Demonetisation: Withdrawal Cap No Violation of Fundamental Rights: Karnataka HC

Budget 2017 takes Steps to discourage Cash transactions & curb Black Money

Demonetisation: Withdrawal Cap No Violation of Fundamental Rights: Karnataka HC




The petitioners are all the agricultural/fishermen/ multipurpose/credit co-operative societies registered under the Karnataka Co-operative Societies Act, 1959. They have filed these petitions seeking the redressai of their grievances over the cap on the withdrawal of the amounts fixed by the respondent Nos.l and 2 pursuant to the scheme of demonetization, as per the notification, dated 8.11.2016 (Annexure-A).

  1. Ravivarma Kumar, the learned Senior Counsel appearing for Sri Mahesh R. Uppin for the petitioners submits that the restrictions imposed by the impugned notification is unenforceable in the absence of proclamation of financial emergency under Article 360 of the Constitution of India. The restriction that one customer cannot draw more than ?24,000/- per week from his/her/its account in the bank is not traceable to any statutory provision.
  2. The learned Senior Counsel submits that the co-operative sector in India has played a pivotal role in the national economy. About 29.7 crores of the populace in India are the members of the co-operative societies. He submits that there are about 93,000 co-operative societies in India. The co-operative societies are formed, owned and controlled by their members. Recognizing the significant contributions made by the co-operative societies and the predominant role played by them in the national economy, constitutional status is conferred upon the co-operative societies with the Parliament enacting the Constitution (ninety-seventh Amendment), Act, 2011. Article 19(l)(c) in Part-3 of the Constitution has been amended to make the formation of a co-operative society a fundamental right of the citizens. The mandate of the said amendment is, inter alia, to strengthen the co-operative movement in India by providing for the autonomous functioning of the co-operative societies. As the right to form a co-operative society has now become a fundamental right and as each member of the co­operative society is its owner, neither the Central Government nor the State Government have any power to interfere in the administration of the co-operative societies. He submits that the imposition of the outer limit of Rs. 24,000/- withdrawal a week has crippled the very functioning of the co-operative societies.
  1. When the Parliament does not have the competence to enact any law pertaining to the co-operative societies, the enquiry into the motive, which weighed with the Central Government in coming out with the cap on the withdrawal of the amounts by the co-operative societies is not required at all. In support of his submissions, he relies on the Apex Court’s judgment in the case of DHARAM DIITT AND OTHERS UNION OF INDIA AND OTHERS reported in (2004) 1 SCC 712.
  2. He submits that the restriction on the withdrawal of the amounts fixed by the respondent Nos.l and 2 is unscientific and impractical. He submits that the respondents are not justified in treating the co-operative societies on par with the individuals. If an individual is permitted to withdraw ?24,000/- a week, then the co-operative society has to be permitted to withdraw the amounts in proportion to the number of its members. That is if a co-operative society has 20 members, then that co-operative society should be permitted to withdraw ?4,80,000/- [24,000 x 20]. Treating the individuals and the co-operative societies alike is putting the oranges and bananas together in one basket.
  3. He submits that imposing the restriction that an account-holder can withdraw the amounts not exceeding ?24,000/- a week is not a reasonable restriction permitted by Article 19(4) of the Constitution of India. It cannot be said that such restriction is imposed in the interest of sovereignty and integrity of India or public order or He brings to my notice that the impugned notification does not refer to any of these four enumerated factors. He submits that the co-operative societies’ matters, etc. are at Entry No.32 in List-II (State List) in the Seventh Schedule to the Constitution. Therefore, the Union Government has no power to make laws with respect to the co-operative societies’ matters.
  4. Sr; Prabhuling K. Navadgi, the learned Additional Solicitor General appearing for the respondent No.l has raised the threshold objection to the maintainability of these petitions. He submits that the notification, dated 8.11.2016 was challenged in its entirety in a public interest litigation (W.P.No.58157/2016).

The Hon’ble Division Bench, by its order, dated 11.11 2016 has rejected the said petition. He would contend that these petitions are hit by the doctrine of constructive res judicata.

  1. He submits that the limiting of withdrawal of ?20,000/- a week is temporary and an incidental measure. Clause 2(vi) of the impugned notification itself states that the withdrawal limits shai! be reviewed. Subsequently, the second respondent Reserve Bank of India, vide its notification, dated 14.11.2016 (Annexure-B) allowed the existing customers to withdraw \24,000/- per week from the District Central Government Co-operative Banks.
  2. He submits that the restriction on the withdrawal of the amounts does not in any way affect anybody’s right to establish and run the co-operative society. He relies on the Hon’ble Supreme Court’s decision in the case of RAM JETHMALANI AND OTHERS v. UNION OF INDIA AND OTHERS reported (2011) 8 SCC 1, wherein it is observed that the society would vanish, if the state does not exercise suitable control over the economy.
  1. Relying on the Apex Court’s judgment in the case of BAJAJ HINDUSTAN LIMITED v. SIR SHADI LAL ENTERPRISES LIMITED AND ANOTHER reported in (2011) 1 SCC 640, he submits that the courts cannot sit in judgment over the wisdom of the policy framed by the legislature or executive, more so pertaining to the technical, commercial and fiscal regulatory measures.
  1. He submits that before reviewing the withdrawal limit, the Government would cake into account whether any black money is being surreptitiously pushed through Jandhan account, non-banking financial companies, societies and co­operative societies.
  2. The submissions of the learned counsel have received my thoughtful consideration. The petitioners’ appreciation of demonetization policy is discernable from paragraph No.5 of the memorandum of writ petitions. It is stated therein that the demonetization is a major, laudable initiative to eradicate black money. In paragraph No.7 of the memorandum of the writ petitions, the petitioners have stated that they welcome the scheme of demonetization whole-heartedly. Their only grievance is over the limitation imposed on withdrawing the amounts from the banks. The restriction imposed cannot be and indeed is not on permanent basis. Clause 2(vi) of the impugned notification itself states that the withdrawal limit shall be reviewed. Permitting the account-holders to withdraw more amounts depends upon the availability of currency notes and calibrating the AT.M.s to issue new currency notes. As submitted by the learned Additional Solicitor General, the Central Government is also examining the issue from the angle of black money being pushed through the channels like Jandhan account, non-banking financial companies, societies, co-operative societies, etc.
  1. The petitioners have already submitted the representation to the respondent Nos.l and 2. The respondent IMos.l and 2 are bound to consider the representations received from the petitioners in a pro-active and responsive manner. But in a situation of this nature, no directions, much less time-bound directions, can be given to the Government of India and the Reserve Bank of India. The perusal of the impugned notification reveals that the Union Government and the Reserve Bank of India have come out with the demonetization scheme to tackle the menaces of fake currency notes, black money and terrorism. These laudable objectives cannot be achieved without imposing certain restrictions. In the larger interests of the society, when a comprehensive mission is being accomplished, certain regulatory measures during the period of transition are bound to affect the interests of some sections of people. There cannot be any dispute that the collateral damage, if any, on any section is to be minimized, if it cannot be avoided. What steps are to be taken and within what time-frame they are to be taken, are the matters for the Central Government and Reserve Bank of India to decide.
  1. I am also not persuaded to give acceptability to the submission made on behalf of the petitioners that the impugned restrictions on the withdrawal of the amounts from the banks are vioiative of Article 19(l)(c) of the Constitution of India.
  2. The menaces of black money, fake currency and terrorism are hydra-headed monsters. When one head of the monster is chopped off, it would raise its other ugly heads. Stamping them out is indeed a herculean task. It is next only to impossible for any policy-maker or decision-maker to anticipate all the difficulties and contingencies. As and when the difficulties are noticed in the course of implementing the policy, the necessary remedial measures have to be taken.
  3. It is immensely profitable to refer to what the Apex Court had to say in the case of BALCO EMPLOYEES’ UNION (REGD.) UNION OF INDIA AND OTHERS reported in (2002) 2 SCC 333 in paragraph Nos.92 and 93 of its decision.

    “92. 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.

    “93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts. Here the policy was tested and the motion defeated in the Lok Sabha on 1 -3-2001.”

  4. In the case of INDIA CEMENT LTD. AND OTHERS UNION OF INDIA AND OTHERS reported in 1990(4) SCC 356, the hon’ble Supreme Court has held that even if some persons are at a disadvantage and suffer losses on account of the formulation and implementation of the government policy, that is not by itself a sufficient ground for interference by the court.
  5. The administrators and legislators are entitled to frame policies and take such administrative decisions, as they think necessary in the public interest. The courts should not ordinarily interfere with the policy-decisions, unless they are manifestly illegal and arbitrary. In this regard, I may usefully refer to what the Apex Court had to say in paragraph Nos.45 and 46 of its decision in the case of Bajaj Hindustan Limited (supra).

    “45. In our opinion there should be judicial restraint in fiscal and economic regulatory measures. The State should not be hampered by the Court in such measures unless they are clearly illegal or unconstitutional. All administrative decisions in the economic and social spheres are essentially ad hoc and experimental. Since economic matters are extremely complicated this inevitably entaiis special treatment for distinct social ohenomena. I he State must therefore be left with wide latitude in devising ways and means of imposing fiscal regulatory measures, and the Court should noi, unless compelled by the statute or by the Constitution, encroach into this field.

    “46. In our opinion, it will make no difference whether the policy has been framed by the legislature or the executive and in either case there should be judicial restraint. The Court can invalidate an executive policy only when it is clearly violative of some provisions of the statute or Constitution or is shockingly arbitrary but not otherwise.”

  6. It is also helpful to refer to the Hon’ble Supreme Court’s decision in the case of PATHAN MOHAMMED SULEMAN REHMATKHAN v. STATE OF GUJARAT AND OTHERS reported in (2014) 4 SCC 156, wherein it is held that it is open to the State and its instrumentalities to take economic and management decisions depending upon the exigencies of the situation, guided by the appropriate financial policy notified in public interest. If every decision taken by the State is tested by a microscopic and a suspicious eye, administration will come to a standstill and the decision-makers will lose all their initiative and enthusiasm.
  7. The challenges to Clause 2(vi) of the notification, dated 8.11.2016 (Annexure-A)f circulars, dated 14.11.2016 and 21.11.20:16 (Annexures-B and C respectively) fail. Consequently the prayers (ii) and (iii) are not acceded to.
  8. These writ petitions are dismissed but subject to the observations made herein above. No order as to costs.


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