The Supreme Court today said Prime Minister Narendra Modi’s decision to ban 1,000 and 500 notes in November 2016 wasn’t flawed or illegal.
Justice BV Nagarathna dissented and said the notes ban notification was illegal.
Despite opposition attacks and public backlash over the sweeping ban that wiped out 80 percent of cash in circulation, the Supreme Court’s ruling is a huge boost for the Centre.
The Reserve Bank of India (RBI) and the government consulted for six months before the notes ban announcement, the Supreme Court said. The court said it’s “not relevant” whether the overnight ban achieved its goal.
Six legal questions were addressed by the majority view.
Here’s what the ruling says:
1. All bank notes can be demonetised by the center
Order: The Centre can’t demonetize only “one” or “some” series of bank notes. For all banknote series, it can do that.
2. The RBI (Reserve Bank of India) Act has a demonetisation safeguard.
There’s an inbuilt safeguard in the RBI Act that says such a power can only be exercised on the central board’s recommendation. That’s why it can’t be thrown out.
3. There are no flaws in the decision-making process
There are no flaws in the decision-making process for the November 8, 2016 notification.
4. The demonetisation notification passes the proportionality test. The court weighed whether the ban on notes was the only way to fight fake currency, black money, and strengthen the formal economy.
The decision passes the proportionality test and can’t be overturned. Proportionality means a “reasonable link” between the objective and the means.
5. It’s not unreasonable to exchange notes in 52 days
6. Banks couldn’t accept demonetised notes after a certain date.
Justice BV Nagarathna, who dissented, called the notes ban “vitiated and unlawful,” but said status quo couldn’t be restored. Judge said an act of Parliament could have done it.
Judge said demonetisation was “contrary to law and unlawful”, noting that it was done in 24 hours.
Justice Nagarathna wonders if the central bank had seen the problems associated with demonetisation.
According to her, documents and records submitted by the Center and the RBI include phrases like “As requested by the Central Government”.
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