Given the extent of the pain being suffered by the masses on account of demonetisation and the changes frequently being made in its implementation, it was but natural for the dispute to land before the Supreme Court. Despite the multiplicity of PILs on the subject before various high courts, the apex court has raised expectations of engaging from 2 December with the legal issues thrown up by the pervasive cash crunch.
Though it declined to stay the demonetisation notification in deference to the government's prerogative to make policy, there is ample scope for the Supreme Court to not only provide various forms of interim relief but also to revisit its 1996 judgement on the earlier round of demonetisation, which had taken place in 1978.
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Skipping the Ordinance Route
Such an intervention may be warranted as there is little overlap between legal issues addressed by the 1996 judgement and the more contentious aspects of the latest denomination. Though Narendra Modi government resorted to an executive notification to withdraw the legal tender status of 86 percent of the currency in circulation, the Morarji Desai government had played it safe by providing a legislative backing, that too to a ban that affected only the affluent few who possessed notes of denominations ranging from Rs 1,000 to Rs 10,000.
In order to maintain the necessary secrecy, the Desai government promulgated an ordinance which was later replaced by a parliamentary enactment.
But then, the Modi government could hardly be faulted for avoiding the legislative route. As clarified by even the 1996 judgement, the Central government is authorised by Section 26(2) of the RBI Act to demonetise through a gazette notification, purportedly on the recommendation of the RBI board.
Therefore, the nub is whether the notification issued under this provision on 8 November violated any fundamental rights of the affected millions, an overwhelming majority of whom hardly fit the intended target of black money hoarders. The fundamental rights that are said to have been infringed include the right to life (because of the havoc wreaked in the lives especially of the poor), the right to carry on any occupation, trade or business (because of the adverse impact on the informal sector), and the right to equality (the discrimination suffered by those who don't have bank accounts).
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Other Concerns
Concerns have also been raised about the anomaly of people not being allowed to draw money freely from their own bank accounts, the threat posed by long queues or cashless ATMs to the law and order situation, the uncertainty due to the rules being changed arbitrarily ever so often, the prospect of all-round digitisation leading to lesser privacy and greater surveillance, and the evidence of BJP leaders making huge deposits or buying properties in the run-up to the 8 November announcement.
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1978 Demonetisation Law
These questions, fraught with far-reaching implications, call for adjudication on a priority basis. There was nothing on this scale or of such gravity in the case related to the 1978 demonetisation. Moreover, the two fundamental rights central to the litigation happened to be repealed close on the heels of demonetisation, through the 44th constitutional amendment passed the same year.
They were the right to property guaranteed by Article 19(1)(f) and the safeguard provided by Article 31(2) against compulsory acquisition of property subject to public purpose and payment of compensation. But when its judgement came almost two decades later, the Supreme Court still upheld the constitutionality of the 1978 demonetisation Act on the touchstone of Articles 19(1)(f) and 31(2) as they were prevalent at the time.
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Violation of Rights
Since those two fundamental rights are defunct, much of the reasoning in the 1996 judgement has only academic value. To begin with, it accepted the contention of petitioners that demonetisation amounted to compulsory acquisition of the property inherent in the banned currency notes. But it rejected their claim that the stated purpose of demonetisation – to check “the illicit transfer of money for financing transactions which are harmful to the national economy or which are for illegal purposes” – did not fulfil the condition of “public purpose” laid down in Article 31(2).
Similarly, in view of the time and procedure provided to obtain an equal value of the demonetised notes from banks, the court disagreed with the argument that the petitioners had been deprived of their right to get compensation for the compulsory acquisition. As a corollary, it held that demonetisation did not impose any “unreasonable restrictions” on the enjoyment of the right to property under Article 19(1)(f).
The limited sense in which the precedent remains relevant to today's crisis lies essentially in its ruling that the cash crunch could not be said to have violated the right to carry on any occupation, trade or business under Article 19(1)(g), a fundamental right that still exists. It is however debatable whether this view would hold good for the vastly different circumstances of the ongoing demonetisation scheme.
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Examining Legality
Considering its track record of entertaining PILs of far lesser consequence, it will be ironic if the Supreme Court shirks from the challenge of examining the legal issues thrown up by demonetisation without foraying, to be sure, into policy areas. Any dithering at this stage may lend credence to the reputation it is acquiring of an elitist institution that displays a great deal of activism on, say, the affairs of the cricket board but nowhere as much concern over a governmental excess hurting common people.
(Manoj Mitta is the author of ‘The Fiction of Fact-Finding: Modi and Godhra’. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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