The Supreme Court's majority judgement upholding the admittedly cataclysmic demonetisation of the 500 and 1000-rupee notes that sucked out 86 percent of currency in circulation through one stroke on the night of 8th November 2016 is one way a slap in the face of Modi baiters. However, the dissenting verdict essentially state that its objectives have not been met substantially and the decision was unlawful on legal grounds.
The view of Justice Gavai that was in majority says Center has the power to demonetise all series of notes and that the notification did not suffer from any flaw. Indeed, in the six months in the run up to the fateful day, there were widespread consultations between the government and the RBI. The 52-day window given for exchange of the demonetised notes was reasonable said the Court as a majority view. The court said the decision was not hit by the doctrine of proportionality as it sought to address the vexed and mammoth problems of black money, counterfeit notes and terror funding.
As many as 58 petitioners had challenged the demonetisation. Earlier when the nation was soldiering on with the lack of currency notes and waiting in serpentine queues, the SC took a principled stand, and refused to stay the executive decision. It has now shown admirable hands-off policy in refusing to sit in judgement over the decision which otherwise would have set a bad precedent with country getting divided right down the middle. Someone in its wake might have called in question say Pandit Nehru’s naïve trust in Hindi-Chini bhai bhai slogan of Chou En Lai way back in 1962. The SC must be commended for not setting the wheels of retributions and reprisals in motion.
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To be sure, the stated objectives have not been met substantially with as much as 99% of the notes getting legitimised through deposit in banks, use for payment at petrol bunks and hospitals and exchanged at exchange counters for notes that were legal tender.
Modi’s heart was at the right place. Demonetisation failed at the altar of implementation both in not being able to nab the crooks and in the painfully slow remonetisation that crippled the cash-economy for nearly a year. Yet, people grinned and bore not only by standing in serpentine queues during those harrowing days when ATMs went dry but also by giving their thumbs up to Modi led BJP in successive elections both for assemblies and the Lok Sabha. Demonetisation was followed by the GST roll-out. Together they ensured the mainstreaming of the economy. The UPI roll-out too has served to encourage the banking habit and limiting the role of cash.
His detractors have been looking for any weapon to bludgeon him with. Demonetisation was one such. They thought any adverse finding or observation by the SC would give them something to go to town with in the run-up to the 2024 Lok Sabha elections a la what they did in 2019 smelling rat in the Rafale deal. That attempt too came unstuck with the opposition getting egg on its face.
The SC verdict should send the right message-----don’t rush to the Courts without substantial material beyond heartburn for the man at the helm. That bulk of the petitions challenging demonetisation was politically motivated cannot be gainsaid. It is small mercy for the challengers that the Court did not come down heavily on them. Yet the verdict is a stinging slap on their faces.
Justice BV Nagarathna’s dissenting views are not as much censure of demonetization but on the desirability of steamrollering such a major decision through an executive order. His Lordship says such a seminal and earthshaking decision should have been taken through a legislation or at least an ordinance as bypassing Parliament does not augur well for a Parliamentary democracy.
I am afraid one cannot agree with his views. Some decisions’ success impinges on secrecy. Budget proposals are guarded assiduously till the finance minister reveals them in the course of his budget speech. If legislation were to be made on demonetisation, crooks would have laundered their black money. Indeed, as it is the charge is the long rope given to crooks through exchange counters, petrol bunks and hospitals has been exploited to the hilt by moneybags. At any rate, not all executive decisions should be subjected to Parliamentary approval because that would blur the distinction between legislature and the executive.
As the majority judgement observes the decision is not vitiated by lack of power with the Center. The majority also observes that RBI was not only kept in the loop but consulted all the way. So, the charge of non-application of mind by the RBI made by the dissenting judgement it is respectfully submitted is not quite correct.
Yes, there is considerable merit in the dissenting verdict when it says that minting of Rs 2000 notes flies in the face of one of the objectives of demonetisation. But then it was done to make amends for delay in remonetisation. Government has been quick to realise that Rs 2000 notes are indeed helping crooks in stashing away their black money by requiring lesser space in dingy lofts, suitcases and bank lockers. And it has quietly been withdrawing them from circulation instead of declaring them non-legal tender with yet another round of demonetisation. It is heartening to note the dissenting judgement lauding the intent of the Modi government while taking this decision that caused an economic and financial tsunami.
—The author S Murlidharan is a CA by qualification, and writes on economic issues, fiscal and commercial laws. The views expressed in the article are personal.
Read his previous articles here
(Edited by : C H Unnikrishnan)
First Published: Jan 2, 2023 3:00 PM IST
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