The Central Government Cabinet had approved an ordinance with respect to possession of old notes as a penal offence. The Cabinet has approved promulgation of Specified Bank Notes Cessation of Liabilities Ordinance to penalise persons holding banned Rs. 500/- and Rs. 1,000/- notes. It will come into force once it gets Presidential assent under Article 123 of the Constitution of India. Once it comes into force, it will make possession of a large number of demonetised Rs. 1,000/- and Rs. 500/- notes beyond a specified amount a penal offence.
This Ordinance has come after series of rules and regulations came into effect since the demonetisation of old Rs. 500 and Rs. 1000/- notes, w.e.f. 8th November, 2016. The Central Government has taken a very tough stand on demonetisation and has been working to tighten loopholes in the wake of illegal exchange of old banned notes with new notes. In fact, in the month of December 2016, in order to curb the menace of black money in terms of banned notes, the Central Government also introduced the Taxation Laws (Second Amendment) Bill, 2016 in the Parliament in recent winter session to impose a higher rate of tax and penalty in respect of undisclosed incomes in wake of recent exorbitant cases of undisclosed income post demonetisation and a Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. Therefore, the present ordinance is one in series of steps taken by the government for efficient working of its policy of demonetisation.
The ordinance amends Reserve Bank of India Act to provide legislative support for scrapping the demonetised banknotes that are not returned by removing the liability of the government and the central bank on the demonetised high-denomination notes to prevent future litigations. It ordinance provides a limited window for depositing the cancelled notes at select RBI branches until 31st March, 2017. As per the ordinance, the possession of demonetised notes will attract a monetary fine of Rs. 10,000/- or five times the cash held, whichever is higher. The penalty for holding old high value currency in excess of 10 notes may include financial fines and no jail term. However, the old demonetised notes will be allowed only for the purpose of research and numismatics.