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Supreme Court dismisses petitions challenging 2016 demonetisation

Supreme Court dismisses petitions challenging 2016 demonetisation

Justice BV Nagarthana said that it is not here to decide on the merits or demerits of economic and/or financial decisions while adding that the Reserve Bank of India (RBI) is the bulwark of the Indian economy. 

SC dismisses pleas challenging 2016 demonetisation SC dismisses pleas challenging 2016 demonetisation

The Supreme Court has dismissed the petitions against 2016's demonetisation in a 4:1 majority judgment. While dismissing the petitions, the Supreme Court noted that demonetisation cannot be struck down merely because the Centre initiated the exercise. 

The Supreme Court's Justice BV Nagarthana said, “The demonetisation exercise cannot be struck down on grounds of proportionality.” Justice Nagarthana added that it is not here to decide on the merits or demerits of economic and/or financial decisions while adding that the Reserve Bank of India (RBI) is the bulwark of the Indian economy. 

"I have noted that RBI is the bulwark of the Indian economy. I have cited history of such demonetisation exercise world over. The court is not to sit over the merit of economic or financial decision," the SC judge noted.

Justice Nagarthana, however, did also point out that demonetisation could have been executed via an act of legislation and not by the government. “Demonetisation at the behest of the Centre is a far more serious issue as compared to demonesation on the recommendations of the RBI. Powers of the Union government being vast, must be exercised only by legislation rather than by an executive order," he said.

The pleas challenging demonetisation cited Section 26 (2) of the Reserve Bank of India (RBI) Act, and questioned the decision-making process, whether the recommendation considered relevant factors, and the objective of demonetisation was achieved or not and whether it withstood the test of proportionality. The petitioners also said that the top court has powers to grant declaratory relief. Section 26 (2) of The Reserve Bank of India Act focuses on demonetisation and states any series of bank notes of any denomination shall cease to be legal tender by notification in the Gazette of India.

In contrast to Justice Nagarthana, Justice BR Gavai stated that the objective behind the 2016 note ban has to be for proper purposes. Justice Gavai said, “Objective has to be for proper purposes and relation with the object of the act. Thus, the power available to the Centre cannot mean that it is in relation to only a specific series of bank notes. It is for all series of bank notes.”

The court was also of the view that the Union government has to take action after consultation with the Central Board of the RBI and there was a consultation for around six months, India Today reported. 

After the top court’s verdict, petitioners’ advocate and senior Congress leader P Chidambaram tweeted, “We are happy that the minority judgment has pointed out the illegality and irregularities in the demonetisation, it may be only a slap on the wrist of the government, but a welcome slap on the wrist. The dissenting judgment will rank among the famous dissents recorded in the history of the Honorable Supreme Court.”

(With inputs from Kanu Sarda)

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