Demonetised notes can’t be considered legal tender: HC

It dismisses pleas of Sasikala’s benamidars against probe into the use of withdrawn currency notes

The inquiry related to former AIADMK interim general secretary V.K. Sasikala having bought malls and mills using ₹1,674.50 crore in demonetised currency notes has led to an interesting development, with the Madras High Court observing that such notes cannot be considered legal tender at all.

Justice Anita Sumanth made the observation while dismissing a batch of writ petitions filed by Ms. Sasikala’s alleged benamidars who had challenged the preliminary inquiry initiated against them by the Income Tax Department. The cases were dismissed by way of a common judgment on October 25 last year, but the verdict was made available only now.

Holding that the Department was in possession of sufficient materials to initiate a preliminary inquiry, the judge, however, said most of the arguments raised by the petitioners could be answered only during adjudication to be undertaken by the Department. On the petitioners’ contention that action under the Prohibition of Benami Property Transactions Act, 1988, could be initiated only if the payment was made by way of legal tender, the judge said, “There is no question that currency notes of the value of ₹500 and ₹1,000, once demonetised, do not constitute legal tender.” She further said, “It is a plausible argument to state that ‘consideration’ must comprise legal tender alone” and left the question open for a decision by the Income Tax Department. The judge also ordered the start of adjudication within a month and insisted upon following the principles of natural justice.