Demonetisation Valid, SC Holds by 4:1 Majority with Justice Nagarathna Dissenting

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Justice Nagarathna in her dissenting judgement said that the RBI did not show independent application of mind and merely approved Centre's desire for demonetisation.

Clarion India

NEW DELHI — The Supreme Court Constitution Bench on Monday upheld by 4:1 majority the 2016 decision taken by the Union Government to demonetise the currency notes of Rs. 500 and Rs.1000 denominations.

The majority held that Centre’s notification dated November 8, 2016 is valid and satisfies the test of proportionality. Justice BV Nagarathna in her dissenting view held that though demonetisation was well-intentioned and well thought of, it has to be declared unlawful on legal grounds (and not on the basis of objects).

Reading out the majority judgment, Justice BR Gavai said demonetisation had a reasonable nexus with the objectives (eradicating black marketing, terror funding, etc.) sought to be achieved. It is not relevant whether the objective was achieved or not, he added, reports LiveLaw.

Justice Gavai further said that the decision-making process cannot be faulted merely because the proposal emanated from the Central government.

The bench said there has to be great restraint in matters of economic policy and the court cannot supplant the wisdom of the executive with its wisdom. Justice Nagarathna differed from the majority view, and delivered a dissenting judgment.

The bench added that Section 26(2) cannot be struck down as unconstitutional on the ground of excessive delegation, adding that there are inbuilt safeguards.

“Delegation is made to Central Govt which is answerable to Parliament which in turn is answerable to the citizen of the country. The Central Govt is required to take the action after the consultation with the Central Board and there is an inbuilt safeguard.”

However, Justice BV Nagarathna also differed from the majority judgment on the point of powers of Central Govt under Section 26(2) RBI Act.

Justice Nagarathna in her dissenting view held that demonetisation of the whole series of Rs 500 and Rs 1000 currency notes is a serious matter and it could not be done by the Centre by merely issuing a gazette notification.

She said that though the measure was well-intentioned and well thought of, it has to be declared unlawful on legal grounds (and not on the basis of objects).

“Demonetisation of all series of notes at the instance of Central Govt is a far more serious issue than the demonetisation of particular series by the bank. So, it has to be done through legislation.”

Justice Nagarathna further expressed that the RBI did not show independent application of mind and merely approved Centre’s desire for demonetization.

“On looking at the records submitted by RBI, there are words “as desired by the Central Govt”…this demonstrates there was no independent application of mind by the RBI. The entire exercise was carried out in 24 hours,” she observed.

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