Constitution Bench to hear pleas against demonetisation

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The Supreme Court on Friday ordered the formation of a five-judge Constitution Bench to test the constitutionality of the November 8, 2016 demonetisation notification and the legality of the implementation of the policy.

The court, however, refrained from providing any drastic interim relief to the public in terms of banks not honouring the notified Rs. 24,000 withdrawal limit or extending the exemptions granted to the public’s use of demonetised notes for essential services and institutions like railway ticketing and payments at government hospitals and pharmacies.

Instead, the Supreme Court said it trusted the government to be the best judge of its own economic and fiscal policies.

The court placed its faith in the government’s assurances that the policy was triggered to weed out black money, counterfeit currency and choke terror funding.

The three-judge Bench, led by Chief Justice of India T.S. Thakur, noted that “no other directions is possible at this stage” and expressed its belief that the government would do the right thing at the right time to alleviate the sufferings of the public due to demonetisation.

The Bench, also comprising Justices A.M. Khanwilkar and D.Y. Chandrachud, stayed the pending proceedings instituted against the government’s demonetisation policy in various High Courts across the country.

Acting on the government’s plea that they should all be transferred to the apex court, the Bench ordered the proceedings to be withdrawn from the other High Courts and transfer it to the Constitution Bench to avoid “multiplicity of litigation”. It then issued notice to all the petitioners in the High Courts.

The Supreme Court addressed each one of the three immediate relief sought by the petitioners in the court, starting with the allegation of discrimination and freeze on withdrawals and deposits in district central co-operative banks (DCCBs).

Here, the court accepted the government’s assurance that Rs. 8,000 crore collected by the DCCBs between November 11 and 14 would be allowed to be deposited with the RBI and enter currency circulation after a “100 per cent audit” of KYC of the sources of money is conducted. The government said this amount would then be replaced with the new currency and distributed back to the 367 DCCBs as per rules uniformly applied to all banks post demonetisation.

The court refused to extend exemption, stating it was “best left to the Government of India”, which it trusted to take a “responsive and sensitive” attitude to the needs of people.

On honouring its notification keeping Rs. 24,000 as withdrawal limit, the court referred to the government’s submissions that Rs. 5 lakh crore, that is, 40 per cent of the demonetised notes had been replaced and the authorities were working “to the best” of their abilities.

The court asked the government to fulfil its commitment to allow withdrawal of up to Rs. 24,000 “to the extent possible” and review the decision periodically.

The Constitution Bench has to look into a batch of following questions:

1. Whether the RBI notification of November 8, 2016 is ultra vires Section 26 (2) and other relevant provisions of the RBI Act, 1954?

2. Whether the notification is violative of Article 300A (right to property) of the Constitution?

3. Whether the notification is ultra vires Articles 14 and 19 of the Constitution?

4. Whether limited withdrawal of one’s own money caused by demonetisation is a violation of Articles 14, 19, 20 and 21 of the Constitution?

5. Whether the implementation of the notification is in substantive and procedural violation of the law of the land?

6. Whether Section 26(2) of the RBI Act is itself a piece of excessive delegation of legislative powers?

7. What is the scope of judicial review into a fiscal and economic policy of the government?

8. Can political parties file writ petitions in the Supreme Court under Article 32 of the Constitution?

9. Were the DCCBs subjected to discrimination when they were stopped from accepting deposits and allowing withdrawals?

The Supreme Court said the issue of demonetisation is of public importance and has far-reaching consequence, requiring a Constitution Bench to hear the petitions challenging the policy.

Admitting their writ petitions, the court issued them notice returnable in six weeks and rejoinder to be filed by the government and the RBI in the subsequent three weeks.