India: Supreme Court upholds government’s demonetisation decision with a 4-1 majority

India's Supreme Court on Monday, in a 4-1 majority ruling, backed theIndian Prime Minister Narendra Modi government's 2016 decision to demonetise currency notes of Rs. 500 and Rs. 1000 denominations.The five-judge Constitution bench of the apex court passed its judgement and said that the decision could not be faulted just because it was initiated by the central government.

The bench headed by supreme court Justice S A Nazeer had taken a batch of 58 petitions challenging several different aspects of the Modi government’s demonetisation decision. According to reports, the petitions also called for the apex court to strike the decision.

Justice BR Gavai, reading out the SC order by the bench said that whether the objective of the move was achieved or not, is “not relevant”. “There has to be great restraint in matters of economic policy. Court cannot supplant the wisdom of the executive with its wisdom,” the court order added.

However, one judge, Justice BV Nagarathna, expressed strong dissent and called the note ban by the government “vitiated and unlawful”. Justice Nagarathna based her argument on the government’s 2016 decision citing its powers under section 26(2) of the RBI Act and said that the Reserve Bank of India should have independently recommended demonetisation as opposed to basing it on the Centre’s advice.

She said, “After perusing the documents and records submitted by Centre and RBI, phrases like ‘as desired by Centre government’ show there was no independent application of mind by RBI.” Meanwhile, the other judges said that the Centre is required to act in consultation with the RBI and noted that there was at least a six-month back and forth between the two entities before the decision was announced.

“The central government's decision was after RBI board’s approval which shows in-built safeguard against centre’s powers. It cannot be said that there is excessive delegation of power under the RBI Act to the Centre which is answerable to the Parliament,” the apex court noted.

Additionally, since the move is an executive’s economic policy it cannot be reversed. In this case, Justice Nagarathna also said that the decision could have been initiated through the Parliament as opposed to being an executive order.

The supreme court justice Nagarathna also went on to call demonetisation with a doubt, “well-intentioned” as it “targeted evils” such as black money, terror funding, and counterfeiting. However, “Best intention and noble objects are not under question. The measure has been regarded as unlawful only on a purely legal analysis, and not on the objects of demonetisation,” she noted.

In addition to the three aforementioned Justices Nazeer, Gavai and Nagarathna, the other members of the five-judge bench of the apex court were Justices A S Bopanna and V Ramasubramanian. The SC also argues that the exercise cannot be struck down as it was not hit by the doctrine of proportionality and that a period of 52 days given to exchange the notes was “not unreasonable”.

(With inputs from agencies)

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