Welcome SC Judgement, On Demonetisation: FM

Finance Minister Niramala Sitharaman on Monday welcomed the Supreme Court judgement upholding the decision of the Modi government to demonetise high value currency notes in November 2016. On November 8, 2016 Prime Minister Narendra Modi had announced demonetisation of old Rs 1,000 and Rs 500 banknotes and one of the key objectives of the unprecedented decision was to promote digital payments and curb black money flows.

"Welcome the Hon'ble Supreme Court's judgement today on Demonetization. A five-judge Constitution Bench (via a 4-1 majority) has upheld the Demonetization after carefully examining the issue & has dismissed several petitions challenging the decision," Sitharaman said in a series of tweets. "There were consultations between the Centre & RBI for a period of 6 months. There is a reasonable nexus to bring such a measure & it satisfies the test of proportionality.

Decision-making process cannot be faulted merely because the proposal emanated from the Centre," she said, quoting the judgement. "SC: "Section 26(2) RBI Act cannot be struck down as unconstitutional on the ground of excessive delegation. There has to be great restraint in matters of economic policy. The court cannot supplant the wisdom of executive with its wisdom"," she said.

In another tweet, she said the apex court has remarked that "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.

" Even the dissenting judge has said that "Demonetization was a well-intentioned and well-thought-of decision to target evils plaguing the nation's economy, such as black money, terror funding and counterfeit currency", the finance minister added. Earlier in the day, the Supreme Court in a 4:1 majority verdict upheld the government's 2016 decision to demonetise the Rs 1,000 and Rs 500 denomination notes.

There has to be great restraint in matters of economic policy and the court cannot supplant the wisdom of the executive by a judicial review of its decision, a five-judge Constitution bench of the apex court, headed by Justice S A Nazeer, said. Justice B V Nagarathna dissented from the majority judgment on the point of the Centre's powers under section 26(2) of the RBI Act and said the scrapping of the Rs 500 and Rs 1,000 series notes had to be done through a legislation and not through a notification.

"Parliament should have discussed the law on demonetisation, the process should not have been done through a gazette notification. Parliament cannot be left aloof on an issue of such critical importance for the country," Justice Nagarathna said. She also said there was no independent application of mind by the Reserve Bank of India (RBI) and only its opinion was sought, which cannot be said to be a recommendation.

The bench, also comprising justices B R Gavai, A S Bopanna and V Ramasubramanian, said the Centre's decision-making process could not have been flawed as there was consultation between the RBI and the Union government. The top court's judgment came on a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on November 8, 2016.

According to Reserve Bank data, the currency in circulation (CIC) in value terms soared from Rs 17.74 lakh crore on November 4, 2016, to Rs 32.42 lakh crore on December 23, 2022. However, soon after demonetisation, the CIC fell precipitously to a low of about Rs 9 lakh crore on January 6, 2017, nearly 50 per cent of Rs 17.74 lakh crore on November 4, 2016.

(PTI)