The High Denomination Bank Notes (Demonetisation) Act, 1978

The High Denomination Bank Notes (Demonetisation) Act, 1978
Parliament of India
An Act for demonetisation of high denomination Indian bank notes, for improving Economy of India, and regulating illegal financial transactions, with higher denomination bank notes.
Citation %201978.pdf The High Denomination Bank Notes (Demonetisation) Act 11, 1978
Territorial extent India
Enacted by Lok Sabha
Date passed 16 January 1978
Enacted by Rajya Sabha
Legislative history
Bill introduced in the Lok Sabha Number 20 of 1978
Amends
High Denomination Bank Notes (Demonetisation) Amendment Act, 1998
Related legislation
Ministry of Law
Status: In force

The High Denomination Bank Notes (Demonetisation) Act, 1978, of India is a law passed in the Indian Parliament, ceasing the usage of high-denomination bank notes of ₹ 500, and ₹1000. On 16 January 1978, the then President of India Neelam Sanjiva Reddy introduced the High Denomination Bank Notes (Demonetisation), Ordinance 1978.[1] The then Prime Minister India, Morarji Desai of Janata Party, Finance Minister Hirubhai M. Patel, and Reserve Bank of India Governor I. G. Patel, are considered the key architects in the development and execution of the policy.[2]

Preamble to the Demonetisation Act 1978

The Preamble to the Demonetisation Act 1978 highlights the need for demonetisation of high denominations, in the public interest. The usage of high-denomination bank notes was considered detrimental to Economy of India, due to illegal financial transactions facilitated by high-denomination bank notes.[3]

Opposition

The Constitutional validity of 1978 Act of Demonetisation was challenged in the Supreme Court of India, on the claimed grounds that it violated the then Fundamental Right of property. The Constitutional bench of the Supreme Court of India rejected the petitioners' plea, and upheld the Constitutional validity of Demonetisation Act, 1978.[4]

Passage in the Parliament

The Act was passed by consideration in both Houses of Parliament and supreme court, and was implemented by an issue of an ordinance on 16 January 1978, [5] which was later made an Act, from 30 March 1978.[6]

Details

The Demonetisation Act of 1978 has fifteen sections.[7]

Section 2 details the usage of words Bank notes in Act[8]

Amendment

1998

Section 2 of the Act was amended in the winter session of Indian Parliament in 1998. Following a discussion in the 1998 winter session of Indian Parliament, the bill was introduced, by the then Finance minister Yashwant Sinha to reintroduce ₹ 1000 banknotes, [9][10] due to claims of shortage of high-denomination notes and increasing pressure on lower denominations.[11]

The draft of the 1978 Demonetisation Ordinance was prepared by referring to the Demonetisation Ordinance of 1946. On 12 January 1946, High Denomination Bank Notes (Demonetisation) Ordinance 1946 was passed by the then Governor General of India, Field Marshal Archibald Wavell, 1st Earl Wavell ceasing ₹ 500, ₹ 1000, and ₹10000 to be legal tender.

Aftermath

The chief economic advisor of the State Bank of India affirmed that 25% of the proscribed currency notes did not return to the banking system during the 1978 demonetisation episode.[12]

See also

References

  1. ↑ "Neelam Sanjiva Reddy, issued an Ordinance to demonetisation, in 1978". Indian Express. 15 November 2016.
  2. ↑ "Key people in 1978 demonetisation". India Today. 23 November 2016.
  3. ↑ "Preamble of 1978 Act, defined". The Times of India. 11 November 2016.
  4. ↑ "Supreme Court Upheld Constitutional validity, of 1978 Act". First Post. 25 November 2016.
  5. ↑ "Supreme Court verdict on 1978 demonetisation". The Times of India. 12 November 2016.
  6. ↑ %201978.pdf "The High Denomination Bank Notes (Demonetisation) Act, 1978" Check |url= value (help) (PDF). lawmin.nic.in.
  7. ↑ %201978.pdf "The High Denomination Bank Notes (Demonetisation) Act, 1978" Check |url= value (help) (PDF). lawmin.nic.in.
  8. ↑ "Definition of Bank notes in Act". The Hindu. 14 November 2016.
  9. ↑ "Reintroduction of 1000 rupees in 1998". DNA India. 18 November 2016.
  10. ↑ "1978 Demonetisation in India". Deccan Herald. 9 November 2016.
  11. ↑ "Yaswant Sinha, reintroduced 1000 rupee notes, in 1998". Indian Express. 16 November 2016.
  12. ↑ Only 75% of demonetised currency returned to the central bank in 1978
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