In 4:1 majority verdict, Supreme Court finds no flaw in demonetisation process
On January 02, 2023, a Constitution Bench of the Supreme Court by a 4:1 majority upheld the central government's decision to demonetise currency notes of Rs 500 and Rs 1,000 denominations six years ago in 2016.
Judgement of the Court
Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian held that the Centre's notification dated November 8, 2016 was valid and satisfied the test of proportionality.
Justice BV Nagaratna, in his dissenting opinion, said that though demonetisation was well-intentioned, it should be declared illegal on legal grounds (and not on objective grounds).
Justice Nagaratna said the decision to demonetise Rs 500 and Rs 100 notes should have been made through legislation and not through notification.
The Supreme Court dismissed 58 petitions challenging demonetisation, saying that this decision related to the economic policy of the government cannot be withdrawn.
Along with this, the Supreme Court said that there was no flaw in this entire process of decision making.
The Supreme Court accepted the government's view that there were consultations between the Center and the RBI before demonetisation.
Demonetization refers to the decision of the government to revoke thelegal tender status of a currency note.
All the currencies issued by RBI are used as a legal tender because the value they bear is assured by the RBI.
Once a currency note is demonetised, it cannot be used.
On 8 November 2016, the Government of India announced the demonetisation of all 500 and 1,000 notes.
The government also announced the issuance of new 500 and 2,000 banknotes in exchange for the demonetised notes.
Objective of 2016 demonetisation
Curb Corruption- Corruption can also be controlled by reducing cash circulation.
Tackle Terrorism- High denomination notes like Rs 500 and Rs 1000 are often used in terrorist/naxalite activities, drug and human trafficking.
Eliminating Fake Currency - According to the annual report of RBI, during the year 2016-'17, fake notes worth Rs 41.5 crore were detected in the banking system in the form of old Rs 500 and Rs 1,000 notes.
Eradicate Black Money- Black money refers to cash that is not accounted for in the banking system or cash for which tax has not been paid to the state.
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