The Supreme Court on Tuesday, while hearing petitions challenging the Centre's demonetisation move in 2016, said that it cannot fold its hands and sit because it is an economic policy.
Senior advocate Jaideep Gupta, representing the Reserve Bank of India (RBI), submitted before a five-judge of bench justices Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna that the objective of the demonetisation policy was to curb black money and fake currencies, adding that not a single bank suffered losses.
Mr Gupta submitted that there is no challenge to the decision on constitutional grounds, and therefore, the proportionality principle should only be applied to the extent, which the attorney general's note also suggested that there should be a nexus between the objective and the method.
He added that beyond that it will be against the run of play, as far as economic policy decisions are concerned, and being an economic policy measure, the court will not review the decision.
Justice Nagarathna said the court will not go into the merits of the decision to implement demonetisation, but it can always go into the manner it was taken, and the two things are totally different.
"Just because it is an economic policy, the court cannot fold its hands and sit. Merits of the decision, it is for the government to decide in its wisdom as it knows what is best for the people, but while taking that decision, what was the material on record, or the relevant considerations..." said justice Nagarathna.
In the day-long hearing, RBI's counsel informed the bench that ample opportunities were given to people to exchange their notes.
Senior advocate P Chidambaram, representing a petitioner, said the government should confidently defend the decision and also the decision-making process, adding that it should place those documents before the Court.
He said if the government were to adopt a route through the parliament on this count, the parliamentarians would have stopped the policy, but it did not follow the legislative route.
Mr Chidambaram submitted that the RBI governor must be fully aware of the fact that, in 1946 and 1978, the central bank opposed demonetisation and resorted to plenary power of the legislature.
"Surely, the history of RBI is published by the central bank. They must be deemed to know that also..." he said, urging the court to see the documents to see whether the decision-making was fair and not arbitrary.
During the hearing, the apex court also inquired into the number of members present at RBI's central board meeting which decided to make the recommendation regarding demonetisation in 2016.
Mr Gupta contended that the process under the RBI Act to make a recommendation to the Centre was followed and the prescribed quorum was met.
Mr Gupta said RBI's central board met and decided to recommend demonetisation and then it went to the Centre which decided to act. Therefore, the due process was followed.
Asking RBI to submit the details regarding the quorum, the bench said, "How many members were present? There should be no difficulty in telling us."
Mr Gupta agreed to provide the necessary information.
Earlier, Mr Chidambaram had alleged that the Centre and RBI are holding back the information regarding the said meeting.
Under the RBI Act, RBI's central board has to make a recommendation to the Centre regarding demonetisation of notes or for any series of bank notes of any denomination to cease to be legal tender.
The top court was hearing petitions challenging the Centre's decision to demonetise currency notes of Rs500 and Rs1,000 in 2016.
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