Demonetisation well-intentioned, but process flawed says lone dissenting SC judge

New Delhi, Jan 02: A five-judge Bench of the Supreme Court today, January 2 held that the decision by the government on demonetisation was valid.

Justices S Abdul Nazeer, BR Gavai, A S Bopanna, V Ramasubramanian were of the view that the decision by the government was not un-constitutional. However Justice B V Nagarathna was the sole judge who had a dissenting view in the case.

Justice Nagarathna said that the government's decision on demonetisation was unlawful and the process of banning all the currency notes of Rs 1,000 and Rs 500 could not have been initiated by the Centre.

Demonetisation was however upheld by the Supreme Court today in a 4:1 verdict.

She agreed with the petitioners that decision was unlawful and as per section 26 of the Reserve Bank of India Act, the Central Board of the RBI should have independently recommended demonetisation and it should not have been done through the advise of the government. There was no independent application of mind by the RBI, she further said.

"In my considered view, action of demonetisation by November 8 notification was unlawful. But status quo ante cannot be restored now since it was in 2016. adding that demonetisation was "an exercise of power, contrary to law, and therefore unlawful," Justice Nagarathna said.

She added that demonetisation was beyond a pale of doubt, well-intentioned. Best intention and noble objects are not under question. The measure has been regarded as unlawful only a purely legal analysis, and not on the objets of demonetisation. She also said that the decision was well-intentioned and well thought. It targeted evils such as black money, terror funding and counterfeiting she said.

She also added that the crux of the argument by the petitioners was as per the RBI Act recommendation for demonetisation should originate from the board of the RBI. However in this case, the Centre wrote a letter to the RBI on November 7, advising for such a recommendation, she added.

Justice Nagarathna said that like previous instances, demonetisation could have initiated through an Act of Parliament and not by an execute notification.

"After perusing the documents and records submitted by Centre and RBI, phrases like "as desired by Centre government" shows there was no independent application of mind by RBI," she added.

The four judges however noted that the Centre is required to act in consultation with the RBI and there is an inbuilt safeguard. The judges said that there was consultation between the RBI and government for six months.

While the 58 petitions challenging the 2016 decision on note ban said that it was not a considered decision of the government, the Centre however said that the court cannot decide on a matter when no tangible relief can be granted.