Demonetisation verdict: BJP feels vindicated; Cong leans on only dissenting voice

After over six years of being slammed by the Opposition, particularly the Congress, for demonetising the then legal tender of Rs 500 and Rs 1000, Prime Minister Narendra Modi’s government has finally had the last laugh. By a 4:1 majority judgment, a constitution bench of the Supreme Court, on Monday (January 2), upheld the validity of the gazette notification of November 8, 2016, through which the Centre withdrew the 500-rupee and 1000-rupee currency notes from circulation after giving the country’s citizens a 24-hour notice.

The majority judgment, delivered by Justice BR Gavai, on behalf of himself and Justices SA Nazeer, AS Bopanna, and V Ramasubramanian, decided to adopt a liberal, or as it noted in the judgment, “pragmatic interpretation” of Section 26 (2) of the RBI Act to conclude that the central notification on demonetisation had satisfied the “test of proportionality.”

Petitions challenging demonetisation had argued that the expression “any” in Section 26 (2) of the Act should be interpreted as “some and not all” and, thus, the Centre may demonetise currency of a particular series of a denomination and not issue an omnibus notification applicable to different denominations. The instant section reads: “On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender.”

Also read: SC upholds demonetisation, says ‘whether objective achieved or not is irrelevant’

“Pragmatic, not pedantic, interpretation”

The majority judgment, however, rejected the contention put forth by various lawyers, including former Union Finance Minister P Chidambaram, who appeared for the petitioners, demanding a restrictive interpretation of the law. Instead, Justice Gavai said, “The modern trend is to adopt a pragmatic, not pedantic, interpretation” and that interpretations that “lead to absurdity have to be avoided” while an interpretation “capable of advancing the statute’s objective” must be followed.

The majority judgment also rejected all submissions by petitioners who had argued that none of the stated objectives of the demonetisation move — eradicating black money, ending terrorism, reducing circulation of cash, et al — had been fulfilled in the years since the said notes were withdrawn, while the hardships faced by the citizens due to the decision continued to play out. Reading out the operative part of the majority judgment, Justice Gavai said whether the objectives of the scheme were fulfilled or not was “irrelevant” to the case.

BJP seeks Congress apology

Emboldened by the majority judgment, the BJP was quick to seek an apology from former Congress president Rahul Gandhi for “his campaign against demonetisation.” Rahul and the Congress have continued to be fierce critics of the demonetisation decision former Prime Minister Dr Manmohan Singh had famously described in Parliament as “organised loot and legalised plunder.”

Also read: Demonetisation verdict explained | What dissenting SC judge, 4 other judges said

Terming the apex court’s majority judgment as “historic” and “in national interest,” former Union Law Minister and BJP leader Ravi Shankar Prasad said, “Supreme Court has held a decision taken in national interest as valid… Will Rahul Gandhi now say sorry for his campaign against demonetisation? He even spoke against it abroad.” Prasad also claimed that demonetisation had boosted income tax collection, cleansed the economy, and proved to be the “biggest blow” to terrorism, as it singularly curbed terror funding.

The Congress has been forced to draw solace from the dissenting opinion authored by Justice BV Nagarathna, who disagreed with conclusions reached by the four judges, who comprised the majority, on each of the six issues the Bench had framed in the case.

Congress’s communication department chief Jairam Ramesh asserted that the judgment only dealt with whether Section 26 (2) of the RBI Act was “correctly applied or not… nothing more, nothing less” and “not with the outcomes” of demonetisation. Ramesh told reporters in New Delhi that there was “no question of Rahul Gandhi apologising” and that it is “Modi who should apologise” for the hardships common citizens had to face, and continue to face, due to demonetisation, as well as for the adverse impact the decision had on India’s economy, particularly the MSME sector.

“Slap on the wrist”

Chidambaram, too, leaned heavily on the dissenting opinion given by Justice Nagarathna, which he said will “rank among the famous dissents recorded in the history of the Hon’ble Supreme Court.” The former Union finance minister said, “It is necessary to point out that the majority has not upheld the wisdom of the decision; nor has the majority concluded that the stated objectives were achieved. In fact, the majority has steered clear of the question whether the objectives were achieved at all. We are happy that the minority judgement has pointed out the illegality and the irregularities in demonetisation. It may be only a slap on the wrist of the government, but a welcome slap on the wrist.”

Also read: Why Congress thinks SC has not upheld the 2016 demonetisation move

The CPI(M), another bitter critic of demonetisation, also claimed that the majority judgment “merely upholds the right of the government to take such a decision and in no way endorses the consequences of such a decision.” A statement issued by the party said the majority judgment “exclusively dealt with the legal right of the central government to take such a decision and that it does not violate Section 26(2) of RBI Act,” while the dissenting opinion “maintained that this Section says that the RBI must recommend to the government to initiate demonetisation.” As such, the CPI(M) said, “In this (demonetisation) case, the decision was taken by the central government, which sought the opinion of the RBI… approval of Parliament should have been taken before this decision was executed.”

The dissenting voice

Justice Nagarathna’s dissent, though appreciative of the intent behind demonetisation, was scathing in its criticism of how the entire scheme was implemented by the Centre. Significantly, Justice Nagarathna’s dissent also emphasised that the entire exercise of demonetisation was “carried out in 24 hours” even though the majority judgment noted that consultations between the Centre and the RBI on the move had gone on for six months.

The dissenting opinion was unsparing in its analysis of the role the RBI played — or did not play — in demonetisation, of the way the Centre banned the said legal tender and of the lack of any assessment of the impact the contentious move had on the people and the country’s economy. Justice Nagarathna dubbed the demonetisation notification as “unlawful” and held that, in her view, “when the proposal for demonetisation originates from the central government, it is not under Section 26 (2) of the RBI Act… it is to be way of legislation, or by way of an ordinance.”

Also read: Demonetisation: Cash is still king, circulation rises by 83 per cent

Stating that she had gone through the official records, Justice Nagarathna said, “Records show no independent application of mind by the RBI.” She also quoted petitioners and other reports, which claimed that 86% of currency in circulation in the country as on November 8, 2016, was demonetised, and wondered “if RBI thought about such implications which included socio-economic hardships.”