Demonetization Valid; SC

The center with RBI…

New Delhi: On Monday, 02 January 2023, The Supreme Court backed Prime Minister Narendra Modi's 2016 notes ban in a landmark 4-1 majority judgment and said the decision could not be faulted only because the Centre initiated it.

The Centre is required to act in consultation with the Reserve Bank of India (RBI) and there is an "inbuilt safeguard", the Supreme Court said. The judges noted that there was consultation between the two for six months.

It is "not relevant" whether the objective was achieved or not, the Supreme Court ruled. "There has to be great restraint in matters of economic policy. The Court cannot supplant the wisdom of the executive with its wisdom," said Justice BR Gavai, reading out the order of the five-judge Constitution bench.

In a strong dissenting judgment, Justice BV Nagarathna called the notes ban initiated by the Centre "vitiated and unlawful" and said the move could have been executed through an act of Parliament.

The November 8, 2016 demonetisation notification was "an exercise of power contrary to law", said the judge, noting that the entire exercise was carried out in 24 hours.

"The problems associated with demonetisation questions whether the central bank had visualised these," said Justice Nagarathna.

She said documents and records submitted by Centre and the RBI, which included phrases like "As desired by the Central Government", show there was "no independent application of mind by the RBI".