A bench of Supreme Court Justices S Abdul Nazir, BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna demanded that the government and Reserve Bank of India examine the validity of the 2016 note ban and how it was done.
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A five-judge Supreme Court Constitution bench dismissed the Centre’s request “not to waste time on an academic issue” because the decision had “worked itself out” on Wednesday, six years after the Union government demonetised the Rs. 500 and Rs. 1,000 currency notes. Instead, the bench decided to examine the decision’s validity and the manner in which it was made.
Using Section 26 of the RBI Act to issue a demonetisation notification on November 8, 2016, a bench of Justices S Abdul Nazir, BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna demanded that the government and Reserve Bank of India submit thorough affidavits outlining the reasons for the decision, as well as the pros and cons of the move. On November 9, there will be another hearing.
Former finance minister and vocal critic of demonetization P Chidambaram testified on behalf of some petitioners in the Supreme Court demonetization case. He called the move a mindless exercise that put regular folk through extreme hardship by forcing them to wait in line for hours to withdraw small amounts, go without food and medicine, and lose their jobs. As a result, he claimed, the demonetisation’s goals of preventing the flow of black money, funding for terrorism, and fake currencies were not met.
Chidambaram said generally, the government takes demonetisation decisions on the RBI board’s recommendations. “But it was the reverse that happened. On November 7, 2016, the government wrote to the RBI seeking recommendation for demonetising Rs 500 and Rs 1,000 currency notes. The RBI board hurriedly met the next day at Delhi. Its recommendation was sent to the cabinet, which was already in a meeting. The meeting accepted the recommendation and the notification was issued,” he said.
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“Why this supersonic hurry to demonetise? Was there any deliberations about the pros and cons? The court must ask the government to produce the November 7 letter, the agenda paper before the RBI board and the recommendation. None of these vital documents were placed before Parliament or put in public domain. We should know what the government had in mind,” the veteran Congress member said.
Attorney general R Venkataramani said, “If and when required, the government will show these documents. But is it necessary for the court to carry out an academic exercise when the decision has worked itself out? The court would be required to go into a web of entangled aspects that is considered before the government takes an economic policy decision. Should the court step into such an area? Economy is no longer only domestic, it has got intrinsic connections with the global economy.”
The bench told the AG, “You cannot keep the documents away from the court’s scrutiny. Keep the papers with you. If we need to look into them, we will.”
Individual concerns related to demonetization may be investigated by the court, according to the solicitor general Tushar Mehta, but the bigger problem is now moot. He said, “The decision was taken keeping in view emergent requirements to stop funding terrorist activities, black money and fake currencies. The November 8, 2016 notification has worked itself out.”
According to Chidamabaram, it is not a research exercise. “The SC had in 1996 decided the validity of the 1978 limited demonetisation. The court can give a ruling which would serve as a guiding light for future demonetisation decisions.” He claimed that both the 1948 and the 1978 demonetisations were carried out in accordance with legislation approved by Parliament, which the government abandoned in 2016 by turning to the RBI Act.