S. Harirao

“Demonetisation was a procedural right decision but instead of the right leg, the left leg was amputated. The courts are not bothered about the consequences of the decision!” – Vinod Chand in fb.

Above is a comment on the Supreme Court majority 4:1 verdict delivered on 02.01.2023  on demonetisation announced on television broadcast by PM Narendra Modi on 08.11.2016. The majority judgement found no flaw and upheld the demonetisation process no matter the hardship faced by the citizens in the process.

The sole woman Judge Justice B.V. Nagarathna, differed with the other judges; in her minority judgment it was stated that the notification issued under Section  26(2) of RBI Act was unlawful because the Government had initiated the process and not the RBI Board. The dissenting Judge further added that official records show the Central Board of RBI had hardly any time to apply its mind independently to the government proposal since the  decision taken within 24 hours and acted merely on the assurances given by the government that the demonetisation process would result in reducing bank notes and switch  over to digitalization in the economy. Instead, the Union government should have taken it to Parliament which is a “nation in miniature” or could have promulgated an ordinance.

Demonetisation created havoc:

Mere the word demonetisation creates a kind of trauma in the mind, reminding the hardship and pain the citizens of this country had undergone for 50 days and thereafter. Around 104 died in the long queues in front of bank branches to exchange a few thousand hard earned money they had during the suddenly announced process. Not to mention the difficulties the bankmen suffered during that time in which 12 of them died.  In the name of system and procedure, many innocent staff were chargesheeted and harassed for no fault on their part. Still one wonders why it has been announced by the PM instead of RBI Governor or its officials.


Though it was said that the objectives were “noble and well-intentioned”, on going through the pronounced three objectives of curbing black money, eliminating corruption and fake notes and stopping funding of terrorist activities, all proved to be only rhetoric and the facts and figures proved that none of the three objectives were achieved in the process but only caused severe economic crunch and unbearable miseries to the majority of  the public.  RBI data says that 99% of old notes in the public domain had come back to RBI which means all black money turned white, and there existed negligible number of fake notes. The terrorist activities have not stopped.  

But after few days of demonetisation, the goal posts were changed by the government stating that the main aim was to bring in digitalisation of transactions which would be good for improving the economy and in curbing black money.  But as per RBI data the money circulation in currencies have actually increased. The money in circulation was 18 lakh crores at the time of demonetization; whereas it has increased to Rs.32.41 lakh crores as on 31.12.2022.

Throughout that 50 days period, banking activities like lending, deposit mobilisation etc got totally paralysed and the only transactions were that of exchange of old notes and remitting them to currency chests.  Even private banks, petrol bunks and shops like Big Bazar were also allowed to exchange old notes, and there were many incidents of frauds.

The Supreme Court lawyer Gautham Bhatia wrote that the secret documents based on which 4:1 majority verdict was delivered were submitted after hearing was over which means that the petitioners were not shown those documents and hence there was no chance to respond on those documents which were relied upon by the  judges.

Shri P. Chidambaram who argued the case in the SC commented that the minority judgement of the dissenting judge pointing out the  illegality of demonetisation is a slap on the wrist of the Government and felt happy that it has emphasised the important role of Parliament in a Democracy.  He further added that the majority verdict has not upheld the wisdom of  the decision nor has the majority concluded that the stated objectives of demonetisation were achieved.

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