Supreme Court Verdict on Demonetisation: Did the Court Dodge Its Duty?
- ByAdmin --
- 30 Jun 2025 --
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The Supreme Court of India delivered its verdict on the controversial demonetisation policy of 2016, dismissing petitions challenging its legality. A 4:1 majority judgment upheld the move as a valid exercise of the Reserve Bank of India’s (RBI) powers, declaring it in line with Section 26(2) of the RBI Act, 1934. However, the dissenting opinion and wider legal critiques raise questions about whether the Court fully addressed the constitutional issues involved.
Background of the Case
On November 8, 2016, the Indian government, in a surprise move, declared that ₹500 and ₹1,000 notes would cease to be legal tender. The stated aims included tackling black money, counterfeit currency, and promoting digital payments. While the move had immediate and far-reaching impacts on citizens and the economy, it also led to a series of legal challenges questioning its constitutional validity.
Key questions raised before the Court included:
- Did the demonetisation violate the Constitution’s guarantee of the right to trade and livelihood under Article 19(1)(g)?
- Was the policy an excessive delegation of legislative power to the executive under the RBI Act?
Majority Opinion: Procedural Validity
The Court's majority opinion, penned by Justice B.R. Gavai, found the demonetisation process procedurally sound. The judgment emphasized that the Centre had consulted the RBI and followed the requirements under Section 26(2). This section allows the government, on the recommendation of the RBI, to declare any series of notes as no longer legal tender.
The Court also noted that policy decisions, particularly economic ones, are within the executive's domain and should not be judicially interfered with unless manifestly arbitrary or irrational. This reaffirmed the principle of judicial restraint in economic policy.
Dissenting Opinion: Flaws in Implementation
Justice B.V. Nagarathna, in her dissent, raised substantial concerns. She opined that demonetisation required a detailed legislative framework rather than an executive notification. According to her, the policy bypassed parliamentary scrutiny, a fundamental requirement in a democracy.
She also questioned whether the policy’s stated objectives were achieved and highlighted the disproportionate burden it placed on the economically vulnerable.
The Question of Judicial Review
Critics argue that the majority judgment avoided addressing the real issue: whether demonetisation violated citizens' fundamental rights. For instance:
- The abrupt withdrawal of cash impacted livelihoods, particularly in cash-dependent sectors.
- Questions about proportionality and necessity under Article 21 (Right to Life) were left unaddressed.
The principle of judicial review mandates courts to examine if executive actions align with constitutional rights. In cases like Maneka Gandhi v. Union of India (1978), the Supreme Court expanded this doctrine, requiring that executive actions affecting fundamental rights meet tests of reasonableness and proportionality.
Legislative Oversight and Executive Power
Another contentious issue was whether Section 26(2) of the RBI Act could be used for such a sweeping measure. The provision’s original intent was to handle isolated instances, not to render 86% of the currency invalid. Justice Nagarathna’s dissent underscores the importance of parliamentary debate in decisions of this magnitude.
Broader Implications
While the Court’s decision brings legal closure to the demonetisation debate, the broader questions remain unresolved:
- Can economic policies be exempt from constitutional scrutiny simply because they are time-sensitive?
- Did the judiciary inadvertently set a precedent for unchecked executive power in financial decisions?
Conclusion: A Missed Opportunity?
The Supreme Court’s verdict is significant, but it leaves a sense of unfinished business. While respecting the boundaries of judicial review is essential, economic policies with profound constitutional implications deserve thorough examination. Justice Nagarathna’s dissent is a reminder that democratic processes and fundamental rights must remain at the forefront of judicial and executive actions.
As India continues to grapple with the aftermath of demonetisation, the Court's approach to such policies will set the tone for the balance of power between the legislature, executive, and judiciary in the years to come.
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