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Supreme Court Upholds Centre’s 2016 Demonetisation

The SC dismisses petitions challenging the demonetisation of Rs 500 and Rs 1000 currency notes

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Raju Vernekar
Raju Vernekar
Raju Vermekar is a senior Mumbai-based journalist who have worked with many daily newspapers. Raju contributes on versatile topics.

INDIA. Mumbai: A five-member bench of the Supreme Court (SC) on Monday upheld the decision of the Union Government in 2016 to ban old Rs 500 and Rs 1000 currency notes (Demonetisation), saying that it was taken after consultation between the Center and the RBI.

A Constitution Bench comprising Justices S Abdul Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna delivered the verdict on a batch of pleas challenging the central government’s 2016 demonetisation exercise.

Delivering the majority opinion, Justice Gavai stated that “it has been held that there has to be a great deal of restraint before interfering in matters of economic significance; we cannot supplant such views with the judicial one.”

“There was consultation between the Center and the RBI for a period of six months. We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by the doctrine of proportionality”, Gavai added.

“Thus, the power available to the centre cannot mean that it is in relation to only specific series of bank notes. It is for all series of bank notes. There is no excessive delegation as under Section 26(2) of the RBI Act, and thus it cannot be struck down. The notification is valid and satisfies the test of proportionality. The period for the exchange of notes cannot be said to be unreasonable. The RBI does not have any independent power to bring in demonetization.”

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However, Justice B. V. Nagarathna differed and delivered a dissenting judgment. 

“I have noted that RBI is the bulwark of the Indian economy.” I have cited the history of such demonetisation exercises the world over. “The court is not to sit over the merits of an economic or financial decision… examining Section 26(2) would not mean to sit over the merits of demonetisation, and thus it is well within the lakshman rekha as drawn by this court,” BV Nagarathna stated.

“Demonetization at the behest of the central government is a far more serious issue affecting citizens than the one done by the banks. With the vast powers of the Center, the same has to be done by plenary legislation. The Parliament cannot be left out of such important decisions. Looking at the records submitted by the RBI, it is noted that demonetisation was recommended by the central government. This shows there was no independent application of mind by the RBI,” Justice BV Nagarathna added.


The petitioners had argued that section 26(2) of the Reserve Bank of India (RBI) Act, which allows the government to declare all series of a particular denomination as being no longer legal tender, was too wide, was flawed, the recommendation did not consider relevant factors, the stated objectives of demonetisation were not achieved, the move failed the test of proportionality, and the Court had powers to mould and grant declaratory relief.

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Sudden ban 

To weed out black money, the decision to demonetize the old 500 and 1000 rupee notes was announced in the evening of November 8, 2016.

Subsequently, the new 2,000-rupee currency note, along with a 500-rupee note, was introduced.

33 deaths, directly or indirectly linked to the demonetisation move, were reported across the country. While a few deaths were the result of shock, some deaths were stated to be due to exhaustion after standing for long hours in lines to exchange notes. 

The people had a tough time exchanging Rs 2000 notes. In some parts of Maharashtra, daily wage earners working under the Employment Guarantee Scheme faced extreme difficulties since they were asked to bring in change before they were given Rs 2000 notes (since their wages were much less than Rs 2000). 

There have also been reports of suicide and even a murder over demonetization in West Bengal.

In March 2017, the government claimed that there had been no official report on deaths connected to demonetisation.

However, in December 2018, the then Union Finance Minister, the late Arun Jaitley, told Parliament that four people, three bank personnel, and one customer of the State Bank of India, died during demonetisation.

Also Read: Heeraben Modi Passes Away at 100: PM Modi Paid Last Respect to His Mother

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  • Raju Vernekar

    Raju Vermekar is a senior Mumbai-based journalist who have worked with many daily newspapers. Raju contributes on versatile topics.

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