Supreme Court to examine 2016 note ban, seeks details from Centre, RBI

The Supreme Court on Wednesday said that will look into the decision-making process behind the 2016 demonetisation exercise and also sought comprehensive affidavits from the central government and RBI on the decision that had then led to “horrendous consequences and big disruption to the informal sector.”

A five-judge Constitution bench, led by Justice S Abdul Nazeer, also asked the Union government to keep ready all the files, including the central government’s letter to RBI, the RBI Board’s decision, and the demonetisation announcement, for its examination.

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While posting over 50 petitions against the 2016 demonetisation decision for further hearing on November 9, the judges said that “we always know where the Lakshman Rekha is, but the manner in which it was done has to be examined.”

While Attorney General R Venkataramani and Solicitor General Tushar Mehta, batting for the Centre, submitted that the issue had become an academic exercise now, the SC bench said to declare whether the exercise is academic or infructuous, it needs to examine the matter since both sides are not agreeable.

The bench, also comprising Justices BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna, noted that when issues of constitutional importance are referred, it is the duty of the court to answer them.

Senior counsel P Chidambaram and other counsel, appearing for of petitioners, argued that Section 26 of the RBI Act does not authorise the Centre to completely cancel the currency notes of particular denomination including Rs 500 and Rs 1,000. They said that the government did not have power to cancel the currency notes through an executive order and the issue was relevant even for the future as the 2016 decision led to horrendous consequences for the economy and common people.

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The AG argued that unless the High Denomination Bank Notes (Demonetisation) Act, passed in 1978, is challenged in a proper perspective, the issue will essentially remain academic and the notifications cannot be challenged.

However, Chidambaram argued that the demonetisation carried out in 1978 was through a separate Act of the Parliament unlike the 2016 decision. He asked whether the demonetisation of this kind — withdrawing 86 % currency notes — in circulation required a separate law by the Parliament. On December 16, 2016, a bench headed by then Chief Justice TS Thakur had referred the question of the validity of the decision and other issues to a larger bench of five judges for authoritative pronouncement. It had framed various questions including whether the notification dated November 8, 2016 was ultra vires provisions of the RBI Act, 1934 and does the notification contravene the provisions of Article 300 (A) of the Constitution, which says no person shall be deprived of his property save by the authority of law.