Demonetisation Verdict: The Supreme Court today upheld the government̵7;s 2016 note ban decision which phased out old Rs 1,000 and Rs 500 currency notes by a 4:1 majority. The apex court said that the decision-making process was not flawed. A five-judge Constitution bench of the apex court, headed by Justice S A Nazeer, said that there has to be a great restraint in matters of economic policy and the court cannot supplant the wisdom of the executive by a judicial review of its decision. However, the dissenting judge said that the order was unlawful and vitiated.
Justice BV Nagarathna, who did not agree with the four other justices, said that the process of banning Rs 1,000 and Rs 500 notes could not have been initiated by the Centre. She agreed with the petitioners’ submission that as per section 26 of the Reserve Bank of India Act, the central board of the RBI should have come forward to independently recommend the demonetisation. She said that the RBI should not have done demonetisation based on the advice of the Centre.
She, however, added that since the decision was taken in 2016, a status quo ante cannot be restored. Justice BV Nagarathna also said that she is not questioning the noble objectives of demonetisation but only the legal angle of it. She said that the note ban decision was well-intentioned and well-thought-off as it targeted evils such as black money, terror funding, and counterfeiting.
She also said that if a note ban was to be done, it should have been initiated through an Act of Parliament and not by an executive notification. She said that phrases like “as desired by Centre government” used by the RBI show that there was no independent application of mind by the central bank.
“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 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. The top court’s judgment came on a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on November 8, 2016.