Arguments advanced:

2. Whether the notification or the address by Prime Minister dated

18th june 2016 ultra vires with provisions of chapter 2 sections 7 and 17
and chapter 3 sections 26(2),23,24,29 and 42 of the reserve bank of
indicata act,1934

It is humbly submitted before the Hon’ble Supreme Court that the

notification or the address by pm dated 18 th june 2016 are not ultra vires
with provisions of chapter 2 sections 7 and 17 and chapter 3 sections
26(2),23,24,29 and 42 of the Reserve Bank of Indicata Act,1934. The
Goverment of Indicata demonetized currency in accordance with the
provisions of Reserve Bank of Indicata Act, 1934. Herein the arguments
have been delt in twofold manner i.e [2.1] the act of demonetization did'nt
contravene the provisions of Chapter II Sections 7 and 17 of the Reserve
Bank of Indicta Act,1934 [2.2] the act of demonetization did'nt contravene
the provisions of Chapter III Sections 26(6), 23, 24, 29 and 42 of the
Reserve Bank of Indicta Act,1934.

2.1 THE ACT OF DEMONETISATION WAS NOT ULTRA VIRES WITH THE
PROVISIONS OF CHAPTER II OF SECTIONS 7 AND 17 OF THE RESERVE
BANK OF INDICATIA ACT,1934

2.1.1 It is most humbly submitted before this Hon’ble Apex Court of Indicatia that
the sections 7 and 17 of RBI, Act has not been voilated. The section 7 of the RBI,
Act talks about the Management and Functions of the RBI where the section 7(1)
specifies that “ the Central Government may from time to time give such directions to
the Bank as it may, after consultation with the Governor of the Bank, consider
necessary in the public interest ” thus clearly stating that the central government has
the power to control the management of the RBI and the RBI may function as per the
directions given by the central government necessary for the fulfilment of its
objectives.
2.1.2 In a report, the International Monetary Fund had said that the “RBI Act
contains provisions that undermine its independence from the government” citing
Section 7 of the RBI, Act as an example. “While these provisions have not been used
in practice, they remain available to the central government to use at its discretion in
the event that it disagrees with the central bank regarding supervisory priorities or
judgements,” the IMF’s report on India’s financial sector assessment said.

2.1.3 The Hon’ble Court then referred to an earlier decision in the case of R.K. Garg
v. Union of India and Ors71 where there was an unsuccessful challenge to a law
enacted by Parliament, the contentions are given herewith, “What has been said in
respect of legislations is applicable even in respect of policies which have been
adopted by Parliament. They cannot be tested in Court of Law. The courts cannot
express their opinion as to whether at a particular juncture or under a particular
situation prevailing in the country any such national policy should have been adopted
or not. There may be views and views, opinions and opinions which may be shared
and believed by citizens of the country including the representatives of the people in
Parliament. But that has to be sorted out in Parliament which has to approve such
policies. Privatization is a fundamental concept underlying the questions about the
power to make economic decisions. What should be the role of the State in the
economic development of the nation? How the resources of the country shall be
used? How the goals fixed shall be attained? What are to be the safeguards to prevent
the abuse of the economic power? What is the mechanism of accountability to ensure
that the decision regarding privatisation is in public interest? All these questions have
to be answered by a vigilant Parliament.This Court cannot review and examine as to
whether the said policy should have been adopted. Of course, whether there is any
legal or constitutional bar in adopting such policy can certainly be examined by the
Court".

2.1.3 Thus it can be contended that in a democracy it is the prerogative of each

elected Government to follow its own policy. Often a change in Government may
result in the shift in focus or change in economic policies. Any such change may
result in adversely affecting some vested interests. Unless any illegality is committed
in the execution of the policy or the same is contrary to law or mala fide, a decision
bringing about change cannot per se be interfered with by the Court.

[2.2]The act of demonetization did'nt contravene the provisions of Chapter

III Sections 26(6), 23, 24, 29 and 42 of the Reserve Bank of Indicta
Act,1934.

2.2.1 It is submitted that the word “any series” in section 26(2) 1 should be read as
“all series” of bank notes not “any specific series” of bank notes. 3. It is submitted
that the contention made by the petitioner that the word "any series" in Section 26(2)
should be read as "any specific series" of bank notes and not "all series" of banknotes
is erroneous in nature because if it assents, then the central government has to issue
distinct notifications for each series of bank notes rather than a common notification
for all series of bank notes. 4. It is further submitted that the word "any" has appeared
two times in Section 26(2) of the RBI Act. Hence, the word "any" coming before the
word "series of bank notes" should be read as "all." On the other hand, the word
"any" coming before the word "denomination" may be read as either way.
1 RESERVE BANK OF INDIA ACT, 1934, s 26(2) On recommendation of the Central Board the 4 [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 5 [save at
such office or agency of the Bank and to such extent as may be specified in the notification]
2.2.2 It is submitted that the RBI has been established to "control the issuing of bank
notes," according to the RBI Act's preamble2. In the case of Municipal Corporation of
Delhi v. Birla Cotton, Spinning and Weaving Mills Delhi and Another 3 it was pointed
out by Supreme Court that–

“In order to find out as to whether the legislature has guidence for exercise of
delegated powers, the Court will have to consider the provisions of the particular Act
with which the court has to deal with, including its preamble”.

It is argued that the Preamble's word "regulate" and Section 3 of the RBI Act's phrase
"taking over the management of the currency" 4 need the broadest interpretations
conceivable. A narrower interpretation, it is argued, would undermine the RBI Act's
fundamental goals, the term "regulate" also includes the word "prohibit."

2.2.3 In the case of The Chief Inspector of Mines and another v. Lala Karam Chand
Thapar etc. 5 held that the word ''any'' found in Section 76 of the Mines Act, 1952
should be interpreted as “every one” or “all”. In reference to this case the decision of
demonetization by Goverment of Indicata is not ultra vires and is in nations interest.
Also in the case of Tej Kiran Jain and others v. N. Sanjiva Reddy and others6 a six-
judge constitutional bench under the then Chief Justice M.Hidaytullah held assuredly
the word “anything” is of the widest import and is equivalent to “everything”.

2.2.4 The policy underlining the provisions of Section 26 of the RBI Act is to enable
the Central Government on the recommendation of the Central Board, to effect
demonetization. The same can be done in respect of any series of bank notes of any
denomination. The legislative policy is with regard to management and regulation of
currency. Demonetization of notes would certainly be a part of management and
regulation of currency. The legislature has empowered the Central Government to
exercise such a power. The Central Government may take recourse to such a power
when it finds necessary to do so taking into consideration myriad factors.

2.2.5 In the matter of Ahmadabad Urban Development v. Sharadkumar Jayanti

Kumar7 ,

“It was held by the hon'able that for implementing various schemes of development,
the development or betterment fee is required to be imposed and collected. Such
imposition of fee, therefore such imposition of withdrawal limit therefore, must be
2 Whereas it is expedient to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of
reserves with a view to securing monetary stability in 2 [India]
3 AIR 1968 SC 1232
4 A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management
of the currency from the [Central Government] and of carrying on the business of banking in accordance with the
provisions of this Act.
5 (1962) 1 SCR 9
6 (1970) 2 SCC 272
7 (1992) 3 SCR 328.
held to be incidental to the development activities. In such state of affairs even if
there is no specific provision for imposition of betterment or development fee, such
power must be held to be implied under the Act.”

2.2.6 The role assigned to the RBI in management and issuance of currency notes, so
also in evolving monetary policy of the country, is well recognised. In so far as the
decision to be taken by the Central Government under sub-section (2) of Section 26
of the RBI Act is concerned, it is to be taken on the recommendation of the Central
Board. Hence, there is an inbuilt safeguard in sub-section (2) of Section 26 of the RBI
Act inasmuch as the Central Government is required to take a decision on the
recommendation of the RBI. Further, there is sufficient guidance to the delegatee
when it exercises its powers under sub-section (2) of Section 26 of the RBI Act, from
the subject matter of the statute, and the other provisions of the Act same was held in
the case of Hamdard Dawakhana(Wakf) Lal Kuan, Delhi and another8 “ it delegates
to administrative authority the power to frame rules and regulations to subserve the
object and purpose of the Act”.

2.2.7 It is further submitted in the case of Mohammad Hussain Gulam Mohammad v.

The State of Bombay9, the similar provisions under Sections 4, 4A, 5, 5A and 5AA of
the Bombay Agricultural Produce Markets Act, 1939 were under challenge. In the
aforesaid judgment, upholding the validity of the said provision, the Hon'ble Supreme
Court held that such provisions are intra vires and do not impose unreasonable
restriction on the right to carry on trade in the agricultural produce. Further, Division
Bench of this Court in the case of Chhaganlal Mansukhlal v. The Agricultural
Produce Market Committee, Dohad53 , reported in while considering the scope of the
provisions under Section 28 and Rule 98 and 54 of the Rules framed under the said
Act, held that rules are only regulatory and do not prohibit trade in all types of
agricultural produce and such Rules 48 and 54 of the Rules are not violative of the
provisions of Articles 19 and 31 of the Constitution of India.

2.2.8 In the matter of Narmada Bachao Andolan v. Union of India and Ors10., there
was a challenge to the validity of the establishment of a large dam.It was held by the
majority as follows,

"It is now well settled that the Courts, in the exercise of their jurisdiction, will not
transgress into the field of policy decision. Whether to have an infrastructural project
or not and what is the type of project to be undertaken and how it has to be executed,
are part of policy-making process and the Courts are ill-equipped to adjudicate on a
policy decision so undertaken. The Court, no doubt, has a duty to see that in the
undertaking of a decision, no law is violated and people's fundamental rights are not
transgressed upon except to the extent permissible under the Constitution..."

8 1960 AIR 554, 1960 SCR(2) 671.

9 AIR 1962 SC 97.
10 (2000) 10 SSC 664.
2.2.9 Section 23 of the RBI Act reveal's that the issue of bank notes shall be
conducted by the RBI through an Issue Department which shall be separated and kept
wholly distinct from the Banking Department, and the assets of the Issue Department
shall not be subject to any liability other than the liabilities of the Issue Department as
defined in Section 34. Sub-section (2) of Section 23 provides that the Issue
Department shall not issue bank notes to the Banking Department or to any other
person except in exchange for other bank notes or for such coin, bullion or securities
as are permitted by the RBI Act to form part of the Reserve.

2.2.10 Furthermore the decision of Demonetization is not beyond the authority of

RBI Act, 1934 as the section 24(2) of the act clearly states that “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 ”. Thus this is a bold move by the government to scrap the
existing 551 and 1051 notes. We are confident that the move will cut down the
menace of fake currency as well as reduce black money in circulation. This will add a
great deal more liquidity to the formal banking system, which will benefit immensely
from the legal flow of liquid cash making life easy for the government and the
common man.
2.2.11 It is submitted that Demonetisation is a policy decision involving complex
economic factors. The Courts have consistently refrained from interfering with
economic decisions as it has been recognised that economic expediencies lack
adjudicative disposition and unless the economic decision, based on economic
expediencies, is demonstrated to be so violative of constitutional or legal limits on
power or so abhorrent to reason, that the Courts would decline to interfere. In matters
relating to economic issues, the Government has, while taking a decision, right to
"trial and error" as long as both trial and error are bona fide and within limits of
authority.