Bombay High Court seeks RBI's response on co-operative banks' petition

Mumbai and Solapur District Central Co-operative banks approached the high court last week challenging the RBI circular of November 14

Observing that prima facie there were some inconsistencies in the two circulars issued by the Reserve Bank to district co-operative banks on demonetisation issue, the Bombay High Court on Monday sought RBI's response to a batch of petitions filed by these banks.

The Mumbai and Solapur District Central Co-operative banks had approached the high court last week challenging the RBI circular of November 14, restricting them from exchanging or depositing old currency notes of Rs 500 and Rs 1,000 which were declared as illegal tender under the government's demonetisation move on November 8.

A division bench of Justices A S Oka and M S Karnik also directed Additional Solicitor General Anil Singh to produce a copy of the transfer petition filed by the Union government in the Supreme Court.

Singh informed the high court that the Union government, in the transfer petition, has sought the apex court to direct for all petitions filed in various high courts in the country to be either heard by SC itself or any one HC.

He said the transfer petition has been posted for hearing on November 23.

"The contentions raised by the district co-operative banks in these petitions here are similar to the petitions pending before the Supreme Court," Singh said.

Senior counsel Janak Dwarkadas, appearing for the Mumbai District Co-operative Bank, however, told the court that the petitions filed by the co-operative banks are different.

"We are not challenging the demonetisation scheme. We are just challenging the RBI circular," Dwarkadas said.

The bench, while directing the Union government to produce the transfer petition tomorrow, said if the main petition filed in the Supreme Court covers the same contentions as raised in these petitions, then it would not hear the matter.

"You (Singh) produce the transfer petition tomorrow. We will see. The RBI should also respond. We are not saying you (RBI) are right or wrong but prima facie we feel there is some inconsistency between the two circulars issued by the RBI," Justice Oka said.
Advocate V M Thorat, appearing for Solapur District

Central Co-operative Bank, said while the RBI circular of November 8 included the co-operative banks and permitted them to accept and exchange old currency notes of Rs 500 and Rs 1,000, another circular issued on November 14 prohibited the co-operative banks from exchanging or depositing the old currency notes.

"We have around 50 lakh account holders who have submitted cheques and cash after the scheme was announced. The cheques are cleared by the co-operative banks through the State Bank of India. But now because of the RBI circular of November 14, the SBI is refusing to clear our cheques or take the old currency notes from us," Thorat argued.

Dwarkadas submitted that under section 26 (1) of the Reserve Bank of India Act, every bank note is considered as legal tender.

READ OUR FULL COVERAGE ON THE MODI GOVT'S DEMONETISATION MOVE