The demonetisation exercise cannot be struck down on grounds of proportionality, the Supreme Court said
New Delhi:
The Supreme Court today backed Prime Minister Narendra Modi’s 2016 notes ban in a landmark 4-1 majority judgment and said the decision could not be faulted just because the Centre initiated it.
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The Centre is required to act in consultation with the Reserve Bank of India (RBI) and there is an “inbuilt safeguard”, the Supreme Court said. The judges noted that there was consultation between the two for six months.
It is “not relevant” whether the objective was achieved or not, the Supreme Court ruled. “There has to be great restraint in matters of economic policy. Court cannot supplant the wisdom of executive with its wisdom,” said Justice BR Gavai, reading out the order of the five-judge Constitution bench.
In a strong dissenting judgment, Justice BV Nagarathna called the notes ban initiated by the Centre “vitiated and unlawful” and said the move could have been executed through an act of Parliament.
The November 8 (2016) demonetisation notification was “an exercise of power contrary to law”, said the judge, noting that the entire exercise was carried out in 24 hours.
“The problems associated with demonetisation make one wonder whether the central bank had visualised these,” said Justice Nagarathna.
She said documents and records submitted by Centre and the RBI, which included phrases like “As desired by the Central Government”, show there was “no independent application of mind by the RBI”.
Some 58 petitions challenged the Centre’s decision to ban Rs 1,000 and Rs 500 currency notes overnight. Rs 10 lakh crore was wiped out of circulation by the move.
Petitions argued that it was not a considered decision and caused immense hardships to millions of citizens, who were forced to queue up for cash.
The demonetisation exercise cannot be struck down on grounds of proportionality, the Supreme Court said, adding that the period of 52 days given for the exchange of notes was not unreasonable.
The government had argued that the court cannot decide on a case when no tangible relief can be granted. It would be like “putting the clock back” or “unscrambling a scrambled egg”, the centre said. It also said demonetisation was a “well-considered” decision and part of a larger strategy to combat the menace of fake money, terror financing, black money and tax evasion.
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