Demonetisation Not Invalid Merely Because Some Citizens Suffered Through Hardships : Supreme Court

The Supreme Court (4:1) observed that the demonetisation cannot be held invalid merely because some citizens have suffered through hardships or that the decision was taken in a hasty manner.

"The contention that the impugned notification is liable to be set aside on the ground that it caused hardship to individual/citizens will hold no water. The individual interests must yield to the larger public interest sought to be achieved by impugned Notification.", the majority comprising Justices S. Abdul Nazeer, B R Gavai, A S Bopanna and V. Ramasubramanian observed thus while upholding validity of demonetisation.

The court was addressing the contentions raised on behalf of the petitioners that, on account of a hasty decision of demonetisation by the Central Government, citizens had to suffer at large. It was submitted that many people were required to stand in the queues for hours, that many citizens were deprived of their meals, and that many citizens lost their jobs. 

The bench noted that on account of demonetization, citizens were faced with various hardships. But it said:

"While adjudging the illegality of the impugned Notification, we would have to examine on the basis as to whether the objectives for which it was enacted has nexus with the decision taken or not. If the impugned Notification had a nexus with the objectives to be achieved, then, merely because some citizens have suffered through hardships would not be a ground to hold the impugned Notification to be bad in law."

The court also noted that the decision-making process is also sought to be attacked on the ground that the decision was taken in a hasty manner.

"We find that the ‘hasty’ argument would be destructive of the very purpose of demonetization. Such measures undisputedly are required to be taken with utmost confidentiality and speed. If the news of such a measure is leaked out, it is difficult to imagine how disastrous the consequences would be ... confidentiality and secrecy in such sort of measures is of paramount importance."

"When demonetization was being done in the year 1978, R. Janakiraman, who had drafted the Ordinance, was not permitted to communicate with anyone including the Bank’s central office at Bombay. It would thus show as to what great degree of confidentiality was maintained. In any case, the material placed on record would show that the RBI and the Central Government were in consultation with each other for at least a period of six months preceding the action.", the court observed.

"Make one wonder whether the Central Board of the Bank had visualised the consequences that would follow. "

Justice BV Nagarathna, in her dissenting opinion observed thus on the 'hardship' argument:

"The problems associated with the measure of demonetisation would make one wonder whether the Central Board of the Bank had visualised the consequences that would follow. Whether the Central Board of the Bank had attempted to take note of the adverse effects of demonetisation of such a large volume of bank notes in circulation? The objective of the Central Government may have been sound, just and proper, but the manner in which the said objectives were achieved and the procedure followed for the same, in my view was not in accordance with law having regard to the interpretation given above."

Case details 

Vivek Narayan Sharma vs Union of India | 2023 LiveLaw (SC) 1 | WP(C) 906 OF 2016 | 2 January 2023 | Justices S. Abdul Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian and Justice B V Nagarathna

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