'Aware of Lakshman Rekha but will examine demonetisation,' says Supreme Court

The court noted that the petitioners’ main argument is Section 26 of the RBI Act does not authorise the Centre to completely cancel the currency notes of particular denomination

The Supreme Court on Wednesday sought a comprehensive affidavit from the Centre and the RBI on the 2016 demonetisation decision, which led to "horrendous consequences and big disruption to the informal sector".

The court also told the Union government to keep the files ready in connection with Centre’s letter to the RBI, the RBI Board's decision, and the demonetisation announcement.

During the hearing, a five-judge bench presided over by Justice S Abdul Nazeer noted that the court is aware of its Lakshman Rekha on judicial review of government policy.

The bench, also comprising justices B R Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna, noted that the petitioners’ main argument is Section 26 of the RBI Act does not authorise the Centre to completely cancel the currency notes of particular denomination.

Also Read | SC Constitution Bench to hear pleas against demonetisation on October 12

"Therefore, the main question is whether the government had powers under Section 26 of RBI Act to demonetise all notes of Rs 500 and Rs 1000 denomination, the bench said, after hearing arguments from senior advocate P Chidambaram and others on behalf of petitioners.

The bench fixed over 50 petitions questioning the Centre’s 2016 demonetisation decision for further hearing on November 9.

Attorney General R Venkataramani and Solicitor General Tushar Mehta on behalf of the Centre, submitted that the issue has become an academic exercise now.

However, senior advocate Chidambaram, contended the issue is still relevant for the future. He claimed the 2016 decision led to horrendous consequences for the economy and common people.

The petitioners also insisted that the government did not have power to cancel the currency notes through an executive order.

The bench noted that when issues of constitutional importance are referred, it is the duty of the court to answer them. However, it asked in this case, has the issue not become fait accompli?

Chidambaram said the issue is very much alive.

The AG, for his part, said when the Act is not challenged, the notifications cannot be challenged and the issues are academic.

Chidambaram said that the demonetisation carried out in 1978 was through a separate Act of the Parliament unlike the 2016 decision. He asked whether the demonetisation of this kind -- withdrawing 86 per cent currency notes -- in circulation required a separate law by the Parliament.

On the aspect whether the exercise is academic or infructuous, the bench said it needs to examine the matter since both sides do not agree.

Mehta said the court’s time should not be wasted on academic issues. Expressing surprise over Mehta's contention, senior advocate Shyam Divan, representing petitioner Vivek Narayan Sharma, read out the issues formulated in the reference order and pointed out that the Supreme Court had barred other courts from entertaining petitions on this subject.