Demonetisation verdict: Supreme Court upholds Centre's 2016 decision to ban Rs 1000, Rs 500 currency notes

Supreme Court on Monday upheld the Centre's 2016 decision to demonetise currency notes of Rs 1,000 and Rs 500 denominations. 

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 the doctrine of proportionality," the Supreme Court said. 

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Demonetisation: Notification dated November 8, 2016 valid, satisfies test of proportionality, says Supreme Court

— Press Trust of India (@PTI_News) January 2, 2023

"Supreme Court says RBI does not have any independent power to bring in demonetisation and the decision was taken after the consultation between the Centre and RBI," it added.

The top court had, on December 7, 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.

It heard the arguments of Attorney General R Venkataramani, the RBI’s counsel and the petitioners’ lawyers, including senior advocates P Chidambaram and Shyam Divan.

Calling the scrapping of the Rs 500 and Rs 1,000 currency notes deeply flawed, Chidambaram had argued that the government cannot on its own initiate any proposal relating to legal tender, which can only be done on the recommendation of the RBI’s central board.

Resisting the apex court’s attempt to revisit the 2016 demonetisation exercise, the government had said the court cannot decide a matter when no tangible relief can be granted by way of “putting the clock back” and “unscrambling a scrambled egg”.

The RBI had earlier admitted in its submissions that there were “temporary hardships” and that those too are an integral part of the nation-building process, but there was a mechanism by which the problems that arose were solved.

In an affidavit, the Centre told the top court recently that the demonetisation exercise was a “well-considered” decision and part of a larger strategy to combat the menace of fake money, terror financing, black money and tax evasion.

The Supreme Court has heard a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on November 8, 2016.