SC Says DeMo Decision ‘Not Flawed’; Dissenting Judge Says Should Have Been ‘Done by Law’

New Delhi: The country’s Supreme Court on Monday upheld by 4:1 majority, with Justice J Nagarathna dissenting, the BJP government’s exercise of sudden demonetisation of Rs 1,000 and Rs 500 currency notes in November 2016.

The top court's judgment came on a batch of 58 petitions challenging the demonetisation exercise announced by the Centre six years ago.

The sudden demonetisation announcement by Prime Minister Narendra Modi over television on the night of November 8, 2016, had brought the entire country on to the streets and paralysed the medium, small and micro enterprises, leading to massive job losses overnight. Over 100 people had died while standing in queues in front of banks and ATMs to exchange their notes.

Read Also: REPLUG: Demonetisation has Been an Utter Failure on all Fronts

Terming the decision-making process as “not flawed”, the five-judge Supreme Court bench, headed by Justice S A Nazeer said 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 decisions, said PTI.

However, 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 and said the scrapping of the Rs 500 and Rs 1,000 series notes had to be done through a 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.

She also said 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 bench, also comprising justices B R Gavai, A S Bopanna and V Ramasubramanian, said the Centre's decision-making process could not have been flawed as there was consultation between the RBI and the Union government.

In its verdict, the court said 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 decision-making process.

It added that it is not relevant whether the objective behind the decision was achieved or not.

"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.

However, the dissenting Justice Nagarathna said: “The action of demonetisation initiated by the Central Govt as per Nov 8, 2016
notification is unlawful. But status quo ante cannot be restored at this this point of time. What relief can be given now? Relief needs to be moulded.”

She added that “Even assuming RBI had such a power, such recommendation is void as the power under Section 26(2) can be only for a particular series of currency notes not for the whole series of currency notes of a denomination,” as quoted by LiveLaw.

It may be recalled that the government had mentioned three objectives of the move: to eliminate black money, to get rid of counterfeit notes and to attack terror funding.

Ironically, the verdict came on the day there were reports of renewed terror attacks in Jammu & Kashmir.

And as per Reserve Bank data, currency with the public has jumped to a new high of Rs 30.88 lakh crore an October 21, indicating that cash usage is still substantial even six years after the demonetisation move.