Bank Notes of Rs. 500 and 1000 , A Legal Tender
Government of India vides notification 2652 dated November 08, 2016 has withdrawn the “Legal Tender” status of ₹ 500/- & ₹ 1000/- Bank Notes (hereinafter referred as “specified bank notes”) from 09/11/2016. This is the normal understanding of every person. India is standing outside Banks & ATMs for exchanging the cash. Through this article the writer tries to point a certain mistake in the said notification which would have an incurable impact.
Relevant Extracts from said 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, namely:-
Every banking company defined under the Banking Regulation Act, 1949 (10 of 1949) and every Government Treasury shall complete and forward a return showing the details of specified bank notes held by it at the close of business as on the 8th November, 2016, not later than 13:00 hours on the 10th November, 2016 to the designated Regional Office of the Reserve Bank of India (hereinafter referred to as the Reserve Bank) in the format specified by it.
Immediately after forwarding the return referred to in sub-paragraph (1), the specified bank notes shall be remitted to the linked or nearest currency chest, or the branch or office of the Reserve Bank, for credit to their accounts.
The specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks for a period up to and including the 30th December, 2016, subject to the following conditions, namely:-
In the above extract, the words “ that the specified bank notes shall cease to be legal tender with effect from the 9th November, 2016 to the extent specified below, namely:-” are of relevance for discussion.
The said words under the rule of literal interpretation shall mean that the specified bank notes shall not been used for payment purpose from 09/11/2016 as specified below. However after reading the whole notification I had not found any specified purpose for which Government had restricted the payment through specified bank notes. Instead the Government mentioned the process of exchange and other process for conversion of specified bank notes. Which gives a rise to question that –
“To What Extent the specified bank notes shall not be a legal tender from 09/11/2016?”
The above question is required to answered by the Government. I would also like to bring in light other notification no.2653 dated 08/11/2016, which gives a support to the above question because therein the Government had specifically covered certain payments for which the specified bank notes shall be considered as a legal tender. The relevant extract –
“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), the Central Government hereby declares that the specified bank notes shall not be ceased to be legal tender, with effect from the 9th November, 2016 until the 11th November,2016, to the extent of transactions specified below, namely:-
(a) for making payments in Government hospitals for medical treatment and pharmacies in Government
hospitals for buying medicines with doctor’s prescription;
(b) at railway ticketing counters, ticket counters of Government or Public Sector Undertakings buses and
airline ticketing counters at airports for purchase of tickets;
When both the notifications are read keeping side by side, the fault in Notification No. 2652 is clear that the Government had not defined the extent of operation of said clause in the notification. Since the extent of operation itself is missing, the writer is of view that the specified bank notes can be used as a legal tender until the Government defines the extent of operation of said clause.