On 8th November 2016, PM Modi announced the DEMONETISATION of Rs 500 and Rs 1000 currency notes and advised all citizens to exchange these notes with new currency notes by 31 December 2016. There was too much noise by the opposition parties regarding this move, and the Congress party said it was not as per the law, and this was their main agenda in the campaign against PM Modi during the 2019 general elections. There were many petitions filed in various courts by many NGOs, political parties, and even the general public against demonetisation. In the end, all these petitions landed in the Supreme Court, and a bench consisting of five judges was constituted by the SC, which heard the matter.
Yesterday SC announced their verdict in this case:
The Supreme Court (SC) upheld the validity of the Central government’s 8th November notification to demonetize the currency notes of Rs 500 and Rs 1000 denominations, saying that it does not suffer any flaws in the decision-making process.
By a majority view of 4:1, a five-judge bench of by five-justice SA Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna pronounced the judgment on over 50 petitions.
Justice Gavai, who authored the majority judgment, said that the decision-making process can not be faulted merely because the proposal emanated from the central government. He said the decision was not flawed, unreasonable or hit by proportionality. The top court also declared that 52 days window for the exchange of notes can not be said to be unreasonable and can not be extended now. “ We fail to understand as to how the said period of 52 days could be construed to be unreasonable, unjust, and violative of the petitioner’s fundamental rights”, the bench said. It is also noted that under the 1978 Act, when a previous demonetisation exercise was done, three days period was provided for exchanging the demonetized notes. The bench said there has to be great restraint in matters of economic policy and the court can not substitute, or supplement the wisdom of the executive with its own views.
The court also rejected the contention that the notification is liable to be set aside on the ground that it caused hardship to individual/citizen, saying “ it will hold no water. The individual interest must yield to the larger public interest sought to be achieved”. With regard to a suggestion to frame a scheme and provide a window for a limited period so as to enable citizens having genuine reasons to exchange the old notes, the bench said “ we do not find that it will appropriate for us in the absence of any expertise in economic, monetary, and fiscal matters to frame such a scheme. In our view, it will be encroaching upon the areas reserved for the experts. If the central government finds there are any reasons for extending the benefit, it is within its discretion to do so. In our view, it can not be a judicial mandate”.
The court also said that RBI does not have independent power to accept the demonetised notes beyond the period specified.
However, Justice Nagarathna differed from the majority view, as she held the proposal for demonetization has to be undertaken by a legislative measure, not through a gazette notification. She also faulted the proposal for having been advanced by the central government. “ The measure has been regarded as unlawful only on the purely legalistic analysis of the relevant provisions of the RBI Act and not on the objects of demonetization”. Justice Nagarathna, however, wrote in her judgment.
The majority said that there was consultation between the Centre and the RBI for a period of six months before the exercise was undertaken. “ We hold there was a reasonable nexus to bring such a measure, and we hold that demonetization was not hit by the doctrine of proportionality”, justice Gavai said.
In its written response, the Centre had told the SC that the November 2016 decision to withdraw legal tender of Rs 500 and Rs 1000 currency notes was one of the critical steps in the series of transformational economic policy steps, and this decision was taken after extensive consultation with the RBI and advance preparations.
In the majority judgment, the SC said the power available to the central government under the RBI Act can not be restricted to mean that it can be exercised only for ’one’ or ‘some’ series of banknotes and not for ‘all’ series of bank notes. “ Merely because on two earlier occasions, the demonetization exercise by legislation, it can not be held that such a power would not be available to the central government”. It further added that the Centre is the best judge since it has all the inputs with regard to fake currency, black money, terror funding, and drug trafficking.
In my opinion, this judgment by the SC is a big slap on the face of the opposition leaders who were all the time harping on, and saying that the demonetization announced by Modi’s government is unconstitutional, illegal, etc. The irony of the matter is Congress leader P Chidambaram who was appearing and arguing in this case for the petitioners had the audacity to say the following after the judgment was pronounced by the bench.
His statement is “ We are happy that the minority judgment has pointed out the illegality and irregularities in the demonetization. It may be only a slap on the wrist of the government, but a welcome slap on the wrist”.
I do not understand how P Chidambaram can say minority judgment, the judgment can never be the minority, the judgment is always a majority judgment, and in the majority judgment, the opponent loses the case, and can not harp on what is said by the judge who happens to be in minority in the panel of judges in the bench of the court.
Please write your views on this blog.
Anil Malik
Mumbai, India
3rd January 2023