Best intentions and noble objects for the betterment of the Nation -Demonetization affirmed by Supreme Court of India
IN THE SUPREME COURT OF INDIA
WRIT PETITION (CIVIL) NO.906 OF 2016
VIVEK NARAYAN SHARMA …PETITIONER (S)
VERSUS
UNION OF INDIA …RESPONDENT (S)
On 8th November 2016, the notification of the Central Government, in exercise of the powers conferred by sub-section (2) of Section 26 of the RBI Act, notified that the bank notes 500 and 1000 shall cease to be legal tender with effect from 9th November 2016.
On 30th December 2016, the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 was promulgated by the Hon’ble President of India. Subsequently, the Parliament enacted the Specified Bank Notes (Cessation of Liabilities) Act, 2017 which received the assent of the then Hon’ble President of India on 27th February
2017. The object and purpose of the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 is to constitute a Reserve Bank of India to regulate the issue of bank notes and for keeping reserves with a view to secure monetary stability in India, and to generally operate the currency and credit system of the country to its advantage.
The Preamble of the Act states that it is essential to have a modern monetary policy framework to meet the challenge of an increasingly complex economy and the primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth.
The monetary policy framework in India shall be operated by the Reserve Bank of India. The previous demonetisations were not carried out on the strength of subsection (2) of Section 26 of the Act inasmuch as both the legislations categorically stated that the demonetisation was “notwithstanding anything contained
in Section 26 of the Act”.
In fact, under the 1978 Act, one of the objects of the demonetisation of high denomination bank notes was that such notes facilitated illicit transfer of money for financial transactions which were harmful to the national economy or were used for illegal purposes and therefore, it was necessary in public interest to demonetise the high denomination bank notes. The use of the nonobstante clause clearly indicates that the Central Government was not demonetising the currency on the recommendation of the Central Board of the Bank under subsection (2) of Section 26 of the Act. In fact, this position is demonstrated by the fact that
in the year 1978, the then Central Government sought an opinion of the Central Board of the Bank regarding the demonetisation of high denomination bank notes. The proposal for demonetisation arose from or was initiated by the Central Government which sought the opinion of the Central Board of the Bank. Therefore, the proposal for demonetisation initiated by the Central Government was de hors subsection (2) of Section 26 of the Act.
The fact that the nonobstante clause found a place in Section 3 of the Ordinance of 1946 as well as in Section 3 of the 1978 Act, would clearly indicate that the Central Government, in those cases, did not demonetise the high denomination bank notes on the recommendation made by the Central Board of the Bank under subsection (2) of Section 26 of the Act but on the other hand, the same was carried out de hors the said provision y plenary legislations. Hence, the Central Government which
initiated the process chose the route through legislation for carrying out the demonetisation rather than by issuing an executive notification in the Gazette of India.
The above is in contrast with the issuance of the gazette notification dated 8th November, 2016, which was followed bythe Ordinance of 2016 and then the Act of 2017 was enacted. The said Act, inter alia, provides that the specified bank notes would cease to be the liability of the Reserve Bank of India or the Central Government.
The demonetisation carried out in the year 2016, of all series of bank notes of denomination Rs.500/ and Rs.1,000/ which forms the subject matter of the controversy at hand was, on the other hand, carried out by the Central Government by issuance of a notification in the Gazette of India on 8th November, 2016 demonetisation was an initiative of the Central Government, targeted to address disparate evils, plaguing the Nation’s economy, including, practices of hoarding “black” money, counterfeiting, which in turn enable even greater evils, including terror funding, drug trafficking, emergence of a parallel economy, money laundering including Havala transactions. It is beyond the pale of doubt that the said measure, which was aimed at eliminating these depraved practices, was well intentioned.
The measure is reflective of concern for the economic health and security of the country and demonstrates foresight. The measure was motivated by anything but the best intentions and noble objects for the betterment of the Nation. The measure has been regarded as unlawful only on a purely legalistic analysis of the relevant provisions of the Act and not on the objects of demonetisation. In the result, the writ petitions, special leave petitions and transfer petitions are directed to be posted before the appropriate Bench after seeking orders from Hon’ble the Chief Justice of India.
Parties to bear their respective costs.
(Adv Vaibhav Tomar )All Rights Reserved
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