SC majority ruling finds no flaw in 2016 demonetisation process

The sole woman judge on the five-member Bench, Justice B.V. Nagarathna, disagrees with the majority , saying the Union government’s notification issued under the Section 26(2) of the Reserve Bank of India Act was unlawful

A majority of four judges on a Constitution Bench of the Supreme Court on Monday found no flaw in the Union government’s process to demonetise ₹500 and ₹1,000 banknotes through a Gazette notification issued on November 8, 2016.

The sole woman judge on the five-member Bench, Justice B.V. Nagarathna, however, disagreed with the majority, saying the government’s notification issued under Section 26(2) of the Reserve Bank of India (RBI) Act was unlawful.

Justice B.R. Gavai, delivering the judgment for the majority, which included Justices S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, pronounced that the statutory procedure under Section 26(2) was not violated merely because the Centre had taken the initiative to “advise” the Central Board to consider recommending demonetisation.

Differing, Justice Nagarathna said the Centre could have issued a notification under Section 26(2) only if the Central Board of the RBI had initiated the proposal to demonetise a specified series of banknotes by way of a recommendation. Here, in 2016, the government had initiated the demonetisation, not the Central Board.

In cases in which the government initiates demonetisation, Justice Nagarathna said, it should take the opinion of the Central Board. The opinion of the Board should be “independent and frank”. If the Board’s opinion was in the negative, the Centre could still go forward with the demonetisation exercise, but only by promulgating an ordinance or by enacting parliamentary legislation.