A five-judge bench upheld the legality of demonetisation of 86 per cent of the currency in circulation in the country.
India’s Supreme Court has upheld the legality of the government’s decision to demonetize 86 percent of the country’s currency in 2016, saying it followed due process in consultation with the central bank.
A five-judge bench of the country’s Supreme Court on Monday delivered a majority verdict on a batch of petitions questioning the move. One of the five judges wrote a dissenting opinion.
“The notification dated November 8, 2016 does not suffer from any defects in the decision-making process,” said Justice PR Kawai, one of the four judges who concurred in the judgment, in a written opinion.
However, Justice P.V. Nagaratna delivered a dissenting judgment, calling the decision “illegal” and an “illegal exercise of power”. He said demonetisation could have been accomplished through an Act of Parliament and not by the government.
The petitioners include lawyers, a political party, cooperative banks and individuals.
India’s former finance minister P Chidambaram was one of the lawyers who argued against demonetisation.
In a surprise televised announcement in November 2016, Prime Minister Narendra Modi led a shock move to ban all 500-rupee and 1,000-rupee notes — 86 percent of currency in circulation — to target undeclared “black money” against corruption.
But this move, popularly known as demonetisation, badly affected India’s cash-based economy. This resulted in losses for small businesses and manufacturers, an economic slowdown and months of financial chaos for ordinary, cash-dependent Indians.
As money dried up, millions of people lined up for days outside banks and ATMs to exchange their savings for legal tender. Eventually the government issued new currency notes in denominations of 500 and 2,000 rupees.
According to the Center for Monitoring the Indian Economy, a Mumbai-based research firm, India has lost 3.5 million jobs in the year since demonetisation.
The economy took another step in 2017 when the government merged central and state taxes into a single Goods and Services Tax (GST). Many small businesses – the backbone of much of India’s economy – were forced to close because they could not comply with the new law.
Despite the confusion, many supported demonetisation after Modi framed it as a fight for the poor against the corrupt rich.
Some of the petitioners argued that the recommendation to ban or invalidate any series of currency notes should have come from the Reserve Bank of India, the central bank, and not from the government.
India’s main opposition Congress party said the high court ruling said nothing about the impact of demonetisation, which the party called “a singularly disastrous move”.
“The majority Supreme Court judgment deals with the limited issue of the decision-making process and not with its consequences,” party spokesperson Jairam Ramesh said in a statement.