'Demonetization was not unreasonable' : SC dismisses petition against Centre

Supreme Court on Monday dismissed the petition against demonetization.

The Supreme Court said that the Central Government's decision to demonetize Rs. 500 and Rs.1000 notes was correct. The Supreme Court has issued a verdict to this extent and dismissed the petitions filed against demonetization.

A five-judge Constitution bench led by Justice S A Nazeer, who will retire on January 4, delivered the Judgment on Monday when the Supreme Court returned from its winter recess. Justices A S Bopanna and V Ramasubramanian join Justices Nazeer, Gavai, and Nagarathna on the five-judge bench.

SupremeCourt Constitution Bench in a 4:1 majority upheld the Centre's 2016 decision to demonetize Rs 1000 and Rs 500 notes observing that it was not unreasonable and the decision-making was not flawed.

Justice B Nagarathana dissented in a separate judgment.

Further, the Supreme Court ruled the 52-day window provided for the exchange of demonetized currency notes with legal tenders is not unreasonable and cannot be extended now.

Moreover, the Supreme Court ruled that the demonetization decision does not suffer from any legal or constitutional flaws.

Resisting the Supreme Court's attempt to revisit the 2016 demonetization exercise, the central 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 previously admitted in its submissions that there were "temporary hardships," which are an inevitable part of the nation-building process, but there was a mechanism in place to address any issues that arose.

Background

On 8 November 2016, the union government announced the demonetization of all bank notes of denominations Rs.500 and Rs.1000. It also announced the issuance of new Rs.500 and Rs.2,000 in exchange for the demonetized banknotes.

Prime Minister Narendra Modi claimed that the action would curtail the shadow economy, increase cashless transactions and reduce the use of counterfeit cash to fund illegal activity and terrorism.

The announcement was followed by prolonged cash shortages in the weeks that followed. People had to stand in long queues to exchange their banknotes.