Supreme Court upholds note ban with 4-1 verdict

New Delhi: A 5-judge Constitution bench of the Supreme Court on Monday upheld the validity of Centre's November 2016 decision to demonetise Rs 500 and Rs 1000 currency notes. The bench headed by Justice S A Nazeer and comprising Justices B R Gavai, A S Bopanna, V Ramasubramanian and B V Nagarathna pronounced the judgment on a clutch of petitions challenging Centre's 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500 denominations. While four judges backed the demonetisation move, Justice Nagarathna dissented, making it a 4:1 verdict. Justice Nagarathna differed from the majority judgment on the point of the Centre's powers under section 26(2) of the RBI Act.

Pronouncing the majority judgment, Justice Gavai said the decision-making process cannot be faulted merely because the proposal emanated from the Central government. Justice Nagarathna said the demonetisation policy was flawed only on legal grounds. She, however, added that the move was well thought of to battle counterfeiting black money and terror funding.

The Supreme Court said there was consultation between the Centre and the RBI before demonetisation. "There was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by doctrine of proportionality," Justice Gavai said.

The court added that the RBI does not have any independent power to bring in demonetisation and the decision was taken after the consultation between the Centre and RBI. Earlier, the court directed the Centre and the Reserve Bank of India (RBI) to put on record the relevant records relating to the government's 2016 decision and reserved its verdict.

In her judgment, Justice Nagarathna said there was no time for the RBI to apply its mind since the notification was passed in 24 hours. She also mentioned that the parliament "can't be left aloof of such serious decisions" as it is a "miniature of the country".