NEW DELHI: More than six years after the Centre decided to ban legal tender of Rs 500 and 1000 notes, a five-judge Constitution bench of the Supreme Court on Monday upheld the same by a majority of 4:1.
The majority view which was authored by Justice BR Gavai was agreed to by Justices S Abdul Nazeer, A S Bopanna, and V Ramasubramanian.
Ruling that the notification dated 8/11/2016 by which the decision was implemented does not suffer from any flaw and satisfies the proportionality test, the majority opined that from the record, it appears that there was consultation between the RBI and the Centre for a period of 6 months.
“The action cannot be hit by the doctrine of proportionality. In the 1978 act, the period was only three days which was further extendable by five days. In the present case, the period provided (for the exchange of the demonetised notes) was 52 days and it cannot be said to be an unreasonable period", the majority also opined.
In the test of proportionality, courts can quash the exercise of discretionary powers where there is no reasonable relation between the objective which is sought to be achieved and the means used to that end.
"The power available to the Centre under section 26(2) of the RBI Act cannot be restricted to mean that it can be exercised only for some series of notes and not for all series of notes. Merely because on two earlier occasions the demonetisation exercise was by plenary legislation, it cannot be held that such power would not be available to the central government," Justice Gavai, who read the majority judgment, said.
Justice BV Nagarathna in her dissenting view ruled that centre’s action initiated by notification dated 8/11 was an exercise of power contrary to law and unlawful. “Power of Centre being vast can be exercised through a plenary legislation rather than by an executive act by issuing a notification," she said.
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Differing from the majority view, Justice BV Nagarathna said that demonetisation of bank notes at the behest of the Central government is a serious issue having an effect on the economy and citizens.
She further ruled that when a statue contemplates a specific procedure to be adhered to in order to arrive at the desired end, such procedure cannot be substituted by an alternate procedure.
The bench also said that there has to be great restraint in matters of economic policy and that the court cannot supplant the wisdom of the executive by a judicial review of its decision.
Contending that it is not the function of the court to sit in judgment over matters of economic policy, the apex court said such issues must necessarily be left to the government of the day to decide.
"We have a Parliamentary system in which the Government is responsible to the Parliament. In case the Executive does not act reasonably, it is responsible to Parliament who are elected representatives of the citizens...to book the elected representatives who act unreasonably in such matters," the bench said.
On the issue of hardships suffered by citizens during demonetisation, the apex court said if the notification had a nexus with the objectives to be achieved, then, merely because some citizens have suffered through hardships would not be a ground to hold the notification to be bad in law.
The bench also said that they find the 'hasty' argument "destructive of the very purpose of demonization."
"Such measures undisputedly are required to be taken with utmost confidentiality and speed. If the news of such a measure is leaked out, it is difficult to imagine how disastrous the consequences would be," it said.
The plea before the top court had also challenged the validity of the notification dated November 8, 2016, issued under the Reserve Bank of India Act, 1934 on the ground that it was violative of Articles 14, 19, 21 and 300A of the Constitution of India.
On December 16, 2016, a three-judge bench of the SC refused to grant interim relief against the decision of demonetisation but had framed questions to be determined by a larger bench.
Justice B R Gavai
Justice B V Nagarathna
(With PTI inputs)