Economy

DeMo Verdict: What Were The Six Issues Framed By The SC? What Was The Dissenting Opinion On Them?

Swarajya Staff

Jan 02, 2023, 01:53 PM | Updated 01:53 PM IST


The demonetised currency notes
The demonetised currency notes

The majority opinion of a five-judge bench of the Supreme Court on Monday dismissed petitions challenging the Central government's 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500.

A five-judge Constitution Bench of the Supreme Court headed by Justice S Abdul Nazeer and comprising of Justices BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna upheld the demonetisation move of 2016 in 4:1 verdict.

The following issues were framed by the Supreme Court for adjudicating on the case: 

  • That Section 26(2) of the RBI Act that allows the government to declare all series of a particular denomination as being no longer legal tender is too wide;

  • That the decision-making process [for demonetisation] was deeply flawed;

  • That the recommendation did not consider relevant factors;

  • That the stated objectives of demonetisation were not achieved;

  • That the move fails the test of proportionality;

  • That the Court has powers to mould and grant declaratory relief.

In the majority opinion given by Justice Gavai, he stated that there has to be great deal of restraint before interfering in matters of economic significance and therefore the judiciary cannot supplant such views with the judicial one.

He further stated that there indeed was consultation between the Centre and the RBI for a period of six months. 'We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by doctrine of proportionality', said Justice Gavai in his opinion.

Moreover, he stated that RBI has no independent power to bring about demonetisation and therefore the power available to the centre is for all series of bank notes. He held that there is not excessive delegation under 26(2) of the RBI Act. The notification was held to be valid and the period for exchange of notes was held to be proper. 

Justice Nagarathna, however, delivered a dissenting opinion and differed on each of the questions. 

She stated that carrying out demonetisation at the behest of the Central government is a far more serious issue affecting citizens than the one done by the banks. Therefore, in her view, powers of Centre being vast, the same had to be done by plenary legislation.

She stated that there is an inherent contradiction in the provision of Section 26(2) of the RBI Act. She also added that demonetisation was recommended by the Central government and there was no independent application of mind by the RBI.


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