Parvez Alam
Published on: 07 January 2023 at 08:53 IST
While it certainly cannot be glossed over that what the majority of the Judges of the Apex Court held by 4:1 majority is binding but that definitely does not mean that we can afford to gloss over what Justice BV Nagarathna has held so very explicitly, eloquently, elegantly and effectively in this leading case.
It is worth stating that in a notable judgment titled Vivek Narayan Sharma vs Union of India in Writ Petition (Civil) No. 906 of 2016 1 that was finally pronounced on January 2, 2023 has upheld by 4:1 majority the decision taken by the Union Government six years ago to demonetize the currency notes of Rs 500 and Rs 1000 denominations. It must be mentioned here that the majority of Bench except Justice BV Nagarathna held that Centre’s notification dated November 8, 2016 is valid and satisfies the test of proportionality.
It must be mentioned here quite clearly that the Bench of Justices S Abdul Nazeer, BR Gavai, AS Bopanna and V Ramasubramanian were in majority who put their stamp of approval on demonetization in their judgment. But it was Justice BV Nagarathna alone who had the guts, gall and gumption to differ with the majority and that is what matters most as she gave very cogent reasons for the same. Justice BV Nagarathna in her dissenting view held that though demonetization was well-intentioned and well thought of, it has to be declared unlawful on legal grounds (and not on the basis of objects). Justice Nagarathna minced just no words to hold that demonetization recommendation could have emanated from either RBI or Centre but if from Centre, it should have been done by making law and not through gazette notification.
We must note that the Bench headed by Justice BV Nagarathna of the Apex Court states first and foremost in para 1 that, “I have had the benefit of reading the judgment proposed by His Lordship, B.R. Gavai, J.”
While adding a caveat, the Bench noted in para 2 that, “However, I wish to differ on the reasoning and conclusions arrived at in his judgement with regard to exercise of power by the Central Government under sub-section (2) of Section 26 of the Reserve Bank of India Act, 1934 (hereinafter referred to as “the Act” for the sake of brevity) by issuance of the impugned notification dated 8th November, 2016. Hence, my separate judgment.”
Preface:
While craving for my esteemed readers exclusive indulgence, the Bench specifies in para 3 that, “By way of a preface, I state that the judgment proposed by His Lordship, Gavai, J. does not recognise the essential fact that the Act does not envisage initiation of demonetisation of bank notes by the Central Government. Sub-section (2) of Section 26 of the Act, contemplates demonetisation of bank notes at the instance of the Central Board of the Reserve Bank of India (hereinafter referred to as “the Bank”). Hence, if demonetisation is to be initiated by the Central Government, such power is derived from Entry 36 of List I of the Seventh Schedule to the Constitution which speaks of currency, coinage and legal tender; foreign exchange. In view of the interpretation given by me to sub-section (2) of Section 26 of the Act in the context of the powers of the Central Board of the Bank and the Central Government vis-à-vis demonetisation of bank notes, my answer is only with regard to question No.1 of the reference order. Incidentally, while considering the same, I would touch upon question No. 7 of the reference order.”
It cannot be lost sight of that the 6 questions re-framed as Reference by Justice BR Gavai are as follows: –
“1. Whether the power available to the Central Government under sub-section (2) of Section 26 of the RBI Act can be restricted to mean that it can be exercised only for “one” or “some” series of bank notes and not “all” series in view of the word “any” appearing before the word “series” in the sub-section, specifically so, when on earlier two occasions, the demonetisation exercise was done by the plenary legislations?
2. In the event it is held that the power under sub-section (2) of Section 26 of the RBI Act is construed to mean “all” series, whether the power vested with the Central Government under the said sub-section would amount to conferring excessive delegation and as such, liable to be struck down?
3. Whether the impugned notification dated 8th November, 2016 is liable to be struck down on the ground that the decision-making process is flawed in Law?
4. Whether the impugned notification dated 8th November, 2016, is liable to be struck down applying the test of proportionality?
5. Whether the period provided for exchange of notes vide the impugned notification dated 8th November, 2016, can be said to be unreasonable?
6. Whether the RBI has an independent power under subsection (2) of Section 24 of the 2017 Act in isolation of the provisions of Section 3 and Section 4(1) thereof to accept the demonetised notes beyond the period specified in notifications issued under subsection (1) of Section 4 of the 2017 Act?”
While disclosing what Justice BV Nagarathna held, it is pointed out in para 5 that,
“i) The Central Government possesses the power to initiate and carry out the process of demonetisation of all series of bank notes, of all denominations. However, all series of bank notes, of all denominations could not be recommended to be demonetised, by the Central Board of the Bank under Section 26 (2) of the Act.
ii) Sub-section (2) of Section 26 of the Act applies only when a proposal for demonetisation is initiated by the Central Board of the Bank by way of a recommendation being made to the Central Government.
iii) On receipt of a recommendation from the Central Board of the Bank for demonetisation under Section 26 (2) of the Act, the Central Government may accept the said recommendation or may not do so. If the Central Government accepts the recommendation, it may issue a notification in the Gazette in this regard.
iv) The Central Government may also initiate and carry out demonetisation, even in the absence of a recommendation by the Central Board of the Bank. However, this must be carried out only by enacting a plenary legislation or law in this regard, and not through issuance of a Notification under subsection (2) of Section 26 of the Act as this provision is not applicable in cases where the proposal for demonetisation is initiated by the Central Government. Bank by way of a recommendation being made to the Central Government.
2. i) This question does not arise for consideration as it has been held that the power under sub-section (2) of Section 26 of the Act cannot be construed to mean “all” series or “all” denominations.
ii) In my view, if the Central Board of the Bank is vested with the power to recommend demonetisation of “all” series or “all” denominations of bank notes, the same would amount to a case of excessive vesting of powers with the Bank.
3.i) That the measure of demonetisation ought to have been carried out by the Central Government by way of enacting an Act or plenary legislation.
ii) The proposal for demonetisation arose from the Central Government and therefore, could not be given effect to by way of issuance of a Notification as contemplated under subsection (2) of Section 26 of the Act, as, such provision would not apply in cases where the proposal for demonetisation has originated from the Central Government, such as the instant case.
iii) That the decision making process was also tainted with elements of “non-exercise discretion” by the Central Board of the Bank in rendering its advise on the impugned measure. That the Bank acted at the behest of the Central Government and did not render an independent opinion to the Central Government.
iv) Therefore, the impugned Notification dated 8th November, 2016 issued under subsection (2) of Section 26 of the Act is unlawful. Further, the subsequent Ordinance of 2016 and Act of 2017 incorporating the terms of the impugned Notification are also unlawful.
4. This question need not be answered in view of the above answers.
5. This question need not be answered in view of the above answers.
6. This question need not be answered in view of the above answers.
To sum it up, we thus see that the Bench of Hon’ble Justice BV Nagarathna minces no words to state in para 22 what must be always borne in mind that, “Before parting, I wish to observe that demonetisation was an initiative of the Central Government, targeted to address disparate evils, plaguing the Nation’s economy, including, practices of hoarding “black” money, counterfeiting, which in turn enable even greater evils, including terror funding, drug trafficking, emergence of a parallel economy, money laundering including Havala transactions. It is beyond the pale of doubt that the said measure, which was aimed at eliminating these depraved practices, was well-intentioned”.
“The measure is reflective of concern for the economic health and security of the country and demonstrates foresight. At no point has any suggestion been made that the measure was motivated by anything but the best intentions and noble objects for the betterment of the Nation,”.
“The measure has been regarded as unlawful only on a purely legalistic analysis of the relevant provisions of the Act and not on the objects of demonetisation.”
We all know fully well and which is beyond a pale of doubt as to how much huge inconvenience and long queues the people had to face waiting for many hours just to get their own hard earned money due to the unexpected sudden announcement of demonetization and many died also from heart attacks and other causes due to no getting their money back in time! Of course, it has to be conceded by all of us that Centre definitely cannot be given clean chit for it and what Justice BV Nagarathna has stated reflects best the ground reality!
Parvez Alam, Advocate