Reactions to Supreme Court’s demonetisation judgment

Six years and several petitions later, Supreme Court says it can do nothing about the hardship faced by a few individuals

The operative part of the judgment is procedurally limited and fails to address the substantive questions of the rights of citizens who suffered economic misery at the cost of their lives. 


A five-judge Supreme Court constitution bench upheld the legality of the 2016 demonetisation decision of the Union Government more than six years after the fact of. Justices S. Abdul Nazeer, B.R. Gavai, A.S. Bopanna and V. Ramasubramanian signed off on the majority judgment authored by Justice Gavai, while Justice B.V. Nagarathna wrote a dissenting judgment.

While the majority judgment states that the Reserve Bank of India (‘RBI’) does not have any independent powers and the Union Government’s power cannot be limited to ‘some’ series of bank notes under Section 26(2) of the RBI Act, 1934, the minority judgment says the contrary. Justice Nagarathna held that the whole exercise is unlawful and must be vitiated.

However, neither judgment examined whether demonetisation has met its objectives of tackling terror financing, black money and fake currency. In fact, the majority has clarified that it does not matter whether it has achieved its objectives since there is a reasonable nexus with the objective it sought to achieve.

Commenting on the judgement, senior advocate and former Union Finance Minister, P. Chidambaram tweeted: “We are happy that the minority judgement has pointed out the illegality and the irregularities in the Demonetisation. It may be only a slap on the wrist of the government, but a welcome slap on the wrist.”

Plea of distressed citizens finds no place in the judgment 

Prima facie, the judgment is upsetting on two grounds. Firstly, the ratio decidendi of the majority decision specifically rejects the suggestion to frame a scheme and provide a window for a limited time to enable citizens with genuine reasons to exchange notes, on the specious ground that it lacks the technical expertise to do so.

Both judgments have made a general observation that no retrospective relief is available. This is despite the fact that lengthy hearings were dedicated to hearing the pleas of the distressed citizens who were unable to exchange the demonetised currency. Justice Gavai, in paragraph 302 of his judgment, has written that framing a scheme would be “encroaching upon the areas reserved for the experts.” Even the dissenting judgment clarifies that “having regard to the fact that the demonetisation process was given effect to from 8th November, 2016 onwards, the status quo ante cannot be restored at this point of time… any relief moulded in the present cases is de hors considerations of success of the measure.” These observations make the objective of challenging the exercise futile in the absence of any deliberation on the aspect of remedial measures.

Court’s ‘every noble cause claims martys’ invalidates the struggles of ordinary citizens 

Second, apart from addressing issues of legal concern, both judgments, in various references, have invalidated the struggles of ordinary citizens who faced undue hardships due to demonetisation. In fact, it went on to term the exercise of demonetisation being driven by a ‘noble cause’ where some element of hardship is a necessary means to achieve said cause. There is a rigorous attempt made by the court to prove the intention of the Union Government as ‘bonafide’.

The majority judgment, for instance, says that demonetisation was meant to implement one of the most important constitutional directives contained in Part IV of the Constitution. It further observed that, if in this process, a few individuals suffer severe hardship, then that cannot be helped. It further held that individual interests must yield to the larger interests of the community or the country as “every noble cause claims its martyr”.

The reference is appalling because “a few individuals” refers to human beings, who faced undue socio-economic hardships and some even lost their lives standing in the long queues (estimates range between official figures of four to over 100). One should be mindful that India is largely an agrarian economy. Some people also committed suicide due to economic crunch and lack of financial resources. They were called black money suicides. Advocate and constitutional scholar, Gautam Bhatia wrote: “Utterly gobsmacked at these six words in the demonetisation judgement” in reference to the court’s claim that “every noble cause claims its martyr”.

Hence, for the majority to simply say that “the contention that the impugned notification is liable to be set aside on the ground that it caused hardship to individuals/citizens will hold no water. The individual interests must yield to the larger public interest sought to be achieved by impugned Notification,” comes across as insensitive.

Senior advocate and politician Kapil Sibal heavily criticised the judgment, tweeting:

Supreme Court:

Demonetisation valid

Can be lawfully repeated

Remember the tragic scenes

The long queues

Heartbreaking consequences

The poor being hit the hardest

The rich unfazed

I guess the court only concerned with the law 

Not with the consequences !

While it makes sense for the court to observe that it cannot interfere in the economic policy of the country, a constitutional court that protects the right to life of the citizens cannot shy away from its duty to at least consider whether the adverse consequences of the hurried policy could have been avoided. But the majority judgment maintained, “The Court does not have necessary competence and expertise to adjudicate upon such economic issues. It is also not possible for the Court to assess or evaluate what would be the impact of a particular action and it is best left to the wisdom of the experts.

The Hindu’s editorial rightfully states, “It is unfortunate that the court had nothing critical to say about the government failing to anticipate the ruinous effect of extinguishing the value of 86% of available currency on the economy and the immense miseries it heaped on the population. 

It further notes, “Justice B.V. Nagarathna’s dissent, holding the process to be flawed and the RBI’s approach to be without application of mind, is a consolation for those who want the courts to hold those in power to account. In a larger sense, of course, a judicial rap on policy questions matters little. But it might give governments cause for pause before implementing decisions with far-reaching consequences for the people.”

A senior advocate of the Odisha High Court, Surendra Nath saidIt is a black judgement except the dissenting view of [Justice Nagarathna] is praiseworthy. No synopsis made or exchanged among judges so as to answer the issues connected with Demonitization&therefore ipso jure violative &a blow to public justice. [sic]”

Precedents suggest unwanted obiter dicta leads to collateral damage 

Further, even though the majority clearly holds that the court cannot supplant the executive’s wisdom with its own, it still observed that the Specified Bank Notes (Cessation of Liabilities) Act, 2017 is a ‘valuable piece of social legislation’.

The minority judgment dedicates an unnecessary clarification that the exercise was targeted to address “disparate evils”. Justice Nagarathna writes, “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.” Such opinions are superfluous, and could have been avoided in the judgment. This obiter dicta, by needlessly attempting to justify the patently ill-conceived policy of the executive, casts aspersions on the independence of the judiciary.

A similar concern was raised when the Supreme Court, in its judgment last year in Zakia Ahsan Jafri versus State of Gujarat & Anr went on to compare the 2002 Gujarat pogrom with the COVID-19 pandemic. The case concerned the petitioner’s plea to inquire about the larger political conspiracy angle in the post-Godhra carnage. But the court went on to observe that those who had the audacity to merely pose legitimate questions on the integrity of government functionaries had an ulterior design to “keep the pot boiling”. The three-judge bench observed, “[A]ll those involved in the abuse of process, need to be in the dock and proceeded with in accordance with law.” What followed next was civil rights activist and journalist Teesta Setalvad, and former Additional Director General of Police (intelligence) in Gujarat, R.B. Sreekumar, being taken into judicial custody for the alleged offence of fabricating evidence of conspiracy for the 2002 riots.

Academic Pratab Bhanu Mehta has called the majority judgment ‘egregious’. For the Indian Express, Mehta wrote: “The majority decision … is a disturbing decision not for upholding the legality of the notification. It is a disturbing decision because it does a total cover-up job.”

Mehta further argues, “It takes the government’s claims at face value (even the dissent gives the “intentions” of the government a clean chit) it refuses to force even retrospective transparency on the chain of reasoning that led to this decision, and it converts the RBI Board’s dereliction into some kind of constitutional high principle, where it miraculously co-produces the decision with government. It licenses total administrative impunity.”

All things done in the name of sealed cover jurisprudence 

What is interesting to note at this juncture is that throughout the hearing, the petitioners, at various instances, requested for the Union Government and the RBI to disclose crucial information on the decision-making process behind demonetisation. But it was withheld from the petitioners, including a letter that was written by the Union Government to the RBI on November 7, 2016, a day before demonetisation was summarily implemented. Chidambaram has argued that crucial information had been withheld and the exercise was haphazardly done within 24 hours.

Justice Nagarathna, in her judgment, observed that there is no independent application of mind by the RBI as the exercise was done within 24 hours. During the final day of the hearing, the Attorney General for India, R. Venkataramani, submitted that he would give all relevant records in a ‘sealed cover’; a practice which is highly discouraged by the court, including by the current Chief Justice of India, Justice (Dr.) D.Y. Chandrachud.

However, the majority held that maintaining secrecy is of ‘paramount importance’ and the exercise was similarly made confidential even during the 1978 demonetisation.

This goes against the principle of natural justice as the petitioners were deprived of the opportunity to respond to the documents that led to such a major economic decision.

In a nutshell, the economic exercise may have been necessary for its given objectives, but it had negative implications for the citizens. Even if it allowed for a supposed digital payments revolution“an economic shock is not the best way to encourage digital payments”, as the editorial in Times of India puts it.