A constitution bench of the apex court on Monday, 2 January, by a 4:1 majority upheld the demonetisation exercise initiated by the Central Government as valid and said that it cannot be struck down.
"Notification dated November 8, 2016 is valid and satisfies the test of proportionality."
Four out of a five-judge bench upheld the move, but Justice BV Nagarathna dissented with the majority view and said:
"The action of demonetisation initiated by the Central Govt as per 8 November, 2016 notification is unlawful. But status quo ante cannot be restored at this point of time."
What did the majority judgment say?
"There has to be great restraint in matters of economic policy. Court cannot supplant the wisdom of executive with its wisdom."Justice BR Gavai reading the majority judgment
The majority judgment pronounced by Justice BR Gavai, additionally, said:
Demonetisation had a reasonable nexus with the objectives sought to be achieved, and that it was not relevant whether the objective was achieved or not
The prescribed period of 52 days for currency exchange cannot be said to be unreasonable
Restrictive meaning cannot be given to the word "any" under Section 26(2) of RBI Act, with the modern trend being of pragmatic interpretation.
What was Justice Nagarathna's dissenting view?
"Demonetisation of all series of notes at the instance of Central Government is a far more serious issue than the demonetisation of particular series by the bank. So, it has to be done through legislation."Justice Nagarathna
Dissenting with the others on the bench, Justice Nagarathna said:
Section 26(2) can only be for a particular series of currency notes and not for the whole series of currency notes of a denomination
When the proposal for demonetisation originates from the Central Govt, it is not under Section 26(2) RBI Act. It is to be way of a legislation, and if secrecy is needed, then by way of an Ordinance.
The apex court had reserved its verdict in the matter on 7 December. Find details of what was argued in the court here.
(With inputs from Livelaw.)
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