[Sree73]

Originally Posted by Sawyer

Other ways of repayment of debt, if acceptable to the creditor, are not illegal.

Other ways of repayment of debt, if acceptable to creditor are not illegal. Agreed. But, it cannot be in a currency which is made illegal by the state/issuing authority.

I owe you 10 lakh and I do not have the money to pay you. If we mutually agree, I can give you a piece of land and close the issue. But, even if both of us agree, we cannot settle that with a currency which is made illegal by state.

Means I cannot give you Currency of old 500/1000 (which is illegal now) and you cannot accept that under law. It is punishable. You are bringing in a parallel CURRENCY which is made illegal by state.

As per your logic, in any sovereign state two mutually agreed parties can transact in a currency which is made illegal by the state. And the state will not / cannot do anything about this. I think that will happen in a cucumber town only (vellarikka pattanam in a vernacular language).

I fail to understand the logic. Some thing is not legal, it's illegal and any one dealing with that is doing illegal activity and is punishable.

[sgiitk]

I went to my bank StanChart, Kanpur yesterday to deposit high denomination cash and draw money from my accounts. I am an old customer, have a relationship with them (earlier Grindlays) since 1979. I had informed them in advance, so managed to get entry fast.

The entire thing was done in about an hour. Depositing cash, and drawing 10k each from a couple of accounts. As for cash they kept it then sms'ed me later when the deposit was done.

The staff as usual was very polite and nice. I could see them under immense pressure given the number of people transacting. Must have been at least 10x the normal number. The manager remarked that while there were many people cursing the PM (expected) there was also a significant number praising him. One problem they faced was that they are linked to an SBI currency chest, and were given a lot of ₹10 coins, and people were unhappy with these. The ₹100 currency they got was all old, so maybe they could not populate their ATM (one). They had received no 500 or 2000 currency. I guess SBI wanted to satisfy their own branches first. They plan to get fresh currency from their outstation major branch which is having a currency chest. I guess they will have calibrated their ATM by then, since the new notes are slightly thicker.

Incidentally, an ATM can handle a maximum of 40 currency notes in one go. This is why you cannot draw more than this number of notes from an ATM at a time.

My CA went to a couple of branches of other banks the day before in the line of duty. He found people were quite happy with the act, and waiting patiently for the exchange. Both he and I were very surprised to see the normally boisterous Kanpur crowd quite orderly.s my CA.

I have heard of stories of people dumping sackfuls of currency into the Ganges from the Barrage. In fact the children of our maid witnessed one such incident.

[binand]

Originally Posted by Sree73

As per your logic, in any sovereign state two mutually agreed parties can transact in a currency which is made illegal by the state. And the state will not / cannot do anything about this.

That is right. The only caveat is that, if one of the parties has any reason to feel aggrieved, he might not get the full protection offered by the law since he chose to play not with the rules.

[Sree73]

Originally Posted by binand

That is right. The only caveat is that, if one of the parties has any reason to feel aggrieved, he might not get the full protection offered by the law since he chose to play not with the rules.

Sorry. I beg to differ. We cannot deal with a currency which is made illegal by the authority. Whether the two parties agree / dis-agree is immaterial.
If an illegal currency is allowed, the sovereignty of the state is not there and the state cease to exist.

[Sawyer]

Originally Posted by Sree73

Sorry. I beg to differ.

That's ok. Maybe you need to brush up on the law as it relates to contracts, consideration and legal tender.

[Sree73]

Originally Posted by Sawyer

That's ok. Maybe you need to brush up on the law as it relates to contracts, consideration and legal tender.

Contract should be something that is "intended to be enforceable by law".

And very much amused when a "legal tender" can be an illegal currency to be considered under contracts and consideration.

I rest my case. Hope you all can deal with illegal currency without the fear of state. God bless.

[mayank0782]

Originally Posted by Sawyer

That's ok. Maybe you need to brush up on the law as it relates to contracts, consideration and legal tender.

There is a difference between piece of paper and banned currency. If you notice, these notes have been "banned" (hope this is pretty clear and doesn't require any more explanation) which means they can't be used anymore for transactions and should only be deposited/exchanged in banks/post offices. Its not about willingness of buyer and seller.

A person buys 5 lakhs worth of gold in cash in old currency after Nov 8. The jeweler accepts it. Fine till now. What happens then ? Once the jeweler goes to deposit and reports this cash (now illegal tender) as his income earned after Nov 8, he can't go scot-free. Definitely a question will be asked as to why did he accept the payment in illegal tender ?

If he maliciously succeeds to adjust and show this cash in his income earned before Nov 8 (by producing back dated bills etc.), then its a different story.

[binand]

Originally Posted by mayank0782

If you notice, these notes have been "banned" (hope this is pretty clear and doesn't require any more explanation) which means they can't be used anymore for transactions and should only be deposited/exchanged in banks/post offices. Its not about willingness of buyer and seller.

This word "banned" is something you are bringing in (probably picking it up from our irresponsible press). If you look at the actual order:

http://finmin.nic.in/172521.pdf

it only says that these notes "cease to be legal tender". The point you are missing is that "legal tender" only means that the value is guaranteed by the government.

Originally Posted by mayank0782

A person buys 5 lakhs worth of gold in cash in old currency after Nov 8. The jeweler accepts it. Fine till now. What happens then ? Once the jeweler goes to deposit and reports this cash (now illegal tender) as his income earned after Nov 8, he can't go scot-free. Definitely a question will be asked as to why did he accept the payment in illegal tender ?

The opposite of legal tender is not illegal tender. If the jeweler takes those notes to the bank, since they are no longer underwritten by the government, the bank will refuse to accept these notes and credit corresponding value to the jeweler's account. Based on other considerations (here, directives from RBI) the bank might report the jeweler's attempt to deposit these notes to the authorities, and the authorities might choose to investigate.

[Sawyer]

Originally Posted by binand

This word "banned" is something you are bringing in (probably picking it up from our irresponsible press). If you look at the actual order:

http://finmin.nic.in/172521.pdf

it only says that these notes "cease to be legal tender". The point you are missing is that "legal tender" only means that the value is guaranteed by the government.



The opposite of legal tender is not illegal tender. If the jeweler takes those notes to the bank, since they are no longer underwritten by the government, the bank will refuse to accept these notes and credit corresponding value to the jeweler's account. Based on other considerations (here, directives from RBI) the bank might report the jeweler's attempt to deposit these notes to the authorities, and the authorities might choose to investigate.

Good points; these are niceties that have been vastly misunderstood by many, in particular the words "banned" and "illegal". All that has been done is that the legal tender characteristic of these notes has been withdrawn and the notes are no longer guaranteed by GOI. That is very different from BANNING because, I am pretty sure, there is no law that can be used to do that.

One point: said jeweller will still be able to deposit these notes and obtain value into his bank account till Dec 31 2016 with no limit thereon. Being deposits made above the Rs 250,000 cut off, the jeweller will have to tally these deposits with his income tax returns and any excess will attract tax and penalty.

[binand]

Originally Posted by Sawyer

All that has been done is that the legal tender characteristic of these notes has been withdrawn and the notes are no longer guaranteed by GOI.

Sodexho coupons are an example of non-legal tender. Their value is underwritten by a corporation and not the government. Since they are not legal tender there is no compulsion on all merchants in the country to accept them.

[Sawyer]

The media, by misinforming, has done everyone a disservice here. There was zero need for shops and traders, that are honest in their income tax, to stop accepting these notes till a couple of days before the end of the year. It would have stopped some of the madness and even perhaps even some deaths in the lines at the banks.

I read a report today of many traders in small towns in Maharashtra that are saying precisely what I have been trying to get across here and have restarted accepting these notes. Some are saying that they don't have the change in hand and ask that purchases be made in multiples of these notes, which is fair enough. Basically they are saying that I have the confidence of still getting value for these notes by depositing them till end of December, and I am honest in my taxes, so why should I let my business and customer service suffer avoidable disruption when it is not necessary for this to happen?

Sound and simple common sense. The only possible risk is of some eccentric person in GOI advancing the Dec 31 date overnight, but that risk can be mitigated by daily deposits of collections, which is a common practice among honest businessmen anyway.

[Sherlocked]

My friend told me that someone he knows just purchased a flat using his 500/1000 notes.
He said it was a win-win situation for both the buyer and the builder as the builder too was having difficulty selling those flats in that particular locality.

Make hay while the sun shines, eh?

Surely, the builder must have made prior arrangements on how to deal with the old notes.

[APV]

In Coimbatore, I had to wait in queue at ICICI bank branch for exactly 2 hours to complete the whole process of depositing some cash & exchange for new 2000 notes - no other denominations were available by then. I had to provide one ID proof for each transaction though. The ATM inside the branch was not loaded with cash till 1 PM.

There are a lot of banks & ATMs in my locality but only 2 out of 10 was loaded with currency, mostly 100s, during the day & one could see long queues.

In the evening though few more ATMs were loaded with 100s & the situation improved a bit. I hope it gets better over the weekend & beyond.

[Divya Sharan]

Originally Posted by Sree73

I have 2 of my coursemates working in banking. One as a chief manager in pvt sector bank and other as a divisional head in a public sector bank. Had some discussion with them yesterday.

The current platform is a one just triggers within bank network if some one tries with the same credentials again. If name is slightly changed or another id is used, it will not give any alarm. Note.. you do not require bank account to exchange 4000. It's not linked to bank account and highlights if the exact entries are made again. But, if you are depositing the amount, it's a different scenario as it has to be with an account..

Replying a little late because I'm traveling, but I hold an account with ICICI and I provided my account number to the ICICI branch (same branch) where I exchanged old notes on both days. I had a total of 7500 to exchange and I could only exchange 2k on the 2nd day (6000 in total) because they were out of smaller denominations (₹50) by the time I reached. They entered my account number and PAN details both times into their systems. So, I believe ICICI hasn't interpreted this to be a one time transaction rule.

[sdp1975]

An interesting article from HT on cash as a % of black money :

In income-tax probes from April 1 to October 31 this financial year, black-money holders accepted having stashed Rs 7,700 crore worth of ill-gotten assets. The cash component was merely Rs 408 crore or 5%. The remaining was invested in business, stocks, real estate and benami bank accounts, the data show. Financial year 2015-16 saw the highest black-money detection in the period, of which 6% was cash.

Another quote from former Finance Minister P Chidambaram :

Governments in the past had considered a similar move but “the consensus was that the economic gains may be very small and the disruption and inconvenience may be very large”, he said.

Source