The High Denomination Bank Notes (Demonetisation) Act 1978

The High Denomination Bank Notes (Demonetisation) Act, 1978 which came into force on 16 January 1978 which was enacted by Parliament on 29th year of Republic of India which extends to whole of India. It was enacted for matters connecting with demonetisation of certain high denomination bank notes in public interest. High denomination bank notes availability increases illicit money transactions which will be very dangerous to national economy.

Section 2 of the Act explains different words used in the Act like Bank, Bank Notes,  Scheduled Bank, State Bank. Section 3 states that all high denomination notes issued by bank under Section 26 of RBI Act 1934 will cease to be legal tender in any place from 19 January 1978. No person shall give to another person or possess such high denomination bank notes.

The Act states that every bank and government treasury should provide Reserve Bank details regarding the total value of high denomination bank notes which the bank holds on 16 January 1978 and even Issue Department of RBI also have to give details of total value of high denomination bank notes that is held in currency chest at close of business on 16 January 1978 with its total numbers.

Any private sector banks can get from Reserve Bank equal amount in exchange of high denomination bank notes returned or credited to Reserve Bank by such banks.  Government treasury can also get equal amount in exchange of these denominations from RBI. But all returns referred to shall be effected by Reserve Bank at Bombay only. All applications that has been exchanged should be accompanied with a copy of return received which has the details of the numbers of such notes.

Section 7 of the Act explains about the high denomination bank notes that are held by any other persons.  Any such note can be exchanged after 16 January 1978 by tender of such note.  When such notes are owned by an individual and if he/she is not in India then any concerned person duly authorised on behalf of him/her can exchange the notes, for a Hindu Undivided Family a Karta can do so, for a company Managing Director, for a firm a Managing Partner, for association of person any member of such association as prescribed by the Act can exchange the high denomination bank notes.

Every person who wants to exchange a high denomination bank notes should give 3 copies of declaration signed with all particulars required by bank no later than 19 January 1978 to any Reserve Bank at Bombay or branches stated under the Act, or State Bank’s main branch, or any public sector bank. All the declaration must be attested by Bank manager or Salaried Magistrate or Inspector of Police. All exchanged denominations shall be transferred to bank account of the declarant. Reserve Bank can refuse to pay such amount to declarant if he does not declare completely all particulars required under the Act.  Central government or any authorised person can write all the reasons for any case the period of these notes exchanged.

Exchange of notes after the specified time is discussed under Section 8 of the Act.  Section 9 of the Act explains about closing of banks and the Government treasuries wherein 17 January 1978 shall be closed for receipt of returned denominations and that day will be deemed to be a public holiday for purposes of Negotiable Instruments Act, 1881.

Section 10 deals with penalties to persons who declare or presents any false materials to the bank or false statement, or any officer transfers such exchanged denomination bank notes to any persons account which has not been done legally may be imprisoned for 3 years term or with fine or both. All prosecutions shall be instituted with Central Government’s sanction although as per Section 29 of the CRPC 1973 a Magistrate can impose a fine exceeding Rupees 5,000.00.

Section 12 explains that no proceedings can be made against Government or authorised officer for any act done in good faith under said provision of the Act. Section 13 states about the Central Government by notification in Gazette can remove the difficulty arising while giving effect to this Act but that order should be laid before Houses of Parliament.

Section 14 details with regard to Central Government’s power to make rules and that rule should be put before Houses of Parliament while it is in session for nearly 30 days period and it can amend/modify the rule. Section 15 states that High Denomination Bank Notes (Demonetisation) Ordinance, 1978 is repealed but any action taken under this Ordinance shall be considered to be done under the provisions of this Act.

by Sushma Javare