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Somi Horam Tongkhul Naga Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
Subject;Banking
CourtGuwahati High Court
Decided On
Case NumberCivil Rule No. 104 of 1980
Judge
ActsReserve Bank of India Act, 1934 - Sections 22, 23, 24, 26 and 39; High Denomination Bank Notes (Demonetisation) Act, 1978 - Sections 8; Constitution of India - Articles 19 and 226
AppellantSomi Horam Tongkhul Naga
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateR.K. Manisena Singh, Adv. General
Respondent AdvocateM.A. Laskar, Standing Counsel
DispositionPetition dismissed
Excerpt:
.....facts of the case. section 22 of the act provides that the bank shall have the sole right to issue bank notes in india and it may for a period which shall be fixed by the central government on the recommendation of the central board, issue currency notes of the government of india, supplied to it by the central government and the provisions of the act applicable to bank notes shall, unless contrary intention appears, apply to all currency notes of the government of india issued either by the central government or by the bank in like manner as if such currency notes were bank notes, and references in the act to bank notes shall be construed accordingly. 1978, to other with a statement explaining the reasons for his failure to apply within the said time limit: 1978, along with a statement..........above contentions have to be considered in the light of the provisions of the high denomination banknotes (demonetisation) act, 1978 under which demonetisation was made, as also of the provisions of the reserve bank of india act 1934 which empowers the reserve bank of india to issue the bank notes and imposes the obligation upon it to exchange the notes. 5. the reserve bank of india has been constituted to regulate the issue of bank notes and the keeping of reserves with a view to securing monetary stability in india and generally to operate the currency and credit system of the country to its advantages. it has two main functions namely, the issue function and the banking function. section 22 of the act provides that the bank shall have the sole right to issue bank notes in india and.....
Judgment:

K.N. Saikia, J.

1. This application under Article 226 of the Constitution of India impugns the order dated 7-2-80 passed by the Additional Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs (Banking Division), rejecting petitioner's appeal under Section 8 (3) of the High Denomination Bank Notes (Demonetisation) Act, 1978, against the order No. Gau. Cy. Mgr. 601/47-79/90 dated 19-7-79 of the Manager, Reserve Bank of India, Gauhati, refusing to exchange value of the petitioner's high denomination notes totalling Rs. 1,68,000/- in thousand rupee notes.

2. The petitioner belongs to the Scheduled Tribe of Tankghul Naga of Manipur and has been carrying on Agfar wood business as lessee of Agar Mahals from time to time. He held Rs. 1,68,000/- (Rupees one lakh sixty-eight thousand only) in one-thousand rupee notes in 1978. In course of his business he had to remain in interior jungles, and hearing a rumour of demonetisation in the early part of 1978, he came to Imphal and thence to Gauhati to deposit the said notes, prepared a list thereof and submitted to the Currency Officer, Issue Department of the Gauhati Branch of the Reserve Bank of India who acknowledged the same by receipt dated 23-1-78 to the effect that the declaration of the petitioner was received and payment of the value of notes would be made only if the Reserve Bank of India were satisfied after making necessary enquiry that the reasons for the failure to sub-

mit the notes for exchange in time were genuine, and that the petitioner would be informed in due course. The petitioner was thereafter asked to submit a certificate from the Income-tax Officer, and to clarify as to the source from where the notes were received by him furnishing full and clear informations. The petitioner replied that he was an ignorant hillman, did not maintain any books of account concerning his business and was not in a position to produce any documentary evidence. He stated that the money came to his possession in different periods during the tenures of his leases. By a letter dated 4-11-7B he was required to furnish further necessary information including documentary evidence of Agar lesseeship and sources of his funds. The petitioner furnished some more informations, but ultimately received a letter on 19-7-79 from the Reserve Bank of India, Gauhati Branch, rejecting the prayer for exchange value of the notes. He served a notice on 28-11-79 upon the Reserve Bank of India demanding justice, else he would file a writ petition in the High Court. It appears that this notice was treated as an appeal by the Central Government under Section 8 (3) of the Act and it passed the impugned order dated 7-2-1980, rejecting the appeal. Prom the order it is clear that the petitioner was given an opportunity to show cause as to why his appeal should not be treated as time-barred and rejected on that ground alone. A reply dated 30-1-1980 was received from the petitioner where he did not show sufficient cause. Consequently the appeal was rejected on that ground as well as on merits finding no reason to interfere with the order which had been passed after careful consideration of the facts of the case.

3. Mr. Manisena Singh, the learned counsel for the petitioner submits that the petitioner was not given adequate opportunity to adduce evidence and the satisfaction of the Reserve Bank cannot be subjective but should be objective and this Court should prescribe the guidelines for consideration. Counsel submits that the petitioner's fundamental right to property has been denied in this case.

4. The above contentions have to be considered in the light of the provisions of the High Denomination Bank

Notes (Demonetisation) Act, 1978 under which demonetisation was made, as also of the provisions of the Reserve Bank of India Act 1934 which empowers the Reserve Bank of India to issue the Bank Notes and imposes the obligation upon it to exchange the notes.

5. The Reserve Bank of India has been constituted to regulate the issue of Bank Notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantages. It has two main functions namely, the Issue function and the Banking function. Section 22 of the Act provides that the Bank shall have the sole right to issue Bank notes in India and it may for a period which shall be fixed by the Central Government on the recommendation of the Central Board, issue currency notes of the Government of India, supplied to it by the Central Government and the provisions of the Act applicable to bank notes shall, unless contrary intention appears, apply to all currency notes of the Government of India issued either by the Central Government or by the Bank in like manner as if such currency notes were bank notes, and references in the Act to bank notes shall be construed accordingly.

6. Section 23 deals with Issue Department and provides that the issue of Bank Notes shall be conducted by the Bank in an Issue Department which shall be separated and kept wholly distinct from the Banking Department.

7. Section 24 prescribes the denomination of notes and provides:--

'(1) Subject to the provisions of Sub-section (2) bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.

(2) The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of

such denominational values as it may specify in this behalf.'

8. Section 26 provides that the notes shall have the character of legal tender as follows:--

'(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.' It is common knowledge that a legal tender is something which can be legally given in discharge of debts or obligations, and the creditor is bound to accept.

9. Section 39 of the Act imposes an obligation to supply different forms of currency and it provides:--

'(1) The Bank shall issue rupee coin on demand in exchange for bank notes and currency notes of the Government of India, and shall issue currency notes or bank notes on demand in exchange for coin which is legal tender under the Indian Coinage Act, 1906.

(2) The Bank shall in exchange for currency notes or bank notes of two rupees or upwards, supply currency notes or bank notes of lower value or other coins which are legal tender under the Indian Coinage Act, 1906, in such quantities as may, in the opinion of the Bank, be required for circulation, and the Central Government shall supply such coins to the Bank on demand. If the Central Government at any time fails to supply such coins, the Bank shall be released from its obligations to supply them to the public.'

Thus, from the foregoing provisions it is clear that Reserve Bank is the sole note issuing authority and has the I obligation to exchange those notes, except when it is relieved of that jobligation under the provision of this Act. The High Denomination Bank Notes (Demonetisation) Act, 1978, hereinafter referred to as the Demonetisation Act, was to provide in the public

interest for the demonetisations of certain high denomination bank notes and for the matters connected therewith. The availability of high denomination bank notes facilitates all financial transactions which are harmful to the national economy or which are for illegal purposes and it was therefore considered necessary in the public interest to demonetise high denomination bank notes. The Act defines High Denomination Bank Note as bank note of the denominational value of rupees one thousand, five thousand or rupees ten thousand issued by the Reserve Bank. Section 3 declares that on expiry of the 16th January, 1978, all high denomination bank notes shall, notwithstanding anything contained in Sec. 26 of the Reserve Bank of India Act, 1934, cease to be legal tender in payment or on account at any place, Section 4 prohibits transfer and receipt of high denomination bank notes providing that save as provided by or under the Act, no person shall, after the 16th Jan. 1978, transfer to the possession of another person or receive into his possession from another person any high denomination bank note. Section 5 provides for declaration of high denomination bank notes by banks and Government treasuries; and Sec. 6 provides for exchange of high denomination bank notes held by banks and Government treasuries; while Section 7 provides for exchange of high denomination bank notes hold by other person after the 16th January, 1978, only on tender of the notes as prescribed.

10. Sub-section (2) of Section 7 provides that every person desiring to tender for exchange a high denomination bank note under the section shall prepare in the form set out in the Schedule three copies of a declaration signed by him giving in full the particulars required by that form and shall not later than 19th January, 1978 deliver such copies in person together with the high denomination bank notes he desires to exchange-

'(a) to either of the' offices of the Reserve Bank at Bombay or to the sub-office, office or branch, as the case may be, of that bank at Ahmedabad, Bangalore, Bhubaneswar, Calcutta, Gauhati, Hyderabad, Jaipur. Kanpur,

Madras, Nagpur, New Delhi and Patna or

(b) to the main office or branch of the State Bank at the headquarters of

a district'.

11. Section 8 provides for exchange of notes' after the time limit specified in Section 7 and says:

'(I) Notwithstanding anything contained in Section 7, any person who fails to apply for exchange of any high denomination bank notes within the time provided in that section may tender the notes together with the declaration required under that section to the Reserve Bank at any of the places specified in Clause (a) of Sub-sec. (2) of that section, not later than the 24th Jan. 1978, to other with a statement explaining the reasons for his failure to apply within the said time limit:

Provided that if such person resides in a place not within convenient reach of the sub-office, office or branch of the Reserve Bank at any of the said places or if, by reason of age. infirmity or illness, he is unable to attend thereat he may forward the high denomination bank notes he desires to exchange together with three copies of the declaration required under Section 7 by insured post to the Reserve Bank at Bombay not later than the 241h Jan. 1978, along with a statement explaining the reasons for his failure to apply within the time specified in Section 7.

(2) The Reserve Bank may, if satisfied after making such inquiries as it may consider necessary that the reasons for the failure to submit the notes for exchange within the time provided in Section 7 are genuine, pay the value of the notes in the manner specified in Sub-section (4) of that section.

(3) Any person aggrieved by the refusal of the Reserve Bank to pay the value of the notes under Sub-section (2) may prefer an appeal to the Central Government within fourteen days of the communication of such refusal to him.'

12. From the petition itself it appears that the Reserve Bank has followed the procedure prescribed under Section 8. The learned Standing Counsel lor the Union of India points out that to passing the appellate order, the Appellate Authority not only considered the question of limitation but also gave the petitioner an opportunity to show cause as to why it should not be re-

jected as barred by limitation, and the petitioner could not show sufficient cause.

13. The Appellate Authority, apart from limitation considered the appeal on merits and found that the Reserve Bank of India, Gauhati, gave the petitioner adequate opportunity. The observations of the Appellate Authority are amply borne out by the statements made in the petition and the Annex-ures annexed to the petition. The contention that the petitioner did not have reasonable opportunity to adduce evidence cannot, therefore, be accepted.

14. The submission that this Court should lay down the guidelines to the Reserve Bank for the purpose of arriving at its satisfaction cannot be accepted in view of the very complicated nature of the functions of the Reserve Bank of India in controlling the money market and managing the entire currency system of the country. The purpose or objects of the High Denomination Bank Notes (Demonetisation) Act 1978, is mainly to prevent illicit transfer of money for financing transactions harmful to the national economy or for illegal purposes. This is necessary to bring about monetary stability. If the decision in a case like the present is not left to the Reserve Bank, it may lead to far-reaching consequences. Such a function or power' cannot be circumscribed by guideline from the Court.

15. Counsel for the petitioner submits that he has lost his fundamental right to property. This contention cannot be accepted in view of the fact that there was property right in the high denomination notes so long they remained legal tender. Once they are demonetised they cease to be legal tender and their value in exchange could be received only in accordance with the provisions of the Demonetisation Act. The Act provides elaborate procedure to safeguard the right of note holders. The petitioner has failed to satisfy the Bank as to how the notes came to him by furnishing the required informations. He could have received the value in exchange if he could properly account for those notes.

16. Ordinarily, the Reserve Bank of India cannot, by a mandamus, be made to exchange the demonetised notes which have ceased to be legal tender, and which have not been accounted for

and presented as per procedure prescribed under the Act. There has not been any substantial or procedural violation in this case; there is also no violation of any statutory provision of law or any principle of natural justice in passing the impugned orders.

17. This application is consequently found to be without any merit. Hence it is dismissed.


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