In 4:1 verdict, SC upholds 2016 demonetisation decision, saying process was not flawed

Justice 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 ₹500 and ₹1,000 series notes had to be done through 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.

Also read: Report on failure in meeting inflation target will not be made public

“In my view, the power of the central government being vast has to be exercised through plenary legislation rather than by an executive act by the issuance of notification. It is necessary that Parliament, which consists of the representatives of the people of the country, discusses the matter and thereafter, approves the matter,” she said.

The judge said the proposal originated from the Centre while the RBI’s opinion was sought and such an opinion given by the central bank cannot be construed as a “recommendation” under section 26(2) of the RBI Act.

“Parliament is often referred to as a nation in miniature. It is the basis of democracy. Parliament provides representation to the people of the country and makes their voices heard. Without Parliament, democracy cannot thrive. Parliament, which is the centre of democracy, cannot be left aloof in a matter of such critical importance,” she 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.

There was consultation with RBI

The bench, also comprising justices BR Gavai, AS 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 8 November, 2016.

The court said the notification dated 8 November, 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 the 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.

(Disclaimer: Only the headline, subheads, and intro of this report along with the photos may have been reworked by South First. The rest of the content is from a syndicated feed)