This Article is From Jan 02, 2023

Demonetisation Was Valid, Says Supreme Court, 1 Judge Disagrees: 10 Facts

The centre is required to take action after consultation with the Central Board of RBI and there was a consultation between the two for six months, the judges said.

The demonetisation exercise cannot be struck down on grounds of proportionality, the Supreme Court said

New Delhi: The Supreme Court backed Prime Minister Narendra Modi's 2016 notes ban today in a landmark 4-1 majority judgment and said it was "not relevant" whether the objective of the overnight ban was achieved. One judge disagreed, calling the move "unlawful".

Here are top 10 points on this big story

  1. A constitution bench said the central government's November 8, 2016 order to ban Rs 1,000 and Rs 500 currency notes is valid and the decision-making process could not be faulted just because the Centre initiated the move.

  2. The Centre, said the court, is required to act in consultation with the Reserve Bank of India (RBI) and there is an "inbuilt safeguard". This consultation did take place for six months, four of the five judges said.

  3. It is "not relevant" whether the objective was achieved or not, the Supreme Court ruled, adding that the period of 52 days given to exchange the banned notes was not unreasonable. "There has to be great restraint in matters of economic policy. Court cannot supplant the wisdom of executive with its wisdom," said Justice BR Gavai, reading out the order.

  4. In a strong dissenting judgment, Justice BV Nagarathna called the notes ban initiated by the Centre "vitiated and unlawful" but said status quo could not be restored now. The move could have been executed through an act of Parliament, said the judge.

  5. The demonetisation order was "an exercise of power contrary to law and unlawful", said the judge, noting that the entire exercise was carried out in 24 hours.

  6. "The problems associated with demonetisation make one wonder whether the central bank had visualised these," said Justice Nagarathna.

  7. She said documents and records submitted by Centre and the RBI, which included phrases like "As desired by the Central Government", show there was "no independent application of mind by the RBI".

  8. Some 58 petitions challenged the Centre's decision to ban ₹1,000 and ₹500 currency notes overnight. ₹10 lakh crore was wiped out of circulation by the move.

  9. Petitions argued that it was not a considered decision and caused immense hardships to millions of citizens, who were forced to queue up for cash.

  10. The government had argued that the court cannot decide on a case when no tangible relief can be granted. It would be like "putting the clock back" or "unscrambling a scrambled egg", the centre said. It also said demonetisation 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.



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