The Supreme Court has upheld the central government’s decision of Demonetisation. A five-judge constitution bench gave its verdict on Monday. The bench said there was no disturbance in the demonetization process of Rs 500 and Rs 1000 notes. The bench also said that the economic decision could not be reversed. The Constitution Bench pronounced this decision by a majority of four-one.

The five-judge constitution bench comprised Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramaniam, and Justice BV Nagaratna. Of these, Justice BV Nagaratna wrote a different judgment from the opinion of the other four judges. He said that the decision to demonetize was illegal. It was to be taken through legislation instead of gazette notification. However, he said that this would not affect the old decision of the government.

The constitution bench said – The government had taken advice from the RBI

The constitution bench of the Supreme Court said – There was a conversation between the government and the RBI before demonetization. From this, it can be assumed that demonetization was not an arbitrary government decision. With this decision, the constitution bench dismissed all 58 petitions against demonetization.

The government had said that demonetization was done on the advice of RBI. 

In 2016, Prime Minister Narendra Modi announced the closure of 1000 and 500 rupee notes. As many as 58 petitions were filed against this decision of the government. During the hearing, the court had asked the government under which law the notes of 1000 and 500 rupees were closed. The court had summoned answers from the government and the RBI in this matter.

In an affidavit filed on November 9 last year, the central government said that the number of 500 and 1000 notes had increased significantly. That is why, after discussions with the RBI from February to November, a decision was taken to demonetize these notes on November 8.

The Chairman of the constitution bench will retire after two days.

Constitution Bench will retire after two days. Justice S. Abdul Nazeer, heading the Constitution Bench, will retire on January 4, 2023, two days after the verdict is pronounced.

The argument in the petition – No right to cancel currency

 In this case, the petitioners argued that Section 26 (2) of the Reserve Bank of India Act does not authorize the government to cancel currency notes of a particular denomination completely. Section 26(2) empowers the Center to cancel currency notes of a specific series and not the entire currency notes.

The Center had said- Demonetisation was to deal with black money.

 In the Supreme Court, defending the decision of demonetization, the government had said it was to deal with problems like fake currency, terror funding, black money, and tax evasion. The planning part was another effective method. This was the biggest step in the series related to changes in economic policies. The Center had also said that the demonetization decision was taken only on the recommendation of the Central Board of Directors of the Reserve Bank.

In the court, the government also counted the benefits of demonetization.

The Center also said in its reply that demonetization had brought many benefits, like reducing fake notes, increasing digital transactions, and detecting unaccounted income. In October 2022 alone, a digital transaction of 730 crores took place. That is, a transaction of Rs 12 lakh crores has been recorded in a month, which was 1.09 lakh transactions in 2016, i.e., about Rs 6,952 crore.

Timeline of hearing against demonetization in court

• In 2016, Vivek Sharma challenged the government’s decision by filing a petition. After this, 57 more petitions were filed. So far, only three petitions have been heard. Now the hearing is going on altogether.
• This case was assigned to the constitution bench on December 16, 2016, but the bench could not be formed then. On November 15, 2016, then Chief Justice TS Thakur praised this decision of the Modi government.
• On December 16, 2016, the Supreme Court referred the matter to a five-judge constitutional bench after the petitioner’s lawyers in the Supreme Court argued that there were several legal mistakes in the government’s demonetization plan.
• Then the court refused to give any interim order on this government decision. Even the court had then stayed the hearing on the petitions filed in different High Courts on the demonetization issue.

On November 8, 2016, PM Modi announced demonetization.

Prime Minister Narendra Modi announced the closure of 500 and 1000 rupee notes from midnight on November 8, 2016, in the name of the country. At that time, the government expected that at least Rs 3-4 lakh crore of black money would come from demonetization. However, only Rs 1.3 lakh crore of black money came to the fore in the exercise.