Top court seeks RBI, govt files on note ban decision
RBI permitted the exchange of the outlawed currency notes till December 30, 2016, and the next day an Ordinance was introduced that barred them as legal tender, while making the possession and use of the old notes a punishable offence after a limited exchange period.
New Delhi The Supreme Court on Wednesday reserved its verdict on the Union government’s move in November 2016 to outlaw currency notes of ₹500 and ₹1,000, and directed the ministry of finance and the Reserve Bank of India (RBI) to produce the relevant files leading to the decision.
Concluding hearing on whether the government followed due procedure provided under the RBI Act before undertaking a massive exercise to withdraw over 86% of the currency from circulation on November 8, 2016, a five-judge bench headed by justice S Abdul Nazeer said: “Counsel for Union of India and Reserve Bank of India are directed to produce the relevant records. Judgment reserved.”
RBI permitted the exchange of the outlawed currency notes till December 30, 2016, and the next day an Ordinance was introduced that barred them as legal tender, while making the possession and use of the old notes a punishable offence after a limited exchange period.
The court’s decision to call for the records came at the fag end of the five-day marathon hearing despite demands being made in this regard by the petitioners led by senior advocate and former finance minister P Chidambaram.
“If you (Centre) have the records, pass it on for the perusal of the court. If it is readily available, give it now or you may give it later in the day,” said the bench, also comprising justices BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna.
Attorney General R Venkatramani, who appeared for the Centre, had on an earlier occasion indicated that the government had nothing to hide. On Wednesday he reasoned that much of what is contained in the records was captured by the affidavits of the Centre and RBI. “Our affidavit captures what is said here (in the files) to a large extent,” AG said. However, the bench in reply stated, “It (the submission of the files) is for our satisfaction”.
On Tuesday, Chidambaram made a case for the government to disclose the documents, saying that nowhere in the arguments did the Centre or RBI claim privilege over the files. “I am not asking that they show us. But the court can certainly look into it and satisfy if the proportionality of the enormity of this decision was considered. Without that it is the blind leading the blind. According to me, decision making was completely flawed,” he said.
Chidambaram narrated the string of events that began with the RBI board getting intimation of a meeting from Centre on November 7, a board meeting on November 8 at 5.30pm, the Union Cabinet getting a recommendation within an hour, and the Prime Minister’s 8pm televised address on November 8 announcing the decision. He wanted the court to examine three documents -- the November 7 letter by the Centre, the November 8 RBI recommendation, and the agenda note or minutes of the board meeting.
The government undertook demonetisation under Section 26 (2) of the Reserve Bank of India (RBI) Act, 1934 after a recommendation from the central board of RBI. The provision empowers the government to declare that “any series of bank notes of any denomination shall cease to be legal tender”.
The petitioners said it was important to review the documents to assess if RBI considered the impact of the withdrawal of such a large volume of currency which caused agony, loss, and hardship to the people of this country. At the relevant time, ₹17.97 lakh crore currency was in circulation in the market of which the demonetised currency notes were valued at ₹15.44 lakh crore. Of this, ₹15.31 lakh crore returned to banks. Although the demonetisation exercise was carried out on two occasions in the past, the petitioners argued that the volume of outlawed currency was 11.5% by value of currency in circulation in 1946 and 0.6% in 1978 thereby not impacting an overwhelming majority of people.
Among the three dozen petitions challenging the 2016 notification, many petitioners were people who were unable to deposit their money within the window period available till December 30. The grace period was extended to limited class of persons and that too came under challenge.
The government justified its action to achieve a larger public interest of ridding the economy of black money, fake currency and terror financing. RBI argued that enough measures were put in place to address the genuine concerns faced by citizens, and once these measures were provided, it was wrong to suggest that the RBI was “thoughtless” in carrying out this exercise.
