out these private businessmen among the directors of its Central Board (https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2453):

Nachiket M. Mor

Dr.Nachiket M. Mor

The private sector connection or accomplishment of Dr.Nachiket M. Mor is described on the RBI website as:

“He worked with ICICI from 1987 to 2007 and was a member of its Board of Directors from 2001 to 2007. From 2007 to 2011, he served as the founding President of ICICI Foundation and during this period was also the Chair of the Governing Council of IFMR Trust and Board Chair of FINO. He is now the Board Chair of CARE India and, … In the past he has also served as a Board Member of Wipro for five years and Board Chair of the Fixed Income Money Market and Derivatives Association of India for two years.”

The internet search for Dr.Nachiket M Mor shows that he is currently the India Country Director for Bill and Melinda Gates Foundation – a fact also stated on the website of the Bill and Melinda Gates Foundation (http://www.gatesfoundation.org/Where-We-Work/India-Office/).

The next listed director of the Central Board from the private sector is Mr.Natarajan Chandrasekaran.

Natarajan Chandrasekaran

Mr.Natarajan Chandrasekaran

His private sector connection or accomplishment is described on the RBI website as under:

“Shri Natarajan Chandrasekaran has been serving as the CEO and MD of Tata Consultancy Services (TCS). .. Shri Chandrasekaran has over 28 years of experience in global software industry and business operations. He served as the Chairman of NASSCOM, and was the Chairperson of the IT Industry at the World Economic Forum, Davos for 2015-16. He is a member of Indo – US CEO Forum as well as India’s bilateral business taskforces for Australia, UK and Japan. ..”

That is, Mr.Natarajan Chandrasekaran is currently, the CEO and managing director of Tata Consultancy Services, a leading software service company in the private sector and the website of TCS also says so (http://www.tcs.com/investors/corp_governance/Pages/default.aspx).

The next listed director of the Central Board from the private sector is Mr.Bharat Narotam Doshi.

Bharat Narottam Doshi

Mr.Bharat Narotam Doshi: 

His private sector connection or accomplishment is described on the RBI website as:

“Shri Doshi is a former Executive Director and Group CFO of Mahindra & Mahindra Limited. He was also the Chairman of Mahindra & Mahindra Financial Services Limited since April 2008…

He is the Chairman of Mahindra Intertrade Limited.

He is also an Independent Director of Godrej Consumer Products Limited.

Shri Doshi is also on the Governing Board of The Mahindra United World College of India, K.C. Mahindra Education Trust and Mahindra Foundation….

Over the last 35 years, Shri Doshi has been actively involved with the work of chambers of commerce and industry being a member of various expert committees. He served as the President of Bombay Chamber of Commerce and Industry for the year 2009-10.”

Moving further, the Reserve Bank of India General Regulations, 1949 (on the RBI website at: https://www.rbi.org.in/commonman/upload/english/content/pdfs/70981.pdf) specifies that a month’s notice ought to be given to each of the directors of the Central Board to transact any specific business and even when an emergency meeting is to be called at a short notice, each of the director present in India is bound to be informed of the meeting and its agenda. Other provisions of this Regulation would ensure that the four private businessmen in the Central Board are kept in the loop about the urgent business of the Central Board. Thereby, the recommendation made by the Central Board to the Central Government for demonetisation was just not a secret at all as private businessmen were plainly involved in formulating and sending that recommendation to the Central Government. I challenge the Central Government to dispute what I have just said here.

When such participation by private businessmen in the Central Board is statutorily provided for, it is a mystery that Mr.Modi’s Central Government chose to invoke this leaky demonetisation process provided in the RBI Act and still claim that it was all secretively executed. To repeat, there was no legal room at all to exclude such private businessmen from this demonetisation planning – their participation was mandated by the law itself.

At this point, if you assume that the demonetisation provided under the RBI Act is only of the ordinary type such as ‘pre 2005 series Rs.500 notes to be phased out and exchanged at bank counters for the next 3 months’, you would be right. The demonetisation under the RBI Act is good just for that. Can you even imagine bankers and private businessmen forming the Central Board of the Reserve Bank possessing any expertise to recommend and lay down novel procedures to the Central Government to dry out terrorism funding? Incidentally, the 1978 regime apparently knew about the limitations of the demonetisation under the RBI Act and therefore, crafted a very new legislation to impose a different demonetisation.

It is therefore, surprising that the Central Government this time did not even care to take proper note of the 1978 demonetisation. To repeat, the extent of demonetisation now attempted is not supported at all under the RBI Act; even the 1978 demonetisation that was done on a much smaller scale by setting out numerous limitations upon citizens was done through a separate legislation (first through ‘The High Denomination Bank Notes (Demonetisation) Ordinance, 1978 (1 of 1978 )’ and then through, ‘The High Denomination Bank Notes (Demonetisation) Act, 1978’ at: https://indiankanoon.org/doc/1547/).

Specifically, the 1978 demonetisation was brought in independently of what is stated in Section 26 of the RBI Act – (Section 3 of the 1978 Act had said: High denomination bank notes to cease to be legal tender - On the expiry of the 16th day of January, 1978, all high denomination bank notes shall, notwithstanding anything contained in section 26 of the Reserve Bank of India Act, 1934, (2 of 1934) cease to be legal tender in payment or on account at any place.) Strangely this time, Section 26 of the RBI Act that was thought to be highly inadequate as early as 1978 for even that limited demonetisation is the very provision embraced by Mr.Modi’s Central Government to effect a historically unprecedented demonetisation! (November 8th Notification - Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as the said Act), the Central Government hereby declares that the specified bank notes shall cease to be legal tender with effect from the 9th November, 2016 to the extent specified below..).

For these reasons, I have no hesitation in saying that the November 8th Notification is bound to be stayed first and eventually quashed by the Courts. It has no prospect of being upheld by any of our 24 High Courts or the Supreme Court should a proper petition be filed; the present petitions challenging demonetisation are quite disappointing, in my view. The blame for such setback, however, should squarely fall upon none but the Central Government itself for its legally awkward exercise.

The Parliament of India could alone impose all the hardship, suffering and devastation that this demonetisation is imposing upon the people of this country; statutorily conferred or customarily enjoyed rights of the citizens cannot be curtailed otherwise under our written Constitution. However, the Constitution itself allows for an emergent legislation by the Central Government in the form of an ‘Ordinance’. And, a Notification could only put into effect what has already been prescribed by a duly made law – it can never by itself, curtail the rights of citizens. These are ordinary principles of our Constitution and Administrative Law.

What has just been done is a mere notification to wipe out 86% of the cash in circulation among people who constitute 1/5th of humanity during peace-time – by a Government limited by a written and the most voluminous Constitution of the world! The world is on notice.


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  Advocate, Supreme Court

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