SC Upholds Centre's 2016 Decision On Demonetisation By 4:1 Majority Verdict, Dismisses Pleas

Justice B R Gavai held that the power under Section 26(2) of the RBI Act can be used to demonetise the whole series of banknotes and not any particular series.

File Photo of The Supreme Court and demonetised Indian currency notes

Source : PTI

New Delhi: A Constitution bench of the Supreme Court on Monday rejected 58 petitions challenging the Centre's 2016 decision to demonetise Rs 500 and Rs 1000 currency notes with a 4-1 majority, saying the decision-making process is not flawed. It held that the notification dated November 8, 2016, which announced the decision to scrap the high-value currency notes, cannot be said to be unreasonable and struck down on the ground of the decision-making process.

"There has to be great restraint in matters of economic policy and the court cannot supplant the wisdom of the executive by a judicial review of its decision," a five-judge Constitution bench of the apex court, headed by Justice S A Nazeer, said, as reported by news agency PTI.

Demonetisation Had To Be Done Through Legislation And Not Through Notification: Justice B V Nagarathna

Justice B V Nagarathna dissented from the majority judgment on the point of the Centre's powers under section 26(2) of the RBI Act, stressing that the scrapping of the Rs 500 and Rs 1,000 series notes had to be done through legislation and not through a notification.

"Parliament should have discussed the law on demonetisation, the process should not have been done through a gazette notification. Parliament cannot be left aloof on an issue of such critical importance for the country," Justice Nagarathna said, as quoted by PTI.

She also mentioned that there was no independent application of mind by the Reserve Bank of India (RBI) and only its opinion was sought, which cannot be said to be a recommendation.

The SC bench stated that the Centre's decision-making process could not have been flawed as there was consultation between the RBI and the Union government.

As per the apex court, the notification dated November 8, 2016 announcing the decision to scrap the high-value currency notes, cannot be said to be unreasonable and struck down on the ground of decision-making process. It is not relevant whether the objective behind the decision was achieved or not, Justice B R Gavai stated.

"There was consultation between the Centre and the Reserve Bank of India for a period of six months. We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by the doctrine of proportionality," the bench said, as per PTI.

The five-judge Constitution bench headed by Justice S A Nazeer, who will retire on January 4, pronounced its verdict on the matter as the top court reopened after its winter break. The Supreme Court has heard a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on November 8, 2016.

Besides Justices Nazeer, Gavai, and Nagarathna, the other members of the five-judge bench are Justices A S Bopanna and V Ramasubramanian.

SC Hearings On Pleas Against Demonetisation

The top court had, on December 7, directed the Centre and the Reserve Bank of India (RBI) to put on record the relevant records relating to the  Centre's 2016 decision and reserved its verdict. The bench heard the arguments of Attorney General R Venkataramani, the RBI's counsel and the petitioners' lawyers, including senior advocates P Chidambaram and Shyam Divan.

According to news agency PTI, Chidambaram called the scrapping of the Rs 500 and Rs 1,000 currency notes deeply flawed and argued that the government cannot on its own initiate any proposal relating to legal tender, which can only be done on the recommendation of the RBI's central board.

Opposing the apex court's attempt to revisit the 2016 demonetisation exercise, the government had said the SC cannot decide a matter when no tangible relief can be granted by way of "putting the clock back" and "unscrambling a scrambled egg".

The RBI had earlier admitted in its submissions that there were "temporary hardships" and that those too are an integral part of the nation-building process, but there was a mechanism by which the problems that arose were solved.

In an affidavit, the Centre told the apex court that the demonetisation exercise was a "well-considered" decision and part of a larger strategy to combat the menace of fake money, terror financing, black money and tax evasion.

(With Agency Inputs)