Challenge To Demonetisation Not Academic : Supreme Court Seeks Affidavits Of Union & RBI


12 Oct 2022 8:05 AM GMT

  • Challenge To Demonetisation Not Academic : Supreme Court Seeks Affidavits Of Union & RBI

    Persuaded by the petitioners to change its preliminary view that the challenge to demonetisation has become an academic issue, the Supreme Court on Wednesday commenced hearing the legal arguments raised by petitioners on merits.After the arguments of the day, the Court asked the Union of India and the Reserve Bank of India to file a comprehensive affidavit in response to the...

    Persuaded by the petitioners to change its preliminary view that the challenge to demonetisation has become an academic issue, the Supreme Court  on Wednesday commenced hearing the legal arguments raised by petitioners on merits.

    After the arguments of the day, the Court asked the Union of India and the Reserve Bank of India to file a comprehensive affidavit in response to the petitioners' arguments, especialy the one that Section 26(2) of the Reserve Bank of India Act does not authorize the Union to completely cancel currency notes of particular denominations. The petitioners argue that Section 26(2) empower the Centre to cancel currency notes of a particular series and not the entire currency notes.

    The bench also said that it wants to see the documents relating to the RBI Board meetings ahead of the announcement of the demonetisation. The case will be next considered on November 9.

    A Constitution Bench comprising Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna is considering 58 petitions which challenge the decision taken by the Central Government to demonetise the currency notes of Rupees 500 and 1000 denominations.

    On the previous hearing date (September 28), the Court had observed that it will first examine whether the petitions challenging demonetisation have become academic.

    While Attorney General for India R Venkataramani and Solicitor General of India Tushar Mehta repeatedly asserted that the issue has become academic in view of the passage of 6 years, Senior Advocates P Chidambaram and Shyam Divan contended that the validity of the Government's decision was still open to challenge. The senior lawyers appearing for the petitioners raised the argument that the Government lacked the power to cancel the currency notes through an executive order and stressed that the issues hold relevance for the future as well.

    Persuaded by the petitioners' arguments, the bench observed that the issue may not have become academic. The bench also said that it has the duty to answer the issues referred to it by the Constitution Bench and that it has to answer them "one way or the other for posterity".

    A detailed account of today's exchange is given below :

    When the matter was taken today, Solicitor General of India Tushar Mehta told the bench that the issues are academic and the individual cases of hardships could be addressed independently. SG said that the Court's time need not be "wasted" on academic issues.
    Senior Advocate Shyam Divan, appearing for some petitioners, expressed astonishment at the expression "wastage of time" when issues of constitutional importance have been referred. Divan said that he has produced a compilation of the various orders passed by the Constitution Bench and also smaller benches indicating the issues involved in the case.
    Justice Nagarathna said "When issues of constitutional importance are referred, it is the duty of the court to answer them. But in this case, has the issue not become fait accompli?".
    Senior Advocate P Chidambaram disagreed and said that the issue are very much live. Attorney General for India R Venkataramani expressed the view that the issues are now academic. "When the Act is not challenged, the notifications cannot be challenged, that too without a context. The issues are academic and there are political implications", the AG said.
    "If the issue has academic, there is no point in wasting the court's time. Should we take this up at this stage after passage of time? We can deal with individual issues", Justice Nazeer suggested.
    Chidambaram said that the demonetisation carried out in 1978 was through a separate Act of the Parliament unlike the 2016 decision. So, the legal issue whether the Section 24 and 26 of the Reserve Bank of India Act can be invoked to demonetise currency notes is very much alive. If the issue is not settled, the government can repeat the same in future.
    "Whether the demonetisation of this kind withdrawing 86% of currency notes in circulation requires a separate law by the Parliament", Chidambaram framed the question.
    Seemingly moved by Chidambaram's arguments, the bench turned to the Attorney General seeking his response.
    "Ultimately, what are they seeking for?", AG asked.
    "Perhaps we cannot undo what has been done. Whether it can be done in future...", Justice Bopanna said.
    "Are we in an advisory jurisdiction?", AG asked.
    "This is not advisory jurisdiction, whether the power can be used in future is the question", Justice Gavai commented. Justice Nazeer added that many landmark judgments of the Supreme Court came in "advisory" jurisdiction and cited the example of SR Bommai case.
    "It is not advisory jurisdiction. This is about declaration of law", Chidambaram said. He referred to Article 142 of the Constitution to say that the Supreme Court has the power to declare what is the correct law.
    AG repeated that the questions cannot be gone into in the "abstract". He also said that the Court may be entering into a "wide range of connected issues in other domains".
    Chidambaram said that the "law has travelled much beyond what the AG has argued" and added the the issue has to be tested on the doctrine of proportionality as well. He highlighted that 86% notes were rendered invalid by the decision. In the previous instances of demonitisation, the currency notes which were withdrawn were not much in circulation, as they were of denomination of Rs 10,000 and Rs 5,000.
    Solicitor General intervened at this juncture to say that the Courts have not applied the doctrine of proportionality with respect to the economic decisions taken by the Government.
    At this juncture, the judges of the bench had a discussion among themselves for a few while. Later, the bench said that it will allow the petitioners to raise their arguments and will grant time to the Centre to respond.
    The AG at this moment requested that the hearing may commence on some other day so that there is a "structured way of addressing everyone's concerns". Chidambaram then said that the issues were formulated by a 3-judge bench in the reference order passed in December 2016. 
    Divan read out the issues formulated in the reference order for the bench. He highlighted that the Supreme Court had withdrawn to itself the cases from High Courts and barred other courts from entertaining petitions on this subject. He also pointed out that a Constitution Bench in 1996 had decided whether the 1978 demonetisation was legal. 
    The bench asked whether the 1978 demonetisation was similar to the 2016 decision. Divan replied that the answer can be "yes" and "no". "Yes" to the extent that similar questions relating to powers of the Government to take the action arise. "No" to the extent that the 2016 decision was different in its magnitude, as the 1978 demonetisation was for extremely high value denominations which were rare in circulation.
    The senior counsel pointed out that his client was someone who had missed out the window for exchanging notes since he was abroad during the relevant time for a surgery. "It is our hard-earned money, which was rendered naught. It is not some abstract, academic question".
    SG replied that that statutory protections were given and it was not as if hard-earned of everyone was taken away.
    When the Attorney General again said that the issues are irrelevant now, Justice Nazeer said, "Mr.Attorney, what we are thinking is, the Act is in force...The notification is still in force..", Justice Nazeer said.
    "The notification has worked itself out", AG replied.
    "We have to examine Mr.Attorney General", Justice Nazeer said. The AG reiterated that the relief will only be an "academic declaration" as the subsequently passed Act has taken over the notification.
    "In some of the petitions, the Act has also been challenged", Justice Gavai pointed out.
    "So it won't become academic in that sense", Justice Nazeer added.
    "We can say the issue has become academic or infructuous only if both sides agree. If there is one point and a counter point on whether it is infructuous...", Justice Bopanna weighed in.
    Justice Nazeer pointed out that the 1978 demonetisation was examined by the Court in 1996.
    "The point is, the wisdom of the government is one aspect of the matter and we know where the lakshman rekha is. But the manner in which it is done and the procedure is something which can be examined. But for that, we need to hear", Justice Nagarathna stated.
    "Any declaration one way or the other is for posterity and I feel it is the duty of the Constitution Bench to answer it one way or other", Justice Nagarathna added.
    The AG said that when "momentous decisions" are taken by the government, several aspects are taken into consideration. Justice Nagarathna replied that those aspects will be certainly considered while answering the issues.
    After this, the bench proceeded to hear the substantive arguments raised by Chidambaram (separate report on that to be published). The arguments are underway. The live-stream can be watched here. Live-updates available here

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