Can Uttar Pradesh really let people pay land registry fees in demonetised notes?

Uttar Pradesh Chief Minister Akhilesh Yadav on Tuesday announced that the government would accept old notes of denominations of Rs 500 and Rs 1,000 for land registrations in the state until November 24. On the same day, Vinod Tawde, minister of cultural affairs in Maharashtra, tweeted an announcement that the state would permit Marathi theatres to accept old notes.

But given that these notes were demonetised by the Centre as of November 9, could either state make such provisions at all, once they had ceased to be legal tender?

For Uttar Pradesh, the fear was of the exemption being misused to channel black money back into the system. Initial reports suggested that this registration would include stamp duty, a tax payable on the sale of a property. In Uttar Pradesh, this stands at 7% of the property value.

Speaking to the Times of India, Navneet Sehgal, principal secretary of information of the Uttar Pradesh government, clarified that the state would permit only the payment of registry fees, not stamp duty, with the old notes. The highest such amount is Rs 20,000.

The Centre had through the Reserve Bank of India published a list of conditions under which old denominations could still be used. These include payments in government hospitals, milk booth purchases, payments at crematoria, rail ticket purchases and payments for utility charges. The Uttar Pradesh government says that it has considered land registration as a utility charge.

The Centre is yet to challenge it on this contention.

Meanwhile, Vinod Tawde’s office also clarified his tweet, which has now raised a minor storm on Twitter. This exemption, they said, applied only to Marathi plays that have already been scheduled at theatres run by urban development boards across the state. This, they said, minimises the possibility of tickets being bought in bulk to launder black money.

Mixed reactions

Legal experts have mixed opinions on these actions.

“All the Centre has done is to say that these notes are no longer legal tender,” explained Alok Prasanna Kumar, an advocate and visiting fellow with the Vidhi Legal Centre in Delhi. “Somebody who refuses to accept these notes is protected under law. However, since banks are at present accepting Rs 500 and Rs 1,000 notes, nothing prevents you from giving services worth Rs 500 and Rs 1,000 with old notes.”

The only caveat is that the person accepting the notes will have to deposit it in a bank by the deadline given by the government or risk having it completely devalued. These states, Kumar said, are merely taking the burden of depositing these notes on itself.

Maharashtra has announced other relief measures during this period. Many of these are extensions of the Centre’s conditions. For the Centre’s statement that old notes will be accepted on national highways, Maharashtra has waived all toll fees on all state highways until November 24. Farmers can travel on state transport buses for free if they are carrying up to 50 kg of produce with them. Chief Minister Devendra Fadnavis has requested private hospitals to accept payments via cheque, with a promise to reimburse an amount up to Rs 10,000 if the cheque bounces.

Tawde’s exemption is the only one that directly creates a new condition for old notes to be used.

“On the use of currency notes, any such power [to use demonetised notes] would flow from the Reserve Bank of India Act,” said Suhrith Parthasarathy, a law practitioner based in Chennai.

While agreeing that there was nothing to stop anyone from using tokens as a means of purchasing a product, Parthasarathy’s concern was about the potential dangers of states being allowed to carve out their own conditions during a procedure that involves the entire country.

“It would create an inequitable situation if states were allowed to create exemptions [for using demonetised notes],” Parthasarathy said. In Maharashtra, it’s ludicrous to allow plays this exemption. I see this as a problematic development. These would have to be examined by a court for us to know what the law really is.”