SC refuses to stay demonetisation. Refers matter to Constitution bench

The Supreme Court (SC) on Friday decided to examine all aspects of demonetisation. The apex court drafted nine questions and referred them to a five-judge Constitution bench. It also stayed the hearing of all petitions related to demonetisation filed in various high courts, saying the SC alone will hear the petitions to avoid multiplicity of decisions. 

However, the bench headed by Chief Justice T S Thakur declined to grant any immediate relief to the depositors on withdrawal of their money in the banks after demonetisation. It did not extend the dates for the use of old currency in various sectors nor did it relax the rules, as it did not want to interfere in the fiscal policy of the government.

The SC took up the plight of the district cooperative banks as the first issue, as its dealings in Rs 500 and Rs 1,000 have been frozen. “We are not inclined to suspend that bar as an interim measure. This is especially when the decision is the outcome of financial policy, which the government claims to have adopted on the basis of experience,” the order said. 

Regarding the bar on cooperative banks from utilising the demonetised notes deposited with them between November 11 and 14, the court took note of the government undertaking about relaxation of the rules and urged the government to issue a suitable notification within two days. 

On the promise to allow withdrawal of Rs 24,000, the court noted that the government has already made it amply clear that it would take around 50 days to streamline the cashflow. That period is still not exhausted. According to the government, as of now, the Reserve Bank of India has been able to infuse around Rs 5 lakh crore of the new legal tender notes of Rs 500 and Rs 2,000. That is around 40 per cent of the amount of demonetised notes already deposited with the banks. 

Taking into consideration the statement of the government, the court recommended that “the authorities fulfil their commitment made in terms of the stated notification permitting withdrawal of Rs 24,000 per account holder per week to the extent possible and review that decision periodically and take necessary corrective measures in that behalf.”

Regarding the plea in the petitions that the date for surrender of the old currency must be extended, the order stated that “in our opinion, whether the exemption period should be extended or not must be best left to the judgment of the government of the day with a hope that the government will be responsive and sensitive to the problems encountered by the common man. Accordingly, we decline to issue any interim direction to the government in the matter of extending the period of exemption and leave it open to the government to take appropriate decision in that behalf, as may be advised.” 

There are some 40 petitions in the SC and around 50 before high courts, which are set to be transferred to the apex court. The government and other authorities concerned have six weeks to file their replies to the petitions and the petitioners can file their counter to the government three weeks thereafter. The process will take around two months. The present Chief Justice is retiring on January 2 and J S Khehar will take over. An early decision on the nine questions will depend on the setting up of the Constitution bench and the time taken for arguments and delivery of judgment thereafter.

Supreme Court on Friday referred 9 queries to a Constitution bench

1. Whether the notification dated November 8, 2016, is ultra vires Section 26(2) and Sections 7,17, 23, 24, 29 and 42 of the Reserve Bank of India Act (RBI), 1934

2. Does the notification contravene the provisions of Article 300(A) of the Constitution?

3. Assuming the notification has been validly issued under the RBI Act, 1934, whether it is ultra vires Articles 14 and 19 of the Constitution

4. Whether the limit on withdrawal of cash from the funds deposited in bank accounts has no basis in law and violates Articles 14, 19 and 21

5. Whether the implementation of the impugned notification(s) suffer(s) from procedural and/or substantive unreasonableness and thereby violates Articles 14 and 19 and, if so, to what effect

6. In the event that Section 26(2) is held to permit demonetisation, does it suffer from excessive delegation of legislative  power,  thereby rendering it ultra vires the Constitution?

7. What is the scope of judicial review in matters relating to fiscal and economic policy of the government?

8. Whether a petition by a political party on the issues raised is maintainable under Article 32

9. Whether district cooperative banks have been discriminated against by excluding  them  from  accepting deposits and exchanging demonetised notes

 
Political implications of SC’s interim order

* The National Democratic Alliance (NDA) government would have been more empowered if the Supreme Court had agreed with the Attorney General’s consistent argument that fiscal and monetary policy is not the domain of courts

* But a judicial denouement of demonetisation as a policy has been avoided

* The interim order establishes yet another important judicial principle: that nothing is beyond judicial review

* The interim order establishes yet another judicial landmark. In the past, whether in the case of Balco privatisation or the R K Garg bearer bonds case, the court recognised that in economic matters, it should adopt a ‘stay off’ policy.

* However, in the process of arriving at a conclusion it laid down further law. This interim order just illustrates that again

* CJI T S Thakur’s term ends on January 3. A new CJI, Khehar Singh will take over on January 4. How he selects a Constitution bench, how the time frame for the hearings are set will be the new CJI’s responsibility. So for the moment, the government can breathe a sigh of relief

* But the issue of whether government should have brought demonetisation before Parliament, whether the RBI Act allows decisions of this nature are questions that will be decided by the Constitutional bench

* In the past, too, (1978) demonetisation issues were heard by a Constitutional bench


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