SC to RBI: Not Going to ‘Sit with Folded Hands’ on Issue of Demonetisation Decision in 2016

Supreme Court Law Insider

Akansha Upadhyay

Published on – 07 December 2022 at 20:06 IST

In the face of the Supreme Court’s claim that the poorest of the poor suffered the most due to the central government’s demonetisation decision in 2016, the Reserve Bank of India, through its counsel, told the court that it believes that “temporary difficulties” were an “integral part” of the nation building.

The Court has said that just because the 2016 demonetisation move by the central government was an economic decision, it is not going to “sit by with folded hands” without reviewing the procedure or manner in which the decision to demonetise ₹500 and ₹1,000 currency notes were withdrawn from legal tender in November 2016.

The decision to make Rs 500 and Rs 1000 notes illegal tender, announced late on November 8 and effective from midnight, led to panic and health complications among those waiting in huge queues. Reports said that 100 people or more were killed as an immediate result of the move.  Many more were affected due to lack of access to banking services and other reasons.

As many as 58 petitions had been filed at the Supreme Court from November 2016 until the court decided to hear them. Reserving its verdict, the five-judge bench of Justices Abdul Nazeer, B.R. Gavai, A.S. Bopanna, V. Ramasubramaniam and B.V.  Nagarathna was hearing the submissions petitions from Attorney-General R. Venkataramani, RBI’s counsel, and the petitioners’ lawyers, including Senior Advocates P. Chidambaram and Shyam Divan.

In an earlier hearing, the petitioners had told the court that the decision was “deeply flawed”.  Experts have termed the central government’s justification for this in the affidavit submitted to the top court as insufficient and unsupported by concrete data.

It was also claimed that because it was an economic policy, the principle of proportionality “would not be fully applicable”. The principle of proportionality is a principle that holds that administrative action cannot be more drastic in order to achieve the desired result. In the same spirit, the bench repeatedly referred to the social impact of demonetisation.

The bench directed the Centre and the RBI to place on record the “relevant records” relating to the demonetisation decision taken by govt in 2016 in relation to currency notes of Rs, 1,000 and Rs. 500 for its perusal.

Justice Nagaratna added that, “Everyone paid laborers and domestic help with demonetised currencies. After all, it was these people who were forced to stand in long queues at the bank. This was the reality.”

The government had announced demonetisation, not through a parliamentary statute, but by issuing a notification in the gazette. The petitioners had argued that such an important move should not have been made by way of a “delegated legislation” like a gazette notification. The petitioners had also argued that the RBI had been in the dark about the demonetisation move.

Related Post