The Supreme Court on Monday upheld the Narendra Modi government’s 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500 denominations.
The SC ruled that the demonetisation decision does not suffer from any legal or constitutional flaws and also noted that Centre’s decision-making process cannot be flawed as there was consultation between RBI and the government.
A five-judge Constitution bench headed by Justice S A Nazeer, who will retire on January 4 was hearing a batch of 56 pleas challenging the demonetisation which was announced on the evening of November 8, 2016, following which around 90 per cent of the current notes in circulation seized to legal tender.
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Besides Justices Nazeer, other members of the five-judge bench are Justices BR Gavai and BV Nagarathna AS Bopanna and V Ramasubramanian.
What the government argued
Earlier, on December 7, the SC had directed the Centre and the Reserve Bank of India (RBI) to put on record the relevant records relating to the government’s 2016 decision and had reserved its verdict.
Representational Image/Reuters
It heard the arguments of Attorney General R Venkataramani, the RBI’s counsel and the petitioners’ lawyers, including senior advocates P Chidambaram and Shyam Divan.
What the petitioners said
Calling the scrapping of the Rs 500 and Rs 1,000 currency notes deeply flawed, Chidambaram had argued that the government cannot on its own initiate any proposal relating to legal tender, which can only be done on the recommendation of the RBI’s central board.
Resisting the apex court’s attempt to revisit the 2016 demonetisation exercise, the government had said the court cannot decide a matter when no tangible relief can be granted by way of “putting the clock back” and “unscrambling a scrambled egg”.
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RBI admitted “temporary hardships”
The RBI had earlier admitted in its submissions that there were “temporary hardships” and that those too are an integral part of the nation-building process, but there was a mechanism by which the problems that arose were solved.
In an affidavit, the Centre told the top court recently that the demonetisation exercise 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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99 per cent notes came back
One of the main objectives the government had in 2016 said as the reason to take the unprecedented step was to fight black money.
But according to the RBI’s own data, almost the entire chunk of money (more than 99 percent) that was invalidated came back into the banking system. Of the notes worth Rs 15.41 lakh crore that was invalidated, notes worth Rs 15.31 lakh crore were returned.
Following the demonetisation, the RBI had introduced two currency notes, a redesigned Rs 500 and a new denomination – Rs 2,000 the highest-valued Indian Rupee note to date.
But six years later, the Rs 2,000 notes are hardly seen in circulation, and in November, the RBI, in an RTI reply, said that the ‘0’ number of the said denomination currency notes were printed in 2019-20, 2020-21 and 2021-22.
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