Gujarat High Court on Tuesday asked the Reserve Bank of India (RBI) and Centre to explain their position on demonetisation on a petition challenging the decision to ban Rs 500 and Rs 1,000 denomination notes. The Division Bench of Chief Justice R Subhash Reddy and Justice VM Pancholi directed the Additional Solicitor General appearing on behalf of the Centre and the counsel of RBI to file their replies on the writ filed by the chairman of the Bhavnagar District Co-operative Bank ltd, Nanubhai Vaghani, who has requested the court to declare the demonetisation move as unconstitutional. Vaghani’s counsel BM Mangukiya said that the decision to scrap currency notes of Rs 500 and Rs 1,000 was against the provisions of law and that the Government did not have powers to demonetise currency notes in the manner it has done earlier this month. In a petition filed on November 25, the counsel also contested the claim of the Government that Section 26(2) of the RBI Act grants such powers to the Government. He contended that the currency note is a legal tender that bears a sovereign promise by the Government to pay back equal amount of money in return of the tender. “Upon recall and invalidation, the government cannot say that it would pay the amount after three months.  There cannot be any legal notification with regard to restraining people from withdrawing their own money from banks,” he said.

He also questioned the Centre’s decision to exclude DCCBs from the process of disbursing new currencies and banning them from accepting old currency notes. “The ban on DCCBs is a discriminatory treatment and hence in violation of Article 14 of the Constitution,” Magukiya argued.

He also questioned various relaxations given to different institutions saying the notes cannot be treated as legal at one place and illegal at the other in the country. The court has fixed December 5, as the next date of hearing.