Supreme Court upholds 2016 demonetisation, says RBI was consulted

 Supreme Court upholds 2016 demonetisation, says RBI was consulted

(Reading out the majority judgment, Justice B R Gavai said demonetisation had a reasonable nexus with the objectives (eradicating black marketing, terror funding, etc.) sought to be achieved. It is not relevant whether the objective was achieved or not,)

New Delhi 

In an important judgement and on its first working day of the year 2023, the Supreme Court

on Monday upheld the Modi government's 2016 decision to demonetise the high value 

currency notes of Rs 500 and Rs 1000 denominations.  

In a 5 judge bench, four judges voted in favour of upholding the noteban whereas one judge dissented.

The Constitution bench headed by Justice S A Nazeer, who will retire on January 4 2023,  pronounced its verdict 

and also dismissed a batch of petitions challenging the Centre’s 2016 decision.

The apex court maintained that the decision, being executive's (government's) economic policy, cannot be reversed.

Justice B V Nagarathna gave her note of dissent. She differed from the majority judgment on the point of the 

Centre's powers under section 26(2) of the RBI Act. 

"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.

The Supreme Court accepted the government's views that there was consultation between the Centre and 

the Reserve Bank of India (RBI) before demonetisation.  There was a reasonable nexus to bring such a 

measure, and it also held that demonetisation "was not hit by doctrine of proportionality".

Justice Nagarathna also said, "Parliament is a miniature of the country. Parliament which is the centre of 

democracy cannot be left aloof in a matter of such critical importance".

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.

Earlier, it had asked the Centre and Reserve Bank of India to place before it the records pertaining to the 2016 demonetisation decision in a sealed envelope.

It had said that it has the power to examine the manner in which the decision for demonetisation was taken adding that the judiciary cannot fold its hands and sit just because it is an economic policy decision.

The top court's remarks came when the Reserve Bank of India counsel made the submission that judicial review cannot apply to economic policy decisions.

 ends