New Delhi: The Modi government on Thursday asserted in the Supreme Court that the "bold move" of demonetisation would eradicate black money and slush funds operating since Independence which cast a "parallel economy" hitting the poor and the middle class.
The Centre, which filed an affidavit on demonetisation, said the decision on which a total secrecy was maintained, would now help in proper implementation of the ambitious 'Jan Dhan Yojana' under which around 22 crore bank accounts for poor people have been opened as reports of unscrupulous elements using these accounts to convert their black money into white surfaced.
Further, demonetisation is seen as a check on the real estate sector where prices get pushed up artificially, reducing the availability of affordable housing for the poor and the middle class.
Elaborating on several measures including the "thrust" given for increasing digital payments in the economy through credit and debit cards, internet banking, mobile apps and e-wallets, the Centre said their use has seen a jump of nearly 300 percent in the last 10 days.
In its affidavit, the Centre also gave reasons for maintaining secrecy about the move which was announced by Prime Minister Narendra Modi just after 8pm on 8 November and came into force from the midnight.
"The gigantic dimensions and possibilities of compromising on secrecy were taken into consideration. If elaborate prior arrangement for distribution of new currency notes were made prior to the announcement of the scheme, the very objective of the scheme would have been defeated.
Further, the scheme impacts several sectors in the short-term but promises large benefits in the economy in the medium-term," the affidavit said.
The affidavit, filed a day before a crucial hearing, contended that "no serious attempt at this scale has been attempted in the past" and in the "two attempts made in 1946 and 1978, the scale of operation was not as expansive due to the sheer size of the cash component in the economy".
Justifying the decision to do away with Rs 1,000 and Rs 500 notes which constituted 80 to 85 percent of the cash flow, the affidavit, settled by Attorney General Mukul Rohatgi, said, "The withdrawal of existing high denomination banknotes will curb funding of terrorists with the proceeds of FICN (fake Indian currency notes) and use of existing FICN network for subversive activities."
"It will eliminate black money which casts long shadow of the parallel economy on our real economy. The poor and middle class, who are worst sufferers due to black money, will be benefited. It will reduce tax avoidance and bring more transactions into the formal economy," it said.
"Information has been received that there is sudden spurt in the quantum of deposit in several Jan Dhan accounts. There are also reports of unscrupulous elements using Jan Dhan accounts of poor and innocent persons to convert their black money into white.
"Such spurt in deposits will be looked into closely. Jan Dhan account holders are requested not to allow their accounts to be misused by anyone," it said.
Claiming that removal of high denomination currency notes of Rs 1,000 and Rs 500 would lead to decline in real estate prices making affordable housing available to all, the affidavit said, "At present, there is excessive use of cash in real estate sector due to large cash transactions in areas
such as purchase of land and housing property. The real estate prices get pushed up artificially.
"This reduces the availability of affordable housing for the poor and middle class. Greater over-the-board transaction will lead to a decline in real estate prices making affordable housing available to all."
The government said all necessary steps are being taken to reach every nook and corner of the country with new currency notes of Rs 2,000 and Rs 500 and accordingly ATMs are being recalibrated and emphasis was laid on printing more number of new legal tenders of greater value.
The Modi dispensation said the decision on demonetisation was in line with successive actions it has taken since coming to power in May 2014 after which an SIT was formed to go into the black money issue.
"The decision was taken keeping in view the need for continuous pressure for the eradication of black money, in line with successive action being taken since the last two years, starting with formation of SIT in June 2014, provisions for declaration of undisclosed foreign income in June 2015, the approval of the measures to incentivise digital payments and move towards a less cash economy in February 2016 and the introduction of the income declaration scheme in July 2016," the affidavit said.
While seeking dismissal of the petitions challenging the 8 November notification on demonetisation, it said the scheme was in coherence with the legal provisions and such actions
can only be interfered by the courts if they are shown to be "arbitrary", "unreasonable" and "illegal".
Further, the demonetisation action fall in the realm of fiscal/economic policy and it is well-settled that there is a limited scope of judicial review over such actions, it said.
Elaborating the steps taken for better convenience of the public, the government said it was closely monitoring the implementation of the decision and to avoid inconvenience to the public, old high-denomination banknotes will continue to be accepted in carrying out emergent and urgent transactions.
It said old currency notes would be allowed for making payments in government hospitals and pharmacies in government hospitals, at railway ticketing counters, purchase at consumer cooperative stores and milk booths operated under authorisation of the central and state governments.
It would also be used for purchase of petrol, diesel and gas at stations operated by PSUs, for making payments to all toll plaza in the states and national highways, for payment on purchases of LPG gas cylinders, entry tickets for monuments maintained by the ASI, payments towards court fees and also for making payments towards utility charges including water and electricity.