Supreme Court Upholds Demonetisation

In a boost to PM Narendra Modi’s move of November 2016, the Supreme Court on Monday, upheld the Government’s decision to demonetise Rs.1000 and Rs. 500 denomination currency notes asserting that the decision-making process was not flawed. On the contrary, the court deemed it flawless. The apex court bench in a 4:1 verdict, added that there has to be great restraint in matters of economic policy and that the court cannot supplant the wisdom of the executive by a judicial review of its decision. The Supreme Court accepted the government’s views that there was consultation between the Centre and the RBI before demonetisation. It seemed to agree with the Centre’s contention that it was a necessary move brought in with the required secrecy.The process of demonetisation was not hit by a doctrine of proportionality, the Supreme Court stated in its historic judgment. It rightly observed that such exercises fell with the domain of experts and beyond the arena of judicial review. 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 cannot be struck down on the ground of flawed decision-making process. The Supreme Court rightly observed that stealth and speed were two important components in the entire process and that there was nothing hasty about Prime Minister Narendra Modi’s address to the nation on November 8, 2016, about the demonetisation of Rs. 500 and Rs.1000 denomination currency notes. Further, the apex court concluded that the Reserve Bank of India and Central government were in consultation with each other for over six months on the issue. It thereby dismissed former Finance Minister P. Chidambaram’s contention that demonetisation was an arbitrary exercise by the Centre, bereft of application of mind, adequate deliberations and consultations. For good measure, the Bench pointed out that similar confidentiality had been maintained during the 1978 demonetisation exercise. Clearly smarting from the impact of the Supreme Court verdict, Chidambaram, however, tried to take consolation in the fact that one judge, Justice B.V. Nagarathna, had dissented with the majority view and churlishly termed her verdict, “a slap on the wrist of the government.” The Congress Party and the Opposition, in general, tried to make demonetisation a major election issue in the run-up to the 2019 Lok Sabha polls. Some media channels chimed in claiming that the decision would prove to be PM Modi’s Waterloo. However, in electing the Narendra Modi-led BJP back to power by a massive majority in 2019, the public at large rejected the Opposition’s charge and demonstrated its confidence in the leadership of Narendra Modi. Moreover, the important dimension of counterfeit currency, a parallel black money economy and terror funding, was not lost on voters. The larger point also, is that all too often we find frivolous PILs seeking the Supreme Court’s intervention in policy matters. By pointing out that certain matters lay outside the realm of judicial review, the Supreme Court refused to suggest an alternative measure, while upholding the Centre’s decision on demonetisation. Did demonetisation control black money to the extent it should have? The jury is still out there on this subject. There is no doubt that it curbed terror funding and the counterfeit currency industry. More importantly, it gave a tremendous boost to digital transactions. By the end of November 2022, the digital payment landscape changed dramatically climbing to Rs. 11.90 lakh crore, coming as a boon especially to street vendors and other small users. There is no doubt that demonetisation put millions of citizens through hardship for some time, but then, seen against the larger interests of the nation, this temporary spell of suffering was indeed a small price to pay, as the apex court verdict seems to suggest.