When the government declared high-denomination currency notes as not being legal tender in 1978, it did so through an Ordinance.In contrast, the November 8 and subsequent notifications came without any legislative support.
IT IS NOT WITHOUT SIGNIFICANCE THAT NONE of the Central government’s notifications since November 8 relating to the old currency notes of Rs.500 and Rs.1,000 ceasing to be legal tender has used the word “demonetisation” to describe it. The reason perhaps is that calling it so would make it imperative for the government to explain why it did not follow the legal obligations associated with it.
In 1978, when the government declared high-denomination currency notes as not being legal tender, it did so through an Ordinance. The Ordinance, and the Act that replaced it (the High Denomination Bank Notes (Demonetisation) Act, 1978), described it as “demonetisation”. In contrast, the November 8 and subsequent notifications were devoid of legislative support. The absence of legislative backing meant that the government could not declare illegal the transfer and receipt of these high-value currency notes to all entities or persons other than banks as had been prohibited by the 1978 Act. Legally, such a prohibition would require legislative backing in the form of Ordinances or Acts passed by Parliament.
No doubt, the many exceptions the government provided were aimed at easing the inconvenience caused to the public. But the exceptions, according to many reports, also helped legitimise the unaccounted-for money. The 1978 Act had penal provisions, with prison terms extending up to three years or a fine or both, to punish those depositing unaccounted-for currencies by making false declarations. As imposition of prison terms would again require legislative backing, the recent notifications merely impose penalties. The non-recourse to the legislative route to “demonetise”, therefore, raises disturbing questions about the government’s intentions.
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