Justice B.V.Nagaratna said that the central government’s 2016 demonetisation action was illegal. Justice BV Nagaratna in his judgment said that the central government has no power to initiate a measure like demonetisation while the other three judges of the five-judge constitution bench upheld Justice B.R. Gavai’s majority judgment. Justice Nagaratna’s dissent strongly disagrees with the majority judgment.
In his judgement, Nagaratna termed the central government’s 2016 note ban announcement as ‘illegal’. In my view the central government notification of 8th November is illegal. Demonetisation was an unconstitutional exercise of power and therefore an illegal act. But since this happened in 2016, the old situation cannot be restored, says Justice Nagaratna’s judgment.
Demonetisation is not something to be implemented through a government notification. Rather, it must be implemented through an enactment in Parliament. The documents produced by the RBI and the central government make it clear that the demonetisation was implemented by the central government. Justice Nagaratna’s judgment also said that the words ‘in the interest of the Central Government’ used in the documents indicate that there was no independent decision of the Reserve Bank in this regard.
According to the Reserve Bank Act, the recommendation for demonetisation is to be given by the Reserve Bank to the central government. But such a recommendation should not be made on the instructions of the central government. However, here the decision to implement demonetisation lies with the government. The central government had written a letter to the Reserve Bank on November 7 seeking the opinion of the Reserve Bank in this regard. Justice Nagaratna cited the RBI Act and said that the opinion given by the RBI cannot be considered as a recommendation.
Article 26(2), which empowers the RBI to recommend demonetisation, is to withdraw notes of certain series. Justice Nagaratna pointed out that it is not for withdrawing all series of a particular amount.
Considering the problems that followed demonetisation, it is doubtful whether the RBI could have foreseen such things. 98% of notes have been demonetized. But it is clear that the target has not been achieved. However, Justice Nagaratna said that the judgment of the court was not based on such considerations.
