By Raju Vernekar
Mumbai, Jan 2:
A five member bench of the Supreme Court (SC) on Monday upheld the decision of the Union Government in 2016 to ban old Rs 500 and Rs 1000 currency notes, saying that it was taken after the consultation between the Centre and the RBI.
A Constitution Bench comprising Justices S Abdul Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian and B V Nagarathna delivered the verdict on a batch of pleas challenging the Central government’s 2016 demonetisation exercise.
Delivering the majority opinion, Justice Gavai stated, that “It has been held that there has to be great deal of restraint before interfering in matters of economic significance, we cannot supplant such views with the judicial one. There was consultation between the Centre and the RBI for a period of 6 months. We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by doctrine of proportionality”.
“Thus, power available to the Centre cannot be mean that it is in relation to only specific series of bank notes. It is for all series of bank notes. There is no excessive delegation as under Section 26(2) of RBI Act and thus cannot be struck down. Notification is valid and satisfies the test of proportionality. Period for exchange of notes cannot be said to be unreasonable. The RBI does not have any independent power to bring in demonetization”.
Dissent
However Justice B V Nagarathna differed and delivered a dissenting judgment. “I have noted that RBI is the bulwark of Indian economy. I have cited history of such demonetisation exercise world over. Court is not to sit over merit of economic or financial decision…examining Section 26(2) would not mean to sit over the merits of demonetisation and thus it is well within the lakshman rekha as drawn by this Court”.
“Demonetisation at the behest of the Central government is a far more serious issue affecting citizens than the one done by the banks. The powers of Centre being vast, the same has to be done by plenary legislation. The Parliament cannot be left aloof on such important decisions. Looking at the records submitted by RBI, it is noted that demonetisation was recommended by the Central government. This shows there was no independent application of mind by the RBI”, Justice BV Nagarathna added.
Petitions
The petitioners had argued that section 26(2) of the Reserve Bank of India (RBI) Act which allows the government to declare all series of a particular denomination as being no longer legal tender is too wide, was flawed, the recommendation did not consider relevant factors, the stated objectives of demonetisation were not achieved, the move failed the test of proportionality and the Court had powers to mould and grant declaratory relief.
Sudden ban
To weed out black money, the decision to demonetise the old 500 and 1000 rupee notes was announced in the evening on November 8, 2016. Subsequently, the new 2,000 rupee currency note along with a 500 rupee note was introduced.
33 deaths, directly or indirectly linked to the demonetisation move were reported across the country. While a few deaths were out of shock, some deaths were stated to be due to exhaustion after standing for long hours in queues to exchange notes. The people had tough time to exchange Rs 2000 notes. In some parts of Maharashtra, daily wage earners working under the Employment Guarantee scheme faced extreme difficulties since they were asked to bring in change, before they were given Rs 2000 notes.(since their wages were much less than Rs 2000). There have also been reports of suicide and even a murder over demonetisation in West Bengal.
In March 2017, the government claimed that there have been no official report on deaths connected to demonetisation. However in December 2018, the then Union Finance Minister late Arun Jaitley told Parliament that four people, three bank personnel and one customer of the State Bank of India, died during demonetisation.
