Demonetisation Challenge : Supreme Court Wants To See RBI Board Meeting Documents, Centre's Recommendation; Seeks Comprehensive Affidavit

"The individual issues and problems may be taken care of on the administrative side. There is no need to waste the time of this Constitution Bench."

However, the Bench was unwilling to agree, and permitted Senior Advocate and former Union Finance Minister, P. Chidambaram to make his preliminary submissions. This was despite the top law officers trying to persuade the Court to take up the matter on another day. In the end, Chidambaram also highlighted the absence of a "comprehensive affidavit" filed either by the Union of India or the Reserve Bank –

"The Union of India has filed one counter-affidavit in VN Sharma's case, which I assume is the counter-affidavit in all the cases. The RBI has filed an affidavit, which I will take as a counter-affidavit, in another case, which I will assume is the counter-affidavit in all the cases. They have not filed individual affidavits in the cases. These are the only two counter-affidavits and subject to what this Court says, we will proceed on the basis that these are two pleadings on that side…I also have no objections if they want to file a more comprehensive affidavit"

Justice Nazeer asked the Union –

"Can we assume your pleadings are complete in this case? There may be some factual differences also in some of the cases…Somebody should take serious note of this from your side."

The Attorney-General confessed that he was finding his footing after recently being appointed. He said –

"I will take stock of all of that. There was a whole range of impleadment applications…The pleadings, except in one or two cases, seem to be the same. I need to look at those cases where the pleadings are different."

Justice Nazeer instructed –

"Somebody should sit and sort all these. At least in one case, both the Union and the Reserve Bank should file a comprehensive affidavit, which we will take as a response to all the cases."

Chidambaram, during the course of his submissions, had emphasised the reluctance of the Central Government to produce crucial documents such as their letter to the Reserve Bank on November 7, the agenda of the Board meeting of the Reserve Bank conducted on the very next day, and the resolution passed by the Board of Directors. He reiterated his demand –

"If necessary, we will file an application to summon these documents. But, in a matter of this nature, the Government should fairly place these documents before the Court. The Government may be directed to place these three documents on record."

The Attorney-General quickly interjected –

"If and when necessary. Whether they will advance the course of all these arguments…"

Justice Nazeer, however, unequivocally stated that the documents in question must be produced before the Court. He said –

"We want to see them…You cannot keep them away from us. Also file a comprehensive affidavit".

Justice Nazeer also pointed out that the petitioners were questioning the power of Central Government to invoke Section 26 of the Reserve Bank of India Act to demonetise currency notes. Chidambadam argued that Section 26(2) gives power to Centre to cancel only certain series of currency notes and not the entire notes of a denomination. 

Taking note of the arguments, Justice Nazeer told the AG :

"The sheet anchor is Section 26(2)…"On the recommendation of the Central Government". Show us where the recommendation of the Central Government is. Thereafter, where is the consideration by the Reserve Bank and what was your reply? These are the three things you must answer, on facts. Secondly, how to interpret the word 'any' in the provision. Chidambaram says read it down or in the alternative, quash it. You must address these in your pleadings."

The Attorney-General tried to underscore the importance of Section 26 in the economic and financial architecture of the country. He said –

"In a matter like this, we are not looking at Section 26 as any other statutory provision. It is in the context of all economic and banking system. It occupies a very important place."

Justice Nazeer interjected –

"State these in your counter-affidavit then."

The Attorney-General explained –

"These arguments were raised, which is why I am trying to respond."

Justice Nazeer quipped –

"They must have raised them in their pleadings."

After receiving the Court's permission to argue on merits, Chidambaram on Wednesday had given a broad overview of his submissions. First, he argued that the power to demonetise all series of banknotes of any denomination by issuing a notification in the Official Gazette was not available under Section 26(2) of the Reserve Bank of India Act, 1934 and accordingly, it must be read down. Otherwise, the power conferred under this section would be "unguided and uncanalised", and as such, subject to the discipline of Part III of the Constitution. The senior counsel also criticised both the decision-making process and the recommendations tendered by the Reserve Bank as "deeply flawed". Furthermore, the Government set out "false objectives" to justify the demonetisation move, Chidambaram contended. When weighed against the "horrendous consequences", he argued, the policy would fail the test of proportionality. Finally, Chidambaram explained that the Supreme Court had wide powers to "grant declaratory reliefs, lay down the law, and mould the reliefs".

The matter is listed again for hearing on November 9.

Case Title

Vivek Narayan Sharma v. Union Of India [WP (C) No. 906/2016] and other connected matters