In her dissenting verdict, Justice BV Nagarathna said the decision to implement demonetisation in November 2016 was vitiated and unlawful and the RBI could not have applied its mind on the proposal sent by the Central Government in 24 hours.
In her 122-page dissenting judgment against the majority judgment of four judges, she said such serious decisions concerning the citizens should have come through legislation and not through notifications.
“Looking at the records submitted by the RBI, it is noted that it says ‘as recommended by the Central Government’. This shows there was no independent application of mind by the RBI. Such a proposal with serious economic ramifications must be placed before the Central Board of the Bank so that there is an application of mind by the experts,” she said.
Nagarathna also compared the demonetisation process in many countries like the US, the UK, Venezuela, and Nigeria and said that such decisions must have come through legislature and not through notifications.
Observing that there was no independent application of mind by the RBI, she said the entire exercise was carried out in 24 hours.
“In my view, the power of the Central Government being vast has to be exercised through a plenary legislation rather than by an executive act by issuance of notification. It is necessary that Parliament, which consists of the representatives of the people of the country, discusses the matter and thereafter, approves the matter,” Justice Nagarathna said.
“Petitioners say that 86 per cent of currency in circulation in the country was demonetised. It makes me wonder if RBI thought about such implications which included socio-economic hardships as well,” said the dissenting Judge, adding that action of demonetisation by a November 8 gazette notification was unlawful.
“But status quo ante cannot be restored now since it was done in 2016,” she said.
“Demonetisation at the behest of the Centre is a far more serious issue affecting citizens than when it is done by the banks. Therefore, in my view, powers of the Centre being vast, the same has to be by plenary legislation.
“Without Parliament, a democracy cannot thrive...Parliament cannot be left aloof on such important decisions,” she said.
In her minority judgment, Justice Nagarathna criticised the RBI for not applying its mind and for just adhering to the Central Government’s recommendation and studying the consequences of the decisions having wide ramifications.
“RBI is the bulwark of the Indian economy. I have cited the history of such demonetisation exercises the world over. The court is not to sit over the merit of economic or financial decisions. Examining Section 26(2) would not mean to sit over the merits of demonetisation and thus it is well within the Lakshman rekha as drawn by this court,” she said, adding that RBI did not give their independent and frank opinion.
“The opinion of the Central Board of the Bank ought to be an independent and frank opinion after a meaningful discussion by the Central Board of the Bank which ought to be given its due weightage having regard to the ramifications it may have on the Indian economy and the citizens of India although it may not be binding on the Central Government. On receipt of a negative opinion from the Central Board of the Bank, the Central Government which has initiated the demonetisation process may still intend to go ahead with the said process after weighing the pros and cons only by means of an Ordinance and/or Parliamentary legislation but not by issuance of a gazette notification.
“In other words, the Central Government in such circumstances cannot resort to exercise of power under sub-Section (2) of Section 26 of the Act by issuing a notification in the Gazette of India as if it were exercising executive powers. Even if the Central Board of the Bank concurs with the proposal of the Central Government, the Central Government would have to undertake a legislative process and not carry out the measure by simply issuing a gazette notification,” said the dissenting judgment, blaming RBI for not taking independent and frank opinion.