IMPORTANT POINT
The High Denomination Bank Notes (Demonetisation) Act, 1978, is a valid piece of legislation and the time and the manner in which the high denomination bank notes could be exchanged were not unreasonable and unjust.

Headnote:(i) Constitution of India-Articles 19(1)(f) and 31(2)- Property within the meaning of Articles 19(1)(f) and 31(2) (since repealed), comprises every form of property, tangible or intangible, including debts and choses in action-Extinguishment of a public debt due and owing from the State -Amounts to compulsory acquisition of such debt -Effect of High Denomination Bank Notes (Demonetisation) Act, 1978. (Paras 7, 8)
       (ii) High Denomination Bank Notes (Demonetisation) Act, 1978-Constitutional validity-Wiping out of a public debt owing to holders of high denomination bank notes from State-Whether such acquisition was for public purpose ?-(Yes)-Time prescribed for exchange of high denomination notes u/ss. 7 and 8 not unreasonable-Act is a valid piece of legislation.
       Held : From the above preamble it is manifest that the Act was passed to avoid the grave menace of unaccounted money which had resulted not only in affecting seriously the economy of the country but had also deprived the State Exchequer of vest amounts of its revenue. Considering the evil the above Act sought to remedy it cannot be said that it was not enacted for a public purpose. The petitioners other contention based on 19(i)(f) and (g) of the Constitution is wholly misconceived for after compulsory acquisition of their property by the impugned Act the petitioners right thereto stood extinguished and consequently the question of reasonable restriction to the exercise or enjoyment of a right, which became non est, could not arise. Equally untenable is the petitioners contention that they were deprived of their right to get compensation for such acquisition, as Section 7 & 8 of the Demonetisation Act lay down an elaborate procedure to apply for and obtain an equal value of the high denomination bank notes in the manner prescribed thereunder. (Para 9)
       Further held : From a combined reading of Sections 7 and 8 it is evidently clear that on furnishing a declaration complete in all particulars in accordance with sub-section (2) of Section 7 by January 19, 1978, the holder was entitled to get the exchange value of his notes from the Bank without any let or hindrance; thereafter, till January 24, 1978, he was also entitled to such exchange from the Bank if he could satisfactorily explain the reasons for his inability to apply by January 19, 1978 and after that date the Central Government was empowered to extend the period of such exchange. Such being the scheme of the Act regarding exchange of high denomination bank notes it cannot be said that the time and the manner in which the high denomination bank notes could be exchanged were unreasonable, unjust and violative of the petitioners fundamental rights. (Para 10)
       (iii) High Denomination Bank Notes (Demonetisation) Act, 1978-Sections 7 & 8-Relief Society-Collection of funds through donations -Donation boxes kept at different places-Boxes opened on 17.1.1978 were found to contain some high denomination bank notes-Failure to deposit the same within prescribed time-Not properly explained-Reasons with authorities to refuse payment to society in exchange of their high denomination bank notes being cogent and convincing-No case to interfere with. (Paras 17, 21)

JUDGMENT

M.K. Mukherjee, J.-The constitutional validity of the High Denomination Bank Notes (Demonetisation) Act, 1978 (hereinafter referred to as the Demonetisation Act ) and the legality of certain orders passed thereunder are under challenge in these petitions under Article 32 of the Constitution of India. The Act replaced an Ordinance, bearing a similar title, which was promulgated by the President and had come into force on January 16, 1978. To appreciate the contentions raised on behalf of the petitioners it will be necessary, at this stage to refer not only to the relevant provisions of the Demonetisation Act but also of the Reserve Bank of India Act, 1934 ( RBI Act for short), which empowers Reserve Bank of India ( Bank for short) to issue bank notes and imposes an obligation upon it to exchange those notes.

2. The Bank has been constituted under the RBI Act 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 advantage. Section 22 of that Act provides that the Bank shall have the sole right to issue bank notes. Section 24, which prescribes the denomination of the notes, reads as under :

"(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."

3. Section 26 lays down that every bank note shall be legal tender at any place in India in payment or on account of the amount expressed therein and shall be guaranteed by the Central Government. It further lays down that on recommendation of the Central Board the Central Government may however 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 except at such office or agency of the Bank and to such extent as may be specified in the notification. The other Section of the RBI Act relevant for our purposes is Section 39 which imposes on the Bank an express obligation to issue, rupee coin or notes of lower values on demand, in exchange for bank notes and currency notes of the Government of India.

4. On a conspectus of the above provisions of the RBI Act it is patently clear that the Bank is the sole note issuing authority and has the obligation to exchange those notes when demanded except when, and to the extent, it is relieved of that obligation by the Central Government.

5. Coming now to the Demonetisation Act we first find that high denomination bank note has been defined in Section 2(d) to mean a bank note of the denominational value of one thousand rupees, five thousand rupees or ten thousand rupees issued by the Reserve Bank. Section 3 declares that on expiry of January 16, 1978 all high denomination bank notes shall notwithstanding anything contained in Section 26 of the Reserve Bank of India Act, 1934 (emphasis supplied) cease to be legal tender in payment or on account at any place. Section 4 which prohibits transfer and receipt of high denomination bank notes reads as follows :

"Save as provided by or under this Act, no person shall, after the 16th of January, 1978, transfer to the possession of another person or receive into his possession from another person any high denomination bank note."

Sections 7 and 8 of the Demonetisation Act, around which a large part of the arguments of the petitioners revolves,

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1996 Supreme(SC) 1230

IMPORTANT POINTThe High Denomination Bank Notes (Demonetisation) Act, 1978, is a valid piece of legislation and the time and the manner in which the high denomination bank notes could be exchanged were not unreasonable and unjust.

Cases Referred (1)

IMPORTANT POINT
The High Denomination Bank Notes (Demonetisation) Act, 1978, is a valid piece of legislation and the time and the manner in which the high denomination bank notes could be exchanged were not unreasonable and unjust.