In 4:1 Majority Verdict, Supreme Court Upholds Centre’s Demonetisation; Justice Nagarathna Has a Dissenting Opinion
Moneylife Digital Team 02 January 2023
The Supreme Court (SC) on Monday upheld the Central government’s 2016 decision to demonetise currency notes of the Rs500 and Rs1,000 denomination. A five-judge Constitution bench, comprising justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna, dismissed a batch of 58 petitions challenging the Centre’s 2016 decision to demonetise currency and said that the decision, being part of the Executive's economic policy, cannot be reversed. 
The majority decision by the Constitution bench, headed by justice SA Nazeer, said the Centre's decision-making process could not have been flawed as there was consultation between the Reserve Bank of India (RBI) and the Union government. There was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by the doctrine of proportionality, the SC said. Justice Nagarathna differed from the majority judgement on the point of the Centre's powers under Section 26(2) of the RBI Act. 
On 7th December, the apex court had directed the Centre and RBI to put on record the relevant undisclosed records relating to the government's 2016 decision in a sealed envelope and reserved its verdict. It heard the arguments of attorney general (AG) R Venkataramani, RBI's counsel and the petitioners' lawyers, including senior advocates P Chidambaram and Shyam Divan.
Delivering the majority opinion, justice Gavai stated, "It has been held that there has to be great deal of restraint before interfering in matters of economic significance...we cannot supplant such views with the judicial one."
He went on to hold, "There was consultation between the Centre and the RBI for a period of 6 months. We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by doctrine of proportionality." Finally, justice Gavai concluded that RBI has no independent power to bring in demonetisation.
"Thus, power available to the Centre cannot be mean that it is in relation to only specific series of bank notes. It is for all series of bank notes...There is no excessive delegation as under Section 26(2) of RBI Act and thus cannot be struck down. Notification is valid and satisfies the test of proportionality. period for exchange of notes cannot be said to be unreasonable."
Justice Nagarathna, however, differed on the answer to each of the questions framed, and delivered a dissenting judgement. "I have noted that RBI is the bulwark of Indian economy. I have cited history of such demonetisation exercise world over. Court is not to sit over merit of economic or financial decision...examining 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." She went on to hold, "Demonetisation at the behest of the Central government is a far more serious issue affecting citizens than the one done by the banks. Therefore, in my view, powers of Centre being vast, the same has to be done by plenary legislation." 
“Without Parliament, a democracy cannot thrive...Parliament cannot be left aloof on such important decisions," she went on to state. Significantly, she held, "There is an inherent contradiction in the provision of Section 26(2) [of the RBI Act] itself. Looking at the records submitted by RBI, it is noted that demonetisation was recommended by the Central government. This shows there was no independent application of mind by the RBI. The entire exercise was carried out in 24 hours."
Calling the scrapping of the Rs500 and Rs1,000 currency notes deeply flawed, Mr Chidambaram had argued that the government cannot on its own initiate any proposal relating to legal tender, which can only be done on the recommendation of RBI's central board. 
Resisting the apex court's attempt to revisit the 2016 demonetisation exercise, the government had said the court cannot decide a matter when no tangible relief can be granted by way of 'putting the clock back' and 'unscrambling a scrambled egg'. 
RBI had earlier admitted in its submissions that there were 'temporary hardships' and that those too are an integral part of the nation-building process, but there was a mechanism by which the problems that arose were solved. In an affidavit, the Centre told the top court recently that the demonetisation exercise 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. SC has heard a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on 8 November 2016 and junked all 58 pleas against the note ban.
In a tweet, noted public interest lawyer and activist, Prashant Bhushan, lauded justice Nagarathna as the sole voice of dissent in the five-judge bench, saying “Very creditable & courageous for the junior most & only woman judge on this bench, Justice Nagarathna to dissent & hold that the exercise for Noteban was arbitrary & without proper application of mind. This mindless decision taken by PM alone destroyed economy & lives of Millions.”


1 year ago
While the majority judgement refers to 6 months deliberations between RBI and Government, the dissenting Judge writes that order of demo was done in 24 hours - there is some thing contradictorily different - the dissenting Judge might have not seen the files submitted in sealed cover?
Meenal Mamdani
Replied to vasanthmadhavoffice comment 1 year ago
Yes, there were deliberations but we are not told what they were. It is possible that RBI had raised several objections which had not been resolved. But when the govt sent the order in November, RBI did not have the entire Board meet and deliberate on it. RBI sent its stamp of approval in 24 hours.
Surely, such a momentous decision should have been discussed thoroughly and over several meetings.
D C Mahulkar
1 year ago
Prashant Bhushan should be barred from appearing in SC. As per him, lone dissent is creditable (because it is against Modi) but not those four judges who were unanimous.
1 year ago
Still we have absurd advocates like Prashant Bhushan who makes lousy comments
1 year ago
The fact that EVERYTHING needs SC "opinion" and "verdict" in the name of "justice" is comical and a tragedy all the same.
Replied to adityag comment 1 year ago
Kamal Garg
Replied to bhatiahv comment 1 year ago
Why we keep on dragging every thing to SC for their final verdict.
1 year ago
So one Justice Nagarathna has managed to make news.
Meenal Mamdani
Replied to vijaygovind53 comment 1 year ago
It is sad and the measure of our times that you would think that is the only reason why she gave a dissenting opinion.
People make news for the wrong reasons, sometimes just to be in the news.
Justice Nagarathna has done us Indians proud. She has not been afraid to call out what is wrong, no matter the repercussions to her or hers.
I wish we had more people like her, courageous and with integrity.
Mani Sriram
Replied to Meenal Mamdani comment 1 year ago
Just because you think it was wrong does not mean it was wrong. Four of the judges said it was in order. Learn to accept the verdict instead of continuing to harp on your biased agenda.
Meenal Mamdani
1 year ago
At last what was suspected is out in the open.
This mindless act was the brainchild of Modi and will be remembered in history as a manifestation of his colossal ego.
Also shows that Reserve Bank was a rubber stamp as had been suspected.
Too bad that Urjit Patel did not have the gumption to resign rather than give his approval.
Replied to Meenal Mamdani comment 1 year ago
It is unfortunate that the matters of national importance (even security) are dragged in court by 'opposition' parties when it is obvious that the clock can't be turned back. Their intent was 'not to fight for general public' and ask relevant questions like what thought process was put in place to avoid the hardship people faced but to understand the operational nitty gritty of executing such massive decision 'without a leak' so they can learn from it and get their pony in right places of decision making to avoid such surprise in future. If this was discussed in parliament before implementation, nothing could have been achieved like unearthing thousand crores of black money and tax evasions.
1 year ago
“Without Parliament, a democracy cannot thrive...Parliament cannot be left aloof on such important decisions," she went on to state. - if so, why did #SC strike down the #NJAC law passed by the #Parliament ?
Replied to m.muralidharan comment 1 year ago
Well said.
1 year ago
Only where there is law, there can be a remedy. Not in India. The Supreme Court has rationalized in many ways why it simply cannot do anything about such a massive, irreversible act of bad governance so long after the fact. The Supreme Court was more honest when it threw up its hands about communist-colonial land expropriation pleading helplessness to undo the obvious injustice:
Mani Sriram
Replied to S.SuchindranathAiyer comment 1 year ago
Act of bad governance cannot be countered through courts, but through only electorate. So try from there to cool down your hurt ego
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