Demonetisation | Won't Sit With Folded Hands, Can Examine Manner In Which Decision Was Taken, Says Supreme Court

Justice Nagarathna made this comment in response to Senior Advocate Jaideep Gupta, who is representing the RBI, attempting to define the limits within which the top court was permitted to exercise its power of judicial review, especially in the domain of economic policymaking. Echoing the sentiments of the Attorney-General for India, R. Venkataramani, the counsel for the Reserve Bank told the Constitution Bench, "The proportionality principle should be applied only to the extent of testing whether a reasonable nexus exited between the stated objectives and the monetary policy of demonetisation. The crux of his contention was that the decision to recommend that the legal tender status of high-value banknotes of the two denominations be cancelled and the subsequent decision of the cabinet to accept the recommendation were not amenable to judicial review. In the sphere of economic policymaking, the Wednesbury principles as well as the proportionality principle were of little or no use, he asserted.

Notably, the senior counsel emphasised that adequate and reasonable opportunities had been given to the common people to exchange their notes, to ensure that no one lost their hard-earned money, but it was ultimately their 'duty' to 'arrange their affairs' in such a way that would allow such opportunities to be availed. Gupta said, "Since reasonable opportunity was given, it cannot be said that there was anything wrong in the way the policy was implemented, or the cut-off date was fixed. Obviously, this was not a situation where every last individual could be catered to." Countering the submissions made by Senior Advocate Shyam Divan appearing on behalf of a petitioner who had left behind Rs 1.62 lakhs in cash when he travelled abroad in April 2016 but could not exchange his money when he finally returned to the country in February 2017, Gupta said, "If there was a person who had money in a locker in India, they should have come back to India. He certainly had the time to do that."

Bench refers to hardships faced by common people

In the course of the hearing, the bench made many references to the social and economic hardships and distress faced by the common people as a result of this controversial policy decision. For instance, Justice Nagarathna poignantly acknowledged, "Everyone paid labourers and household help with the demonetised currencies. Ultimately, these were the people who were forced to stand in long queues at the bank. This was the reality." Conceding that there were 'temporary hardships', the senior counsel said, "If I may say so, temporary hardships are also an integral part of the nation-building process. Some of the hardships may not have been anticipated. But a mechanism was put in place by which problems that arose were solved."

On a related note, the senior counsel also categorically stated that while the Specified Bank Notes (Cessation of Liabilities) Act, 2017 had provided for relief to be given to certain categories of persons subject to verification by the Reserve Bank, 'individual cases of hardships' that were not envisioned under the act could not be gone into. "The Reserve Bank cannot go beyond the act," Gupta told the Bench. Speaking about the 2017 act, the senior counsel also submitted that the notification had been 'statutorily affirmed'. He added, "We are no longer in a situation where the Parliament has not had the opportunity to consider decision taken by way of notification."

Explaining that the Reserve Bank was the 'acknowledged expert on monetary policy' and as such, its powers or the powers of the central government to make economic policy decisions should not be circumscribed, Gupta cautioned the top court against attempting to lay down judicial guidelines in the exercise of the powers conferred under sub-section (2) of Section 26 of the Reserve Bank of India Act, 1934. He said, "This court has noted that it is impossible for even the legislature, executive, or the central bank to envisage every possibility. When that is so, to lay down judicial guidelines would be extremely dangerous." Furthermore, attacking the petitioners' submission that unless 'any' in the section was construed as 'some', then the power conferred by it would be unguided, uncanalised, and arbitrary, Gupta urged the apex court to confer the widest possible amplitude on the provision to help realise its actual legislative intent. As such, he argued, the withdrawal of all series of the two denominations was within the jurisdiction and powers conferred upon the Reserve Bank of India by the section. The senior counsel also submitted that the process envisioned under the section had been 'duly followed' and that the petitioners had failed to establish that relevant factors were not considered and irrelevant factors were taken into consideration.

He concluded his submissions by saying that the court could not issue 'futile' or 'academic' writs. It is also well-settled that the court does not issue a writ if the matter has become infructuous and declaratory relief in such cases will not be given if it involves factual adjudication, he said. "Declaring a law to be unconstitutional is a declaratory relief that can be given at any time. But a judicial review on the basis of facts amounts to adjudication on facts. Once the decision is not to be reopened, it should not be adjudicated at this stage," the senior counsel told the court.

The Bench also heard the brief submissions made by the Attorney-General who warned that the court was being invited, on the pretext of alleviating economic hardships, to devise an alternative norm and push the exchange window or the grace period. "The court should not enter into this because it amounts to a fundamental alteration of the nature of the law," the top law officer said. He also appealed to the court to look at the matter from a 'broader perspective'. He asked, "If every act of a legislature, on the premise of wisdom, or lack thereof, is investigated, then where will we be?"

Finally, the Constitution Bench heard the submissions of Senior Advocate and former finance minister, P. Chidambaram made in rejoinder. While reiterating his main arguments and intensifying his efforts to get the government and the central bank to declassify key documents, the senior counsel asked the court to not be 'intimidated' by phrases such as 'economic policy' and 'monetary policy' and back down from critically examining the decision-making process, as well as the decision itself, if found to be manifestly arbitrary. He said in conclusion, "Even if this court cannot strike down demonetisation now that it has started hearing this case six years later, this court can pronounce on the decision-making process and the decision, the scope of sub-section (2) of Section 26, the difference between demonetisation through plenary legislation and demonetisation by pressing into service this section, the ideal decision-making process, and on the fairness of the process employed by the government and the proportionality of the outcome."

Case Title

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

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Challenge To Demonetisation Not Academic : Supreme Court Seeks Affidavits Of Union & RBI