Supreme Court verdict on demonetisation

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What did the Apex Court say?

• The majority held that Centre’s notification dated November 8, 2016 is valid and satisfies the test of proportionality. 
• Supreme Court accepted the government’s views that there was consultation between the Centre and the RBI before demonetisation.  
• The Supreme Court stated that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by doctrine of proportionality.
• The court said the notification dated November 8, 2016, which announced the decision to scrap the high-value currency notes, cannot be said to be unreasonable and struck down on the ground of decision-making process.
• The top court’s remarks came when the Reserve Bank of India counsel made the submission that judicial review cannot apply to economic policy decisions.
• RBI had told the apex court about the objective of the demonetisation policy to curb black money and fake currencies.
• Justice Nagarathna, however, differed from the majority judgment on the point of the Centre’s powers under section 26(2) of the RBI Act.  
• She further said that Parliament should have discussed the law on demonetisation, the process should not have been done through a gazette notification. Parliament cannot be left aloof on an issue of such critical importance for the country.
• Justice BV Nagarathna in her dissenting view held that though demonetization was well-intentioned and well thought of, it has to be declared unlawful on legal grounds (and not on the basis of objects).

What is demonetization?

• Demonetization is the process through which a nation’s economic unit of exchange loses its legally enforceable validity.
• Currencies that are terminated are no more legally considered exchanges and have no financial value.
• On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series. 
• It also announced the issuance of new ₹500 and ₹2,000 banknotes in exchange for the demonetised banknotes

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