DNA Money Edit: Govt's new dilemma: to exchange scrapped notes or not

The Supreme Court's directive on Tuesday asking the government to consider exchange of old Rs 500 and Rs 1,000 notes on a case-to-case basis has created some confusion. In a strongly-worded directive, the apex court told the government that it cannot be allowed to deprive a person of his money if he couldn't deposit it due to some genuine problem. "What if someone is terminally ill and couldn't deposit the money?" asked the court.

The government and Reserve Bank of India (RBI), in fact, stand on a strong legal ground, after the passage of the Specified Bank Notes Bill in February that ended the liability of these currency denominations between the central bank and the government. In fact, the government did not extend the deadline to deposit old notes beyond December 30, 2016, except for certain category of people who were allowed time until March-end. The government took a stance that most cash held by the people beyond the first one month of the window, is illegal. A week before the December deadline ended, the central bank issued a circular to banks asking them to accept deposits above Rs 5,000 only once during the remaining period.

Petitioners have given equally strong grounds on which they could not deposit cash during the days of demonetization. For instance, one septuagenarian, who lost her husband in April, 2016, stumbled on Rs 1.8 lakh in cash while going through his possessions, which she wants to exchange now. The apex court found merit in their argument and directed the government to consider opening a window to let people with genuine problems exchange the scrapped notes.

Caught in a bind, the government will have to clarify its strategy in two weeks' time.