Discussion In Parliament On Demonetisation Would Have Given It Legitimacy : Justice BV Nagarathna

Supreme Court judge Justice BV Nagarathna, who penned a dissenting judgment to declare the 2016 demonetisation as illegal, opined that the Central Government could not have demonetised the whole series of bank notes of Rs.500 and Rs.1000 through a mere executive notification. The judge expressed the view that such a measure had to be carried out through a plenary legislation.

"Such demonetisation of currency notes at the instance of the Central Government cannot be by the issuance of an executive notification", said Justice Nagarathna. The judge held that the Government could not have invoked Section 26(2) of the Reserve Bank of India Act 1934 for this measure, as the power under Section 26(2) is only to withdraw bank notes of a particular series and not the entire currency notes of a denomination. 

In the judgment, Justice Nagarathna also made certain crucial observations regarding the importance of Parliamentary discussion.

Parliament is "nation in miniature", must be taken into confidence on crucial issues

"The Parliament which is the fulcrum in our democratic system of governance, must be taken into confidence. This is because it is the representative of the people of the Country. It is the pivot of any democratic country and in it rest the interests of the citizens of the Country. The Parliament enables its citizens to participate in the decision-making process of the government. A Parliament is often referred to as a “nation in miniature”; it is the basis for democracy. A Parliament provides representation to the people of a country and makes their voices heard. Without a Parliament, a democracy cannot thrive; every democratic country needs a Parliament for the smooth conduct of its governance and to give meaning to democracy in the true sense".

Parliament cannot be left aloof on crucial matters like demonetisation

"The Parliament which is at the centre of our democracy cannot be left aloof in a matter of such importance. Its views on the subject of demonetisation are critical and of utmost importance".

Discussion in Parliament on demonetisation would have given it legitimacy 

"On a matter as critical as demonetisation, having a bearing on nearly 86% of the total currency in circulation, the same could not have been carried out by way of issuance of an executive notification. A meaningful discussion and debate in the Parliament on the proposed measure, would have lent legitimacy to the exercise".

"When an Ordinance is issued or a Bill is introduced in the Parliament and enacted as a law, it would mean that it has been done by taking into confidence the Members of Parliament who are the representatives of the people of India, who would meaningfully discuss on the proposal for demonetisation made by the Central Government. In such an event, demonetisation would be by an Act of Parliament and not a measure carried out by the issuance of a gazette notification by the CentralGovernment in exercise of its executive power".

"When the process of demonetisation is carried out through a Parliamentary enactment and after being the subject of scrutiny by the Members of Parliament, any opinion sought by the Central Government from the Central Board of the Bank before initiating the promulgation of the Ordinance or placing the Bill before the Parliament may also be additional material which could be considered by the Parliament. When the Central Government initiates the proposal for demonetisation and thereafter consults the Bank on such proposal, then it could be said that the necessary safeguards were taken, as the Central Government would be fortified in its proposal for demonetisation having taken the advice of not only an expert body but the highest financial authority in the country, which handles not only the monetary policy but is also the sole authority vested with the power of issuance of bank notes or currency notes in India. When the Central Government proposes to demonetise the currency notes, not only the view of the Central Board of the Bank is relevant and important but also that of the representatives of the people in the Parliament. The Members of the Parliament hold the sovereign powers of “We, the People of India” in trust".

Demonetisation illegal, but no relief can be granted

Justice Nagarathna declared the notification dated November 8, 2016 to be "contrary to law" and "unlawful".

"In the circumstances, the action of demonetisation of all currency notes of Rs 500 and Rs 1000 is vitiated. Further, the subsequent Ordinance of 2016 and the Act of 2017, incorporating the terms of the impugned notification, are unlawful. However, having regard to the fact that the impugned notification and the Act have been acted upon, the declaration of law will apply prospectively and will not affect any action taken by the Central Government or the RBI pursuant to the notification dated November 8, 2016. Hence, no relief is being granted in the individual petitions".

Justice Nagarathna however added that the measure was well-intentioned to target evils plaguing the nation's economy such as black money, terror funding and counterfeit currency.

"Before parting, I wish to observe that demonetisation was an initiative of the Central Government, targeted to address disparate evils, plaguing the Nation’s economy, including, practices of hoarding “black” money, counterfeiting, which in turn enable even greater evils, including terror funding, drug trafficking, emergence of a parallel economy, money laundering including Havala transactions. It is beyond the pale of doubt that the said measure, which was aimed at eliminating these depraved practices, was well-­intentioned. The measure is reflective of concern for the economic health and security of the country and demonstrates foresight. At no point has any suggestion been made that the measure was motivated by anything but the best intentions and noble objects for the betterment of the Nation. The measure has been regarded as unlawful only on a purely legalistic analysis of the relevant provisions of the Act and not on the objects of demonetisation", she said in conclusion.

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