Today the Supreme Court is slated to commence hearing arguments on a slew of petitions that call into question the correctness, and indeed the constitutional validity, of the Union government’s policy of demonetisation . The petitions allege that the primary notification issued on November 8, which illegitimatises currency notes of denominations of Rs.1,000 and Rs.500 , and the series of consequential orders passed by the Reserve Bank of India (RBI) lack competency, in that the government cannot demonetise currency through mere executive fiat absent any legislative support. The policy, as a collective whole, the petitioners contend, far from causing what the government has described as mere inconveniences, impinges deeply on several fundamental rights, and it should therefore be declared invalid.
How the Supreme Court treats these challenges will tell us a great deal about the checks and balances that our democracy purports to provide.
Courts and economic policy
There is an often-repeated belief that issues of policy — especially those involving the state and nature of a country’s economy, such as this — ought to be beyond judicial review. That is, courts should exhibit restraint in examining what are really matters for executive determination. Indeed, despite popular opinion that might hold the Supreme Court as excessively interventionist, India’s judiciary has historically shown a reticence in interfering in matters of economic policy. For the most part, the court has been justified in acceding to the executive’s expertise. But while there is certainly a kernel of rationality to such a theory of limited judicial review, it is dangerous to see judicial deference as forming part of an immutable doctrine. As the former President of the Israeli Supreme Court Aharon Barak had once observed, separation of powers exists to “strengthen freedom and prevent the concentration of power in the hands of one governmental actor in a manner likely to harm the freedom of the individual”.
The issues at stake before the Supreme Court are, without doubt, complicated. They give rise to a dispute which might be described as a “hard case”, where differing value judgments can lead to entirely different conclusions. But that need not dissuade the court from applying its mind to the subject, and from ruling upon questions of law that go to the root of the policy’s validity. In the present case, despite the sense of most independent economists that the long-term economic benefits of the government’s notifications are negligible at best, what the petitioners are questioning is not the policy’s financial viability. Rather, what they ask of the court is to judge the government’s competency in effecting the policy, and, even more gravely, to decide on whether the means of its enforcement has led to unconstitutional consequences. Regardless of where one might stand on the political spectrum, it is difficult to argue against the magnitude of these questions.
The petitioners’ case
Were the court to decide that it can, in fact, examine the policy’s validity, it would likely find that, on merits, the petitioners’ primary argument stands on a weak ground. This is because Section 26(2) of the Reserve Bank of India Act, 1934, expressly states: “On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that… any series of bank notes of any denomination shall cease to be legal tender save at such office or agency of the Bank and to such extent as may be specified in the notification.” The petitioners assert that under Section 26(2), the government can only withdraw the legal tender of any particular series of a bank note of any denomination. Therefore, according to them, the government ought to have, at the least, passed an ordinance (as the Morarji Desai-led regime had done in 1978) to implement this policy of demonetisation.
But ordinary rules of statutory interpretation suggest otherwise. The government can argue, quite reasonably, that the executive power vested in it to withdraw any particular series of bank notes would necessarily also include a power to withdraw all the series of bank notes belonging to any particular denomination. What’s more, it may be pointed out, the RBI, acting under the Payment and Settlement Systems Act, 2007, has been unequivocally bestowed with authority to regulate the means and the manner through which money can be withdrawn, exchanged and deposited. In sum, therefore, it is perhaps difficult to assail the demonetisation policy for the reason that it lacks legislative support.
The shocks of demonetisation
But it isn’t enough for the government to show that it possessed the basic competency to implement demonetisation through mere executive orders. It must also show that the manner of the policy’s enforcement, and the details of the various notifications that have been issued, conform to constitutional standards of fairness.
The immediate reverberations of demonetisation, by any account, have been brutally depressing. Most shocking amongst these consequences has been the death toll. News reports aver that there have been as many as 55 deaths emanating out of its diktats. Consider one of these cases: a suicide committed by Ravi Pradhan, a farmer from Chhattisgarh, who stood in queues for two consecutive days at a bank branch around 2 km away from his home town, to get exchanged Rs.3,000, only to be rebuffed each time as he was unable to reach the front of the queue before bank hours ended. Pradhan intended to send the money to his two sons who were working on daily wages in Tamil Nadu.
These humanitarian costs are graver yet when you study the liquidity crunch in the informal economy, the numerous lay-offs of workers across industries, and the woes of millions of people seeking to access the most essential services. If the ordinary Indian is not complaining, as some would want us to believe, it’s because she has little choice, faced with a denial of her right to be treated as an equal, and of her freedom to move freely and earn her basic livelihood.
Government’s pitiless response
Quite opposed to taking steps to assuage the deep infractions of rights that the policy has caused, the government has merely indulged in what can only be described as policymaking on the fly. Since the original notification was announced, the rules have been constantly modified (more than 20 times at last count), with some of the classifications that have been made crossing all thresholds of the absurd. How, for instance, one may easily ask, can it be permissible to withdraw Rs.2.5 lakh in cash for a wedding, when people are forbidden from withdrawing money beyond a minimal limit for other equally, if not more, pressing purposes? To make matters worse, on November 24, the RBI shattered any remaining notion of trust that one had reposed in it by announcing that exchange through banks of the old Rs.500 and Rs.1,000 notes would be ceased immediately despite the Prime Minister’s explicit promise that limits imposed earlier would be enhanced, and that such exchange would be permitted until the end of the year.
Although its transgressions have been flagrant, the state’s response has been markedly pitiless, based, as it is, on a warped sense of utilitarianism: the short-term losses (a pathetic euphemism for loss of life, among other things), the government argues, are somehow compensable by the long-term gains that the policy will usher in.
Here, let’s pause to understand what justice really demands. Justice requires not only an adherence to procedural integrity, where democratic institutions collectively determine social and economic policy, but, even more significantly, it also requires that any policy takes into account the potential injustices that might accrue out of its enforcement. To view policy decisions as merely a product of a balancing of short-term pains against supposed long-term pleasures is to ignore the injustices of the present. While many governmental actions make significant trade-offs, should those trade-offs be allowed to impinge on a person’s most foundational freedoms in a manner that perpetuates existing inequalities?
The classifications that the demonetisation policy makes, and the manner of its enforcement, suffer from this inherent flaw: they fail to consider the moral abhorrence in treating some lives as more valuable than others. There is no doubt the executive should be allowed great leeway in using the state as a laboratory for democracy, to borrow Justice Louis Brandeis’s famous aphorism. But such experiments cannot come at the cost of human lives. By constantly moving its goalposts, by arbitrarily tweaking the rules virtually every day, the government has committed a serious sin on society: it has used the fig leaf of public interest to create a situation of grim distress. Were the Supreme Court to review these terrible consequences of demonetisation, it would scarcely be overreaching its authority. On the contrary, it would merely be performing its rightful role in India’s constitutional structure.
Suhrith Parthasarathy is an advocate practising at the Madras High Court.
