A Constitution Bench on Wednesday questioned whether the government and the Reserve Bank of India (RBI) realised their stated objectives of choking black money, terror financing and fake currency through the policy to demonetise ₹500 and ₹1,000 notes in 2016.
“What about black money and terror funding?” Justice S. Abdul Nazeer, heading the five-judge Bench of the Supreme Court, asked while hearing 58 petitions challenging demonetisation.
The court’s question came despite the government urging the Bench not to “waste” judicial time on the issue. Attorney-General R. Venkataramani termed the case “academic” in nature as things had long settled.
“You may not be able to undo something that has happened, but whether in the future such power can be exercised or not can be looked into,” Justice A.S. Bopanna said.
Solicitor-General Tushar Mehta questioned the very maintainability of the case which concerned a purely economic policy of the government.
Senior advocates P. Chidambaram and Shyam Divan, for petitioners, said the issue was “very much alive”. Demonetisation in 1946 and 1978 were implemented through separate Acts debated by Parliament. In 2016, it was done through a mere notification issued under provisions of the Reserve Bank of India Act, 1934. He said the court should declare the law or nothing would stop the government from repeating the exercise which had seen “horrendous consequences”.
Mr. Chidambaram, citing the RBI’s annual report, submitted that ₹15.44 lakh crore worth of currency was demonetised. The withdrawn money amounted to 86.4% of the currency in circulation at the time. Only ₹16,000 crore out of the ₹15.44 lakh crore was not returned. He said only .0027% fake currency was “captured” following demonetisation.
But Justice V. Ramasubramanian, on the Bench, said may be all fake currency holders had not dared to come forward to try and exchange their counterfeit currency for the new ones... Their currency out there might have been rendered useless by demonetisation.
Mr. Chidambaram said crucial documents leading to the massive exercise were not in the public domain — he asked the court to call for them. The Cabinet took an “instantaneous decision” to clear the withdrawal and the Prime Minister announced it on TV on November 8.
“Is it a reasonable and prudent decision-making process that you withdraw 86.4% of currency in 24 hours and do not place the documents in the public domain?” Mr. Chidambaram asked in court.
The court wondered whether the government had thought about the consequences before going ahead with the withdrawal of the banknotes. It scheduled the next hearing on November 9 and directed the government and the RBI to file comprehensive affidavits in response to Mr. Chidambaram’s submissions.
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