Observations Of SC: Why Demonetization Was Not a Wrongful Act of Union Government!

The five-judge Constitution bench of Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and
BV Nagarathna delivered the verdict on a batch of pleas challenging the Central government’s
2016 demonetisation. The Supreme Court upheld by a 4:1 majority, the Union Government’s
decision to demonetize Rs. 500 and Rs. 1000 currency notes six years ago.

Observation of Constitution Bench

• Central government in consultation with RBI can bring in demonetization under Section 26(2) of RBI Act.

• Demonetization notification is valid and satisfies the test of proportionality. Period for exchange of
  old notes not unreasonable.

• There was consultation between the Central government and the RBI for a period of 6 months.
  There was a reasonable nexus to bring such a measure.

• Power available to Centre cannot be mean that it is in relation to only specific
  series of bank notes. It is for all series of bank notes.

• RBI does not have any independent power to bring in demonetization.