The Supreme Court on Monday asked the government whether it would have brushed aside objections from the Reserve Bank of India (RBI) had the Central bank opposed the demonetisation policy.
The question from the Constitution Bench led by Justice S. Abdul Nazeer came after Attorney General R. Venkataramani said the government and the RBI "acted in consultation" to notify demonetisation in November 2016. There was no question of delegation of powers to the Centre, Mr. Venkataramani said.
The government had announced demonetisation, not through a parliamentary statute, but by issuing a notification in the gazette. The petitioners had argued that such an important move, which adversely affected millions, should not have been made by way of a “delegated legislation” like a gazette notification. The petitioners had also argued that the RBI had been in the dark about the government’s demonetisation move.
“Suppose it [demonetisation] had emanated from the Centre and the RBI, in its wisdom, thouhg it was not right to do it now, or [it was not] right to do it at all, and given its proposal to the Centre. What would have happened then? Would the Centre have brushed it aside?” Justice B.V. Nagarjuna, one of the five judges on the Bench, asked the Attorney General.
Mr. Venkataramani said the question did not arise in the case. The demonetisation notification had subsequently merged with an Act of the Parliament. The Parliament had agreed with the government. Besides, Mr. Venkataramani said, the government, as a sovereign power, was well within its right to disagree with the RBI.
At one point during the day-long hearing, Justice B.R. Gavai asked whether a policy would become invalid if its valid objectives were ultimately not achieved. “Certainly not. Every minute the government looks at targets. The Five Year Plans had its targets. Over a period of time, these targets may or may not be met, but will it make the targets bad?” Mr. Venkataramani asked.
The petitioners had argued that none of the government’s projected objectives — choking black money, fake currency, and terror funding — were met eventually.
Senior advocate P. Chidambaram, for the petitioners, had said the RBI’s figures show ₹32.18 lakh crore currency in circulation now in India, almost double the ₹ 17.97 lakh crore of currency in use just before demonetisation in November 2016.
The government had contended that demonetisation was a “transformational economic policy step” which led to a phenomenal growth in digital transactions.
The government had claimed that the withdrawal of ₹500 and ₹1,000 banknotes, which had at the time formed more than 80% of the currency in circulation, was a “critical” part of a policy push to “expand formal economy” and thin the ranks of the informal cash-based sector.
