LegislationDemonetisation of old notes: The proposed law explainedVatsal Khullar- February 7, 2017The Specified Bank Notes (Cessation of Liabilities) Bill, 2017 is being discussed in Parliament today.[1]The Bill replaces an Ordinance promulgated on December 30, 2016 to remove the Reserve Bank of India’s  (RBI) liability and central government’s guarantee to honour the old Rs 500 and Rs 1,000 notes which were demonetised on November 8, 2016 through a notification.[2]These notes were allowed to be deposited in banks by December 30, 2016.  In light of this, we explain the provisions of the Bill and possible implications.What does the Bill say?Under the RBI Act, 1934, RBI is responsible for issuing currency notes, and is liable to repay the holder of a note upon demand.  The Bill provides that, from December 31, 2016, RBI would no longer be liable to repay holders of old notes of Rs 500 and Rs 1,000, the value of these notes.[3]Further, the old notes will no longer be guaranteed by the central government.Can a person keep old notes?A person will be prohibited from holding, transferring or receiving the old notes from December 31, 2016 onwards.  It exempts some people from this prohibition including: (i) a person holding up to 10 old notes (irrespective of denomination), and (ii) a person holding up to 25 notes for the purposes of study, research or numismatics (collection or study of coins or notes).What happens if a person continues to hold old notes after December 30, 2016?Any person holding the old notes, except in the circumstances mentioned above, will be punishable with a fine: (i) which may extend to Rs 10,000, or (ii) five times the value of notes possessed, whichever is higher.Are there any issues with this provision?There may be two issues.No window to deposit old notes before imposing penalty:The notification of November 8thallowed old currency notes to be deposited till December 30, 2016 and specified that people unable to deposit them till this date would be given an opportunity later.2However, the Ordinance which came into force on December 31, 2016 made it an offence to hold old currency notes from that day onwards and imposed a penalty.  This overnight change did not provide a window for a person holding the notes on that day to exchange or deposit them.  Therefore, not only did the holder lose the monetary value of the notes but he was also deemed to have committed an offence.  This implies that a person who had the notes did not have an opportunity to avoid committing an offence and attracting a penalty.Unclear purpose behind penalty on possessing old notes:The purpose and the objective behind imposing a penalty for the possession of old currency notes is unclear.  One may draw a comparison between holding an invalid currency note, and an expired cheque since both these instruments are meant to complete transactions.  Currently, a cheque becomes invalid three months after being issued.  However, holding multiple expired cheques does not attract a penalty.Is it still possible to deposit old notes?The government has specified a grace period under the Bill to allow: (i) Indian residents who were outside India between November 9, 2016 to December 30, 2016 to deposit these notes till March 31, 2017, and (ii) non-residents who were outside India during this period to deposit notes till June 30, 2017.  The government may exempt any other class of people by issuing a notification.  In addition, RBI has permitted foreign tourists to exchange Rs 5,000 per week.  No other person can exchange or deposit old notes after December 30, 2016.Would this satisfy Constitutional norms?While the notification issued on November 8 specified that after December 30, 2016, any person unable to exchange or deposit old notes would be allowed to do so at specified RBI offices, the Bill does not provide such a facility except in the circumstances discussed above.On may question whether this violates Article 300A of the Constitution, which states that no person will be deprived of his property except by law.  Though this Bill will be a “law”, one may want to think about whether its provisions meet the standards of due process and are not arbitrary.  Given that earlier notifications had indicated that a facility for exchanging or depositing old notes would be provided after December 30, 2016, would the action of not providing such facility under the Bill qualify as an arbitrary action which violates due process?[4]A few examples will be useful in examining this question.Case 1:  A person unable to deposit notes due to poor healthA person may have been unable to deposit old currency notes owing to various reasons such as poor health, old age or disability till the deadline of December 30, 2016.  The Bill does not provide any facility for such persons to deposit old notes, except if they were not in India during the period between November 8 and December 30, 2016.Case 2: A person without a bank accountA person without a bank account may have held over Rs 4,500 in old currency notes.  The notification (and future modifications) allowed a person to exchange up to Rs 4,500 over the counter once till November 24, 2016.[5]Such a person would have to incur a monetary loss if he possessed old notes above this value, given his inability to deposit them in a bank account.Case 3: Indian citizens living abroadThere may be Indians working or studying abroad holding old currency notes.  The government has notified the last date for depositing old notes for these non-resident Indians as June 30, 2017.[6]However, these people may not visit India between November 8, 2016 and June 30, 2017.  In such a scenario, these people may have to incur a monetary loss.Case 4: Foreign nationals entering India before demonetisationForeign tourists in the country may have held old currency notes before demonetisation on November 8, 2016.  Such tourists can only exchange old currency notes of up to Rs 5,000 per week till January 31, 2017.[7]Given that such foreigners may not have bank accounts in India, they may also suffer a monetary loss for whatever amount could not be exchanged within the period they were in India.  For example, a person who had Rs 10,000 and left India on November 13, 2016 would not have been able to get the value of notes they had, over Rs 5,000.In addition, Indian currency notes are used legally in neighbouring countries such as Nepal and Bhutan.  The Bill allows only Indian citizens to deposit old notes for an extended period under certain conditions.  However, it does not make any provisions for foreigners to deposit or exchange old notes held by them.  Such foreign nationals who are not Indian residents would not have bank accounts in India.[1]The Specified Bank Notes (Cessation of Liabilities) Bill, 2017,http://www.prsindia.org/uploads/media/Specified%20Bank%20notes/specified%20bank%20notes%20bill%202017-compress.pdf.[2]S. O. 3407 (E), Gazette of India, Ministry of Finance, November 8, 2016,http://finmin.nic.in/172521.pdf.[3]The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016,http://www.prsindia.org/uploads/media/Ordinances/Specified%20Bank%20Notes%20%28Cessation%20of%20Liabilities%29%20Ordinance,%202016.pdf.[4]Section 2 (ix) of the notification issued on November 8, 2016 (No. S. O. 3407 (E)) states that any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the 30th December, 2016, shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by it.[5]S. O. 3543 (E), Gazette of India, Ministry of Finance, November 24, 2016,http://finmin.nic.in/172740.pdf.[6]S. O. 4251 (E), Gazette of India, Ministry of Finance, December 30, 2016,http://dea.gov.in/sites/default/files/24Notification%2030.12.2016.pdf.[7]Exchange facility to foreign citizens, January 3, 2017,https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10815&Mode=0.ParliamentFirst no-confidence motion of the 17th Lok Sabha discussed todayNiranjana Menon- August 8, 2023Discussion on the first no-confidence motion of the 17thLok Sabha began today.  No-confidence motions and confidence motions are trust votes, used to test or demonstrate the support of Lok Sabha for the government in power.  Article 75(3) of the Constitution states that the government is collectively responsible to Lok Sabha.  This means that the government must always enjoy the support of a majority of the members of Lok Sabha.  Trust votes are used to examine this support.  The government resigns if a majority of members support a no-confidence motion, or reject a confidence motion.So far, 28 no-confidence motions (including the one being discussed today) and 11 confidence motions have beendiscussed.  Over the years, the number of such motions has reduced.  The mid-1960s and mid-1970s saw more no-confidence motions, whereas the 1990s saw more confidence motions.Figure1: Trust votes in ParliamentNote: *Term shorter than 5 years; **6-year term.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.The no-confidence motion being discussed today wasmovedon July 26, 2023.  A motion of no-confidence is moved with the support of at least 50 members.   The Speaker has the discretion to allot time for discussion of the motion.  TheRules of Procedurestate that the motion must be discussed within 10 days of being introduced.  This year, the no-confidence motion wasdiscussed13 calendar days after introduction.  Since the introduction of the no-confidence motion on July 26, 12 Bills have been introduced and 18 Bills have been passed by Lok Sabha.  In the past, on four occasions, the discussion on no-confidence motions began seven days after their introduction.  On these occasions, Bills and other important issues were debated before the discussion on the no-confidence motion began.Figure2: Members rise in support of the motion of no-confidence in Lok SabhaSource: Sansad TV, Lok Sabha, July 26, 2023; PRS.Figure3: Number of days from introduction to discussion on no-confidence motionsNote: Number of days implies calendar days.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.On average, no-confidence motions (excluding the one being discussed today) have been discussed for 13 hours over three days.  Discussions have lasted longer than 20 hours on four instances, most recently in 2003.  Today’s no-confidence motion was allotted 12 hours discussion time by theBusiness Advisory Committee.Following the discussion, the motion is put to vote.  26 out of 27 no-confidence motions (excluding the one being discussed today) have been voted upon and rejected.  This means that no government has ever had to resign following a vote of no-confidence.   On one occasion, in 1979, the discussion on a no-confidence motion against the Morarji Desai government remained inconclusive.  He resigned before the motion was put to vote.  50% of all no-confidence motions (14 out of 28) were discussed between 1965 and 1975.  Of these, 12 were against governments headed by Indira Gandhi.Figure4: Duration of discussion on no-confidence motionsNote: This graph excludes the no confidence motion moved on July 26, 2023.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.In comparison, confidence motions have a more varied history.  The first motion, brought in 1979 to demonstrate confidence in Charan Singh’s government, was not discussed at all.  The Prime Minister resigned before the discussion could take place.  Since then, 11 confidence motions have been discussed in Lok Sabha, with nine occurring in the 1990s.  During this period, several coalition governments were formed, and Prime Ministers sought to prove their majority throughconfidence motions.   These motions have been discussed, on average, for 12 hours over two days.Figure5: Duration of discussion of confidence motionsSource: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.Of the 11 confidence motions discussed in Lok Sabha, seven were accepted.  On three instances, governments had to resign as they could not prove that they had the support of the majority.  On one instance in 1996, the motion was not put to vote.  Following an eleven-hour discussion on this confidence motion, Prime Minister Atal Bihari Vajpayee announced his intention to resign on the floor of the House.  He resigned 16 days into his term.Vajpayee became Prime Minister again in 1999, and faced another confidence motion.   This time, it was put to vote.   The motion was defeated by a margin of one vote.  This has been the closest result on a trust vote in the history of Lok Sabha.  The next closest result was when a motion of no-confidence against P V Narasimha Rao’s government was defeated by 14 votes in 1993.  In most cases, results have been in favour of the government by a large margin.«12345678910»
LegislationDemonetisation of old notes: The proposed law explainedVatsal Khullar- February 7, 2017