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Cooperative bank in Tamil Nadu files PIL against demonetisation notification

LiveMint logoLiveMint 09-08-2017 Shreya Agarwal

New Delhi: A district cooperative bank based in Tamil Nadu on Tuesday filed a public interest litigation (PIL) in the Supreme Court challenging the validity of a rule, a Reserve Bank of India (RBI) circular and a notification relating to demonetisation.

The Villupuram District Central Cooperative Bank Ltd, in a petition, said that combined, the three measures “have the effect of barring district central cooperative banks from depositing specified bank notes, i.e., of Rs500 and Rs1,000 held by them on November 8, 2016 with the linked currency chest (and thereby get the said amount credited to their account)”.

The bank sought to be allowed to deposit all its SBNs (specified bank notes of Rs500 and Rs1,000) amounting to Rs21.56 crore held by it at the close of day on 8 November 2016 as cash in hand with the linked currency chest/RBI.

On 8 November, the government issued Notification No. 3407 under Section 26(2) of the RBI Act, stating that SBNs shall cease to be legal tenders from the next day. The notification initially applied to “banking companies” as defined in the Banking Regulation Act 1949. It required the banking companies “to forward a return showing details of SBNs held” by them as on 8 November 2016 to RBI before 1.00pm, 10 November 2016, after which the SBNs could be remitted with the linked currency chest for credit to the bank’s account.

This notification was amended on 9 November 2016 to apply to cooperative banks as well. The Villupuram bank said it filed the returns on 10 November 2016 at 1.42pm. However, when it attempted to deposit the SBNs across several days, they were not accepted by the currency chest.

Further, SBNs deposited with the bank from 10 to 14 November amount to Rs51.52 crore. An RBI circular dated 29 June 2017 directed District Central Cooperative Banks (DCCBs) to deposit their SBNs collected between 10 to 14 November by 19 July 2017. However, again, attempts by the bank on 7 July 2017 to deposit SBNs held as on November 8, 2016 were rejected.

The petitioner said it has already made representations to various authorities for acceptance of SBNs as held by it on 8 November. The writ has been filed seeking relief from the Supreme Court.

The court has listed the matter to be heard along with the main writ petition against demonetisation.

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