A majority of four judges on a Constitution Bench of the Supreme Court on Monday found no flaw in the Union government’s process to demonetise ₹500 and ₹1,000 banknotes through a Gazette notification in 2016. The sole woman judge on the five-member Bench, Justice B.V. Nagarathna, however, disagreed with the majority, saying the government’s notification issued under Section 26(2) of the Reserve Bank of India (RBI) Act was unlawful.
Justice B.R. Gavai, delivering the judgment for the majority, pronounced that the statutory procedure under Section 26(2) was not violated merely because the Centre had taken the initiative to “advise” the Central Board to consider recommending demonetisation. Differing, Justice Nagarathna said the Centre could have issued a notification under Section 26(2) only if the Central Board of the RBI had initiated the proposal to demonetise a specified series of banknotes by way of a recommendation.
In cases in which the government initiates demonetisation, Justice Nagarathna said, it should take the opinion of the Central Board. Describing Parliament as the “nation in miniature”, she said, “Without Parliament, democracy will not thrive.” Justice Nagarathna concluded there was no “meaningful application of mind” by the Central Board to the government’s initiative for withdrawing ₹500 and ₹1,000 notes, which formed 86% of the currency in circulation at the time, causing severe financial crunch and socio-economic despair. The objectives of demonetisation were “noble and well-intentioned”, but the process undertaken was bad in law, she added. Nothing, however, can be done to restore the situation to status quo ante, but the judgment could act prospectively, she said.
The Opposition, meanwhile, said the judgment doesn’t acquit the Modi government. Congress’s Jairam Ramesh said the judgment is limited to the issue of the process of decision-making and not with its outcome. The BJP, however, hailed the Supreme Court’s decision and said the court had accepted that the government’s decision was within the ambit of the law. Union Law Minister Kiren Rijiju also accused the Congress of “misinforming” the people and targeted former Finance Minister P. Chidambaram for his observation that the dissenting verdict in the 4:1 majority decision was a “slap on the wrist” of the Centre.
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