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Supreme Court dismisses petition challenging 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500

Supreme Court dismisses petition challenging 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500

On January 2, a Supreme Court constitutional bench comprised of Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna dismissed petitions challenging the Central Government's 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500.

The five-judge bench issued its decision on a slew of petitions challenging the Central Government's 2016 demonetisation exercise. According to Justice Gavai, "It has been held that there has to be great deal of restraint before interfering in matters of economic significance...we cannot supplant such views with the judicial one." "There was consultation between the Centre and the RBI for a period of 6 months. We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by doctrine of proportionality."

Finally, Justice Gavai concluded that the RBI lacks the independent authority to implement demonetisation. The bench also ruled that Section 26(2) of the RBI Act, which allows the Centre to demonetize any series of bank notes of any denomination, can be used to demonetize the entire currency series. It was observed, 
“Restrictive meaning cannot be given to word "any" in Section 26(2) of RBI Act. The modern trend is of pragmatic interpretation. Interpretation which leads to absurdity must be avoided. The purposes of the Act must be considered while interpretation.”

The petitioners raised the following broad grounds six years after the move:
•    Section 26(2) of the Reserve Bank of India (RBI) Act, which allows the government to declare all series of a particular denomination no longer legal tender, is overbroad; 
•    The decision-making process was deeply flawed; 
•    The recommendation failed to take into account relevant factors; 
•    The stated objectives of demonetisation were not met; 
•    The move failed the proportionality test; and 
•    The Court has the authority to shape and grant declaratory relief.

Senior Advocate P Chidambaram had told the Supreme Court that the Central Government should release documents revealing how the 2016 demonetisation exercise was approved so that the court could rule on the legality of the move.
On the final day of the hearing, the Court requested that the Central Government hand over some undisclosed documents relating to the decision in a sealed cover.

 

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