The Supreme Court in its verdict held that the demonetisation decision does not suffer from any legal or constitutional flaws.
The Apex Court said the petitions can be placed before an appropriate bench by the CJI for deciding issues linked to the main issue relating to validity of demonetisation process.
The Top Court said the 52 day window provided for exchange of demonetised currency notes with legal tenders is not unreasonable and cannot be extended now. It said in the 1978 demonetisation, the window for exchange of demonetised bank notes was three days, which was extended by another five days.
The five-judge Constitution bench, while affirming the demonitisation notification, said the decision, being Executive’s Economic Policy, cannot be reversed.
“The decision making process (of the Union government) is not flawed,” the Supreme Court said, in its verdict.
A five-judge constitution bench of the Supreme Court, headed by Justice S Abdul Nazeer, pronounced the verdict today on a batch of petitions challenging the decision taken by the Union government in 2016.
The Supreme Court, though initially framed, 9 issues to consider this matter, it has, however, finally, reframed 6 issues.
Justice BV Nagarathna differs from majority view, of the judgement rendering a dissenting verdict.
Justice B V Nagarathna said, scrapping of Rs 500, Rs 1,000 series currency notes had to be done through legislation, not through notification.
Justice Nagarathna, said Justice Gavai’s judgment does not recognize the essential fact that Section 26(2) does not take into account the initiation of demonetisation.
“I differ on the answers of each of the question as formulated by Justice B R Gavai,” Justice Nagarathna said, in the verdict.
Justice Nagarathna said she noted that RBI is the bulwark of Indian economy. “The Court is not to sit over merit of economic or financial decision. 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.
“I have stated that when demonetisation originates from centre it is not under section 26(2) of the RBI, but it is to be by way of legislation, and if secrecy is needed then ordinance is the way,” she said, in her dissenting judgement.
“Demonetisation at the behest of centre is far more serious issue affecting citizens as the one done by the banks. Therefore in my view powers being vast of centre same has to be by plenary legislation. Without parliament a democracy cannot thrive and so that meaning to democracy is given. Parliament cannot be left aloof on such important decisions,” Justice Nagarathna said in her dissenting judgemnt.
A five-judge constitution bench of the Supreme Court, headed by Justice S Abdul Nazeer, had on December 7, reserved the judgement after extensively hearing the arguments and submissions from various petitioners, Centre and Reserve Bank of India (RBI) in the matter.
The other four judges in the bench of the Apex Court were: Justices Gavai, Bopanna, Ramasubramanian and Nagarathna.
The Apex Court, while reserving its judgement, had asked the Centre and RBI to place before it the records pertaining to the decision of demonitizatiom in a sealed envelope for its perusal.
Senior advocate and forme Finance Minister, P Chidambaram, who was leading the arguments on part of many petitioners, told the Top court that if the central government was so confident of its order of introducing demonetization, it should not shy away from producing the relevant files or material that went into the decision-making process.
“The demonetization exercise was “completely flawed,” Chidambaram had told the Supreme Court, and added that the process had to emanate from the RBI under Section 26(2) of the RBI Act, which deals with the power to demonetize currency notes of any denomination.
The Centre, in its affidavit filed in the Supreme Court, has defended its decision to demonetise Rs 500 and 1,000 currency notes in 2016 as it said that it was a major step to fight the menace of fake currency notes, terror financing, black money and tax evasion.
The Centre, in its affidavit filed in the Supreme Court, said it was a part of a larger strategy for combating the menace of fake money, terror financing, black money and tax evasion, but not confined to them alone.
“It was an economic policy decision exercised in accordance with powers conferred by an Act of the Parliament (RBI Act, 1934), in conformity with the provisions of the said Act and was subsequently affirmatively taken note of by the Parliament in the Specified Bank Notes (Cessation of Liabilities) Act, 2017,” the affidavit said.
The affidavit was filed to counter the various pleas challenging the Centre November 8’s, 2016, decision.
The notification issued on November 8, 2016 was a major step to fight the menace of fake currency notes, storage of unaccounted wealth and financing of subversive activities, the government said.
Justifying its decision, the government also said, “The expansion of the formal sector and the shrinking of the informal sector were undertaken through a series of policy measures. The policy push included digitalising transactions, technology connectivity and implementation to enable last-mile reach, increasing the tax base, enhancing tax compliance, lowering the cost of doing business, eliminating policy distortions, facilitating financial inclusion at the formal sector level and labour and agrarian reforms.”
The withdrawal of the legal tender character was one of the significant steps in the enhanced formalisation of the economy with the aim of expanding opportunities for the millions living on the periphery of the economy, the government said.
Various petitions were filed arising from the decision of the Government of India to demonetise the old notes of Rs.500 and Rs.1,000. One of the petitions was filed by lawyer, Vivek Narayan Sharma. The petition has challenged the notification of November 8, 2016.