REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL/CRIMINAL APPELLATE/ORIGINAL JURISDICTION
WRIT PETITION (CIVIL) NO.906 OF 2016
VIVEK NARAYAN SHARMA ...PETITIONER (S)
VERSUS
UNION OF INDIA ...RESPONDENT (S)
WITH
T.P.(C) No. 1958-1967/2016, W.P.(C) No. 1011/2016, SLP(C) No.
36757/2016, W.P.(C) No. 40/2017, W.P.(C) No. 47/2017, W.P.(C)
No. 41/2017, W.P.(C) No. 260/2017, T.P.(C) No. 607/2017,
T.P.(C) No. 588/2017, T.P.(C) No. 626/2017, T.P.(C) No.
585/2017, T.P.(C) No. 582/2017, T.P.(C) No. 638/2017, W.P.(C)
No. 568/2018, W.P.(C) No. 1018/2019, W.P.(C) No. 683/2020,
T.C.(C) No. 9/2017, W.P.(C) No. 908/2016, W.P.(C) No.
913/2016, W.P.(C) No. 916/2016, W.P.(C) No. 1026/2016,
W.P.(C) No. 943/2016, W.P.(Crl.) No. 162/2016, W.P.(C) No.
951/2016, W.P.(C) No. 929/2016, W.P.(C) No. 930/2016, W.P.(C)
No. 944/2016, T.P.(C) No. 1982-1996/2016, W.P.(C) No.
952/2016, W.P.(C) No. 953/2016, W.P.(C) No. 958/2016, W.P.(C)
No. 957/2016, SLP(C) No. 35356/2016, T.P.(C) No. 2030-
2038/2016, W.P.(C) No. 978/2016, W.P.(C) No. 1025/2016,
SLP(C) No. 35805/2016, W.P.(C) No. 997/2016, W.P.(C) No.
1008/2016, W.P.(C) No. 1010/2016, W.P.(C) No. 1009/2016,
W.P.(C) No. 996/2016, W.P.(C) No. 1006/2016, T.P.(C) No. 47-
67/2017, T.P.(C) No. 659/2017, W.P.(C) No. 223/2017, SLP(C)
No. 14272/2017, SLP(C) No. 14131/2017, SLP(C) No.
14216/2017, W.P.(C) No. 341/2018, W.P.(C) No. 193/2018,
W.P.(C) No. 316/2018, MA 1552/2018 in W.P.(C) No. 626/2017,
W.P.(C) No. 971/2016, T.P.(C) No. 2018-2022/2016, W.P.(C) No.
972/2016, W.P.(C) No. 389/2018.
Signature Not Verified
Digitally signed by
Anita Malhotra
Date: 2023.01.02
17:54:54 IST
Reason:
1
INDEX
I. INTRODUCTION…………………………………………….. Paras 1 to 4
II. BACKGROUND……………………………………….......... Paras 5 to 15
III. SUBMISSIONS OF PETITIONERS………………………. Paras 16 to 51
IV. SUBMISSIONS OF UNION OF INDIA…………………… Paras 52 to 78
V. SUBMISSIONS OF THE RBI……………………………… Paras 79 to 86
VI. SUBMISSIONS IN REJOINDER…………………………. Paras 87 to 94
VII. REFRAMED QUESTIONS…………………………………. Paras 95
VIII. STATUTORY SCHEME…………………………………….. Paras 96 to 109
IX ISSUE NO. (i)………………………………………………… Paras 110-158
Paras 112-127
Precedents construing the word “any”………………….
Paras 128-143
Purposive interpretation ……………………………………
Construction of sub-section (2) of Section 26 of the RBI
Act………………………………………………………..
Paras 144-157
X. ISSUE NO. (ii)……………………………………………….. Paras 159-211
Paras 162-193
Precedents considering delegated legislation ………..
Paras 194-202
Status of the RBI……………………………………………..
Application of the aforesaid principles to the present
case…………………………………………………. ………..
Paras 203-211
XI. ISSUE NO. (iii)……………………………………………….. Paras 212-262
Paras 215-218
Scope of Judicial Review……………………………………
Scope of Judicial Interference in matters pertaining to
economic policy……………………………………………….
Paras 219-225
Paras 226-237
Application of the aforesaid principles to the present
case………………………………………………………………
Paras 238-245
Recommendation of the RBI ………………………………
Paras 246-262
Relevancy of attainment of objectives………................
XII. ISSUE NO. (iv)……………………………………………….. Paras 263-281
Paras 266-280
Four-pronged test of proportionality…………………….
XIII. ISSUE NO. (v)………………………………………………. Paras 282-288
XIV. ISSUE NO. (vi)………………………………………………. Paras 289-303
Contextual and harmonious construction of the
provisions of the 2017 Act…………………………………
Paras 290-299
XV ANSWERS TO THE QUESTIONS …….…………………. Paras 304-305
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J U D G M E N T
B.R. GAVAI, J.
I. INTRODUCTION
1. This reference to the larger bench of Five-Judges arises
out of the writ petitions filed challenging the Notification No.
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3407(E) dated 8 November 2016 (hereinafter referred to as
“the impugned Notification”), issued by the Central Government
in exercise of the powers conferred by sub-section (2) of Section
26 of the Reserve Bank of India Act, 1934 (hereinafter referred
to as “the RBI Act”), vide which the Central Government
declared that the bank notes of denominations of the existing
series of the value of five hundred rupees and one thousand
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rupees shall cease to be legal tender with effect from 9
November 2016, to the extent specified in the impugned
Notification. This is popularly known as an act/policy of
‘demonetization’.
3
2. Immediately after the impugned Notification was issued,
several writ petitions challenging the policy of demonetization
came to be filed before this Court as also before various High
Courts. Transfer Petitions were filed by the Union, seeking
transfer of all such matters pending before the High Courts to
this Court.
3. A bench of learned three Judges of this Court passed an
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order dated 16 December 2016 in Writ Petition (Civil) No.906
of 2016 and other connected petitions, observing therein that,
in their opinion, following important questions fall for
consideration:
“(i) Whether the notification dated 8th
November 2016 is ultra vires Section
26(2) and Sections 7, 17, 23, 24, 29
and 42 of the Reserve Bank of India
Act, 1934;
(ii) Does the notification contravene the
provisions of Article 300A of the
Constitution;
(iii) Assuming that the notification has been
validly issued under the Reserve Bank
of India Act, 1934 whether it is ultra
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vires Articles 14 and 19 of the
Constitution;
(iv) Whether the limit on withdrawal of cash
from the funds deposited in bank
accounts has no basis in law and
violates Articles 14, 19 and 21;
(v) Whether the implementation of the
impugned notification(s) suffers from
procedural and/or substantive
unreasonableness and thereby violates
Articles 14 and 19 and, if so, to what
effect?
(vi) In the event that Section 26(2) is held to
permit demonetization, does it suffer
from excessive delegation of legislative
power thereby rendering it ultra vires
the Constitution;
(vii) What is the scope of judicial review in
matters relating to fiscal and economic
policy of the Government;
(viii) Whether a petition by a political party
on the issues raised is maintainable
under Article 32; and
(ix) Whether District Co-operative Banks
have been discriminated against by
excluding them from accepting deposits
and exchanging demonetized notes.”
5
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4. Vide the said order dated 16 December 2016, this Court
also directed that, if any other writ petitions/proceedings were
pending in any High Court, further hearing of those matters
should also remain stayed. This Court further directed that no
other Court should entertain, hear or decide any writ
petition/proceeding on the issue of or in relation to or arising
from the decision of the Government of India to demonetize the
notes of Rs.500/- and Rs.1,000/-, since the entire issue in
relation thereto was pending consideration before this Court.
II. BACKGROUND
5. Before we consider the matter, it will be necessary to refer
to certain facts.
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6. On 8 November 2016, vide the impugned notification, the
Central Government, in exercise of the powers conferred by
sub-section (2) of Section 26 of the RBI Act, notified that the
specified bank notes (hereinafter referred to as “SBNs”) shall
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cease to be legal tender with effect from 9 November 2016.
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The SBNs were bank notes of denominations of the existing
series of the value of Rs.500/- and Rs.1000/-. Under clause 1
of the said notification, every banking company and every
Government Treasury was required to complete and forward a
return along with the details of SBNs held by it at the close of
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business as on the 8 November 2016, not later than 13:00
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hours on the 10 November 2016 to the designated Regional
Office of the Reserve Bank of India (hereinafter referred to as
“RBI”). Insofar as the individual persons were concerned,
under clause 2 of the impugned notification, they were entitled
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to exchange SBNs in various banks specified therein upto 30
December 2016 subject to certain conditions. Initially it
provided a limit of Rs.4,000/- for such exchange. It also
provided that the limit of Rs.4,000/- for exchanging SBNs shall
be reviewed after 15 days from the date of commencement of
the impugned notification. It further provided that, insofar as
Know Your Customer (KYC) compliant bank account
maintained by a person with a bank was concerned, there was
7
no limit on the quantity or value of the SBNs that could be
credited to such an account. However, insofar as non-KYC
compliant bank accounts were concerned, an outer limit was
fixed at Rs.50,000/-. There were certain other provisions made
under the impugned notification.
7. Vide another notification of the even date, various other
relaxations were granted whereunder SBNs could be used for
making payment in Government hospitals, pharmacies, Railway
booking centers, for purchases at consumer cooperative stores,
milk booths, purchase of petrol, etc. The said relaxations were
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to be valid till 11 November 2016. Thereafter, various
notifications came to be issued from time to time granting
further relaxations.
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8. On 30 December 2016, the Specified Bank Notes
(Cessation of Liabilities) Ordinance, 2016 (hereinafter referred
to as “the 2016 Ordinance”) was promulgated by the Hon’ble
President of India. Subsequently, the Parliament enacted the
8
Specified Bank Notes (Cessation of Liabilities) Act, 2017
(hereinafter referred to as “the 2017 Act”), which received the
th
assent of the then Hon’ble President of India on 27 February
2017.
9. Section 3 of the 2017 Act provides that, on and from the
appointed day, notwithstanding anything contained in the RBI
Act or any other law for the time being in force, the SBNs which
had ceased to be legal tender in view of the impugned
Notification of the Government of India, shall cease to be
liabilities of the RBI under Section 34 of the RBI Act and shall
cease to have the guarantee of the Central Government under
sub-section (1) of Section 26 of the RBI Act.
10. Section 4 of the 2017 Act provides for a grace period in
case of certain classes of persons holding such SBNs on or
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before the 8 day of November, 2016 for tendering, with such
declarations or statements, at such offices of the RBI or in such
other manner as may be specified by it. One of the classes of
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persons who was provided a grace period by clause (i) of sub-
section (1) of Section 4 of the 2017 Act was a citizen of India
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who makes a declaration that he was outside India between 9
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November 2016 and 30 December 2016. Clause (ii) of sub-
section (1) of Section 4 of the 2017 Act also provided a grace
period for such class of persons and for such reasons as may
be specified by Notification, by the Central Government.
11. Sub-section (2) of Section 4 of the 2017 Act provides that
the RBI may, if satisfied, after making such verification as it
may consider necessary that the reasons for failure to deposit
the notes within the period specified in the notification referred
to in Section 3, are genuine, credit the value of the notes in his
‘KYC compliant bank account’ in such manner as may be
specified by it. Sub-section (3) of Section 4 of the 2017 Act
makes a provision for enabling any person, aggrieved by the
refusal of the RBI to credit the value of the notes under sub-
section (2), to make a representation to the Central Board of the
10
RBI (hereinafter referred to as “the Central Board”) within
fourteen days of the communication of such refusal to him.
12. On the very same day of the promulgation of the 2016
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Ordinance i.e. 30 December 2016, the Central Government
issued Notification No. 4251(E), in exercise of the powers
conferred by clause (b) of sub-section (1) of Section 2, read with
clause (i) of sub-section (1) of Section 4 of the 2016 Ordinance.
st
It provided a grace period till 31 day of March 2017 to citizens
who were residents in India. Insofar as the citizens who were
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not resident in India are concerned, the period was upto 30
day of June 2017. The proviso thereto limited the amount of
SBNs tendered to not exceed the amount specified under
regulation 3 or regulation 8 of the Foreign Exchange
Management (Export and Import of Currency) Regulations,
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2015 [Notification No. FEMA 6 (R)/RB-2015, dated the 29
December, 2015] made under the provisions of the Foreign
Exchange Management Act, 1999 (42 of 1999) and the
conditions specified therein are complied with.
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13. Some of the writ petitions were listed before this Court on
st
21 March 2017, when this Court passed the following order:
“1. Issue notice.
2. On our asking, Mr. R.
Balasubramanyam, learned counsel,
accepts notice on behalf of the Union of
India and Mr. H.S. Parihar, learned
counsel, accepts notice on behalf of the
Reserve Bank of India.
3. Having heard submissions, which
remained inconclusive, and before
proceeding further with the matter, it was
felt, that this Court should ascertain from
the Union of India (a) whether the Central
Government intends to exercise the
power conferred by clause (4)(1)(ii) of
Ordinance 10 of 2016; and (b) if the
answer to (a) is in the negative, the
reason why the Central Government
chose not to exercise its jurisdiction. An
affidavit may accordingly be filed by the
Central Government, explaining its
position to this Court.
4. Needful be done within two weeks
from today.
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5. Post for hearing on 11 April,
2017.”
12
14. In pursuance of the directions issued by this Court, a
short affidavit came be to be filed on behalf of the Union of
th
India on 7 April, 2017. It was stated in the said affidavit thus:
“26. In view of the above and those to be
urged at the time of hearing, it is most
humbly submitted that the Central
Government took a conscious decision
that no necessity or any justifiable reason
exists either in law or on facts to invoke
its power under Section 4(1)(ii) of the
Ordinance to entitle any person to tender
within the grace period the specified bank
notes.”
15. The matter came up for hearing before this Bench initially
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on 12 October, 2022 and, thereafter, on various dates. We
have heard Shri P. Chidambaram and Shri Shyam Divan,
learned Senior Counsel, Shri Prashant Bhushan, learned
counsel, Shri Viplav Sharma, petitioner-in-person in support of
the petitions and Shri R. Venkataramani, learned Attorney
General appearing for the Union of India and Shri Jaideep
Gupta, learned Senior Counsel appearing for the RBI. We have
13
also heard the learned counsels appearing in the connected
petitions.
III. SUBMISSIONS OF PETITIONERS
16. Shri P. Chidambaram, learned Senior Counsel led the
arguments on behalf of the petitioners.
17. Shri P. Chidambaram submitted that, upon its correct
interpretation, sub-section (2) of Section 26 of the RBI Act will
have to be read down in a manner that sub-section (2) of
Section 26 of the RBI Act does not permit the power to be
exercised in respect of “all series” of notes of a specified
denomination. He submits that the word “any” will denote that
the power can be exercised only when a particular series of any
denomination is sought to be demonetized.
18. Shri Chidambaram submits that, on earlier occasions i.e.
by the High Denomination Bank Notes (Demonetization)
Ordinance, 1946 (hereinafter referred to as “the 1946
Ordinance”) and the High Denomination Bank Notes
14
(Demonetization) Act, 1978 (hereinafter referred to as “the 1978
Act”), “all series” of high denomination bank notes were
demonetized. He submits that, by the 1946 Ordinance, high
denomination bank notes were meant to be “all series” of bank
notes of the denominational value of Rs.500/- Rs.1,000/- and
Rs.10,000/-. Similarly, by the 1978 Act, the high
denomination bank notes were meant to be “all series” of the
bank notes of the denominational value of Rs.1,000/-,
Rs.5,000/- and Rs,10,000/-. It is thus submitted that,
whenever it was found necessary to demonetize “all series” of a
particular denomination, it was considered necessary to do so
by way of a separate enactment of Parliament.
19. Shri Chidambaram submits that, since the bank notes are
issued in different series, the words “any series” before the
words “of bank notes of any denomination” appearing in sub-
section (2) of Section 26 of the RBI Act, will have to be
construed as limiting the power of the Government to declare
only a specified series of notes to be no longer legal tender. He
15
submits that it will have to be held that the words “any series”
mean “any specified series” and not “all series” of bank notes.
20. Shri Chidambaram submits that, if it is held that the
Central Government is conferred with the power under sub-
section (2) of Section 26 of the RBI Act to demonetize currency
notes of “all series”, then a situation may arise wherein the
bank notes issued on the previous day can be demonetized on
the very next day. He submits that, as a result of the
th
demonetization done on 8 November 2016, even the currency
notes issued on the previous day of the denominational value of
Rs.500/- and Rs.1,000/- had become illegal tender.
21. Shri Chidambaram submits that if sub-section (2) of
Section 26 of the RBI Act is not read down in the aforesaid
manner, then the said Section would be vulnerable to be
challenged on the ground that it confers an unguided,
uncanalised and arbitrary power upon the Executive
Government. He submits that, in such a situation, the said
16
provision is liable to be struck down on the ground that it
violates Articles 14, 19, 21 and 300A of the Constitution of
India. He submits that the fact that the demonetization of “all
series” of high denominational currency notes in the years 1946
and 1978 was done through separate enactments of Parliament
would support the said proposition.
22. Shri Chidambaram submits that, upon a plain reading of
sub-section (2) of Section 26 of the RBI Act, it is obvious that
there is neither any policy nor any guidelines in the said
provision. What factors are required to be taken into
consideration and what factors are to be eschewed from
consideration, are not specified in sub-section (2) of Section 26
of the RBI Act. It is submitted that if a drastic power of
demonetizing currency notes of “all series” in certain
denominations is to be entrusted to the Executive Government,
then Parliament ought to have laid down the guidelines for
exercising such power. He submits that, in the absence of
anything of that nature, it will have to be held that the
17
delegation to the Executive Government is excessive, arbitrary
and as such, violative of Articles 14, 19, 21 and 300A of the
Constitution of India. Learned Senior Counsel relied on the
Constitution Bench Judgments of this Court in the cases of
Hamdard Dawakhana (Wakf) Lal Kuan, Delhi and another
1
v. Union of India and others and Harakchand Ratanchand
2
Banthia and others v. Union of India and others in
support of his submissions.
23. Shri Chidambaram submits that, in any case, the
decision-making process in the present case was deeply flawed
and, therefore, is liable to the scrutiny of judicial review by this
Court.
24. The learned Senior Counsel submits that a plain reading
of sub-section (2) of Section 26 of the RBI Act would reveal that
the Central Government can exercise the power only on the
recommendation of the Central Board. It is, therefore,
1
(1960) 2 SCR 671
2
(1969) 2 SCC 166 = (1970) 1 SCR 479
18
submitted that it is implicit in the said sub-section that the
proposal for demonetization must emanate from the RBI. It is
submitted that, from the scheme of the RBI Act, it is clear that
the Central Board, consisting of Members specified in Section 8
of the RBI Act, would consider all relevant material, weigh the
pros and cons, consider the impact of the proposed measure on
the people of the country and the consequences on the
economy before making a recommendation. It is submitted
that, on a plain reading of sub-section (2) of Section 26 of the
RBI Act, it is clear that the Central Government is not bound to
accept the recommendation of the Central Board. The word
‘may’ used therein, postulates exercise of discretion and,
therefore, the discretion so exercised by the Central
Government must be exercised after considering the matter
carefully, as to whether the recommendation of the RBI is
required to be accepted or not.
25. Learned Senior Counsel, therefore, submits that it is
implicit in sub-section (2) of Section 26 of the RBI Act that the
19
Central Board constituted under Section 8 of the RBI Act must
devote sufficient time to apply their mind while making a
recommendation, particularly when a major step like
demonetization is to be taken.
26. Learned Senior Counsel submits that, however, in the
present case, the decision-making process is deeply flawed. He
submits that, under Section 8 of the RBI Act, the only channel
for non-government Directors to come on the Central Board of
the RBI is through clause (c) of sub-section (1) of Section 8 of
the RBI Act. He submits that, usually, experts in trade and
commerce, economists, industrialists, etc. are nominated in the
said category. However, on the date on which the decision for
th
demonetization was taken by the Central Board i.e. 8
November, 2016, there were only 3 independent Directors
under clause (c) of sub-section (1) of Section 8 of the RBI Act.
He submits that, it is thus clear that, at the relevant time, the
Central Board consisted of a majority of the Directors who were
representatives of the Central Government inasmuch as there
20
were 7 vacancies of Directors in category under clause (c) of
sub-section (1) of Section 8 of the RBI Act.
27. Learned Senior Counsel further submits that, in the
present case, a reverse mechanism was adopted. He submits
that it was the Central Government which initiated the proposal
for demonetization and sought opinion of the Central Board
th
vide its communication dated 7 November 2016. The meeting
of the Central Board was held immediately on the next day i.e.
th
8 November 2016 at 5.00 p.m. Within hours, a
recommendation of the Central Board was sent to the Central
th
Government and, on the same date itself, i.e. 8 November
2016, the Hon’ble Prime Minister announced the decision of the
Cabinet with regard to demonetization on National Television at
8.00 p.m.
28. Learned Senior Counsel submits that, unless the following
documents are produced by the respondents, it cannot be
verified as to whether the Central Board while recommending
21
demonetization or as to whether the Central Government while
deciding to notify demonetization had taken into consideration
the relevant factors or eschewed irrelevant factors:
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a) The letter of the Central Government dated 7
November 2016;
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b) The Agenda Note dated 8 November 2016, if any,
placed before the Central Board of RBI and the
relevant research papers, background notes,
information, data, report, etc.;
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c) The recommendation of the Central Board dated 8
November 2016 to the Central Government;
d) The Note for Cabinet, if any, that was placed before
th
the Cabinet on 8 November 2016;
e) The actual decision of the Cabinet as recorded in the
th
Minutes of the Cabinet of its meeting dated 8
November 2016.
29. It is submitted that it is only on the perusal of the minutes
th
of the meeting dated 8 November 2016, of the Central Board,
22
it could be seen as to whether the requisite quorum was there
or not and as to whether one director from the category under
Section 8(1)(c) of the RBI Act as required under the Reserve
Bank of India (General) Regulations, 1949 (hereinafter referred
to as “the 1949 Regulations”) was present in the meeting or not.
30. Shri Chidambaram submits that there is no record
available to show that there was application of mind to the
relevant factors by the Central Board, so also by the Central
Government. He submits that it is also not clear as to whether
there was any Cabinet note based on the recommendation of
the Central Board, which was placed before the Cabinet for
consideration. He submits that the Hon’ble Prime Minister
th
went on National Television at 8.00 p.m. on 8 November 2016,
in a slot that had already been booked by the Government since
all channels telecasted the speech at 8.00 p.m., and announced
the decision on demonetization. He submits that the decision-
making process was pre-meditated and rushed, which depicted
a non-application of mind and was deeply and fatally flawed. It
23
is thus submitted that the procedure adopted was in total
violation of the procedure contemplated under sub-section (2)
of Section 26 of the RBI Act.
31. Shri Chidambaram further submits that neither the RBI
nor the Central Government took into consideration the
relevant factors and eschewed irrelevant factors before making
such a far-reaching recommendation and decision respectively,
that would have serious consequences. He submits that, as a
result of demonetization, 86.4% of the currency (by value) was
declared no longer to be legal tender and was eventually
withdrawn. He submits that, in terms of absolute value, it
amounted to Rs.15,44,000 crore. It is submitted that 2,300
crore distinct notes had become illegal overnight. It is
submitted that, at the relevant time, the notes in the
denomination of Rs.500/- and Rs.1,000/- were commonly used
and, since they were demonetized overnight, millions of people
were left with no valid bank notes to buy essential goods, such
as, food, milk or even medicines, etc. Thousands of families
24
went without a meal. In fact, various voluntary organizations
distributed free food to thousands of families during the
relevant period.
32. Shri Chidambaram submits that the result of
demonetization was disastrous. It resulted in steep
unemployment within a short period. Wages were not paid for
several weeks. Millions of farmers were unable to withdraw or
deposit money. They did not have money to buy seeds or
fertilizers or to hire labour. It is submitted that the price of
agricultural products dropped to a huge extent, thereby
causing loss to the farmers.
33. Shri Chidambaram submits that the Government also did
not take into consideration the fact that over 2 lakh ATMs were
required to be recalibrated to dispense the newly issued notes.
It is submitted that the Government, as also the RBI, also did
not take into consideration that, out of 1,38,626 bank branches
in India, over two-thirds were located in metropolitan, urban
25
and semi-urban areas, while only one-third were located in
rural areas, and that 90% of all ATMs were located merely in 16
States. He submits that the seven States in North-East India
had only 5199 ATMs, of which 3645 were in Assam alone. As a
result thereof, the individuals residing in rural areas and those
in the Northeast region were disproportionately and adversely
impacted. They had to travel long distances and stand in
queues to exchange notes, forsaking their livelihood at
considerable expense.
34. Learned Senior Counsel submits that, without taking into
consideration all these factors, the Central Board made the
recommendation and the Central Government took the decision
of demonetization. It is submitted that the consequence thereof
is that demonetization cost the economy about 1-2% of the
GDP, i.e. about Rs.1,50,000 crore.
35. Shri Chidambaram further submits that the objectives
stated in the impugned Notification were false and illusory
26
which could not have been achieved and which, in fact, were
not achieved. He submits that one of the objectives was to
weed out fake currency notes that were causing adverse effect
on the economy. Another objective was to stop the use of high
denomination bank notes for the storage of unaccounted
wealth. Learned Senior Counsel submits that, when a fake
currency note is detected by a Bank Officer, he is obliged to
impound it, report it and give the same to the RBI. The RBI is
required to destroy the note, thus taking the fake currency note
out of possible circulation. It is submitted that the Annual
Report of the RBI for the year 2016-2017 reported that only
fake currency of the value of Rs.43.3 crore was detected in the
nearly Rs.15.31 lakh crore of currency exchanged through the
banking system. It is submitted that this represented 0.0028%
of the total currency notes that were returned/exchanged
through the banking system/RBI.
36. Learned Senior Counsel submitted that, in fact, the Indian
Express quoted a senior Directorate of Revenue Intelligence
27
(DRI) official who said that, while fake currency seized before
demonetization was of low quality and easily identifiable by the
naked eye, the quality of fake notes considerably improved
post-demonetization, making it harder to identify. It is
submitted that, as such, it is clearly seen that the said objective
was false and, in any case, demonetization hopelessly failed to
achieve the said objectives.
37. Learned Senior Counsel further submitted that the third
objective was to arrest the use of fake currency for financing
subversive activities such as drug trafficking and terrorism,
which cause damage to the economy and the security of the
country. In this respect, learned Senior Counsel submits that
new notes of denominational value of Rs.2,000/- were found on
the bodies of two terrorists killed in an encounter in Bandipora
nd
on 22 November 2016. Learned Senior Counsel submits that
nearly 99.3% of the demonetized notes were returned, whether
they represented storage of accounted or unaccounted wealth.
It is submitted that to facilitate the exchange of money, several
28
brokers sprung up, who offered to exchange ‘demonetized’ notes
for a price. As such, even honest people turned dishonest to
make some money.
38. Learned Senior Counsel submits that, shortly after
demonetization, the Income Tax Department and the DRI
conducted searches and raids and seized alleged unaccounted
wealth in the form of Rs.2,000 notes. It is, therefore, submitted
that all the stated objectives have utterly failed.
39. Shri P. Chidambaram further submitted that the
impugned Notification is liable to be set aside on another
ground also. He submits that the doctrine of proportionality
has now been recognised in Indian jurisprudence. Applying the
test of proportionality to the impugned act of demonetization,
he submits that there was absolutely no justification to
demonetize 86.4% of the currency in circulation representing a
value of Rs.15,44,000 crore that caused enormous damage to
the economy and placed an intolerable and horrendous burden
29
upon the people of the country, especially the poor. It is
submitted that, before resorting to such a drastic step, the
Central Board as well as the Central Government ought to have
taken into consideration as to whether an alternative method
could have been resorted to achieve the purpose for which the
exercise of demonetization was done. In this respect, learned
Senior Counsel relied on the judgment of this Court in the case
of K.S. Puttaswamy (Retired) and another (Aadhaar) v.
3
Union of India and another and Internet and Mobile
4
Association of India v. Reserve Bank of India .
40. Learned Senior Counsel submitted that though, while
exercising the power of judicial review, it may not be
permissible for this Court to examine the correctness of the
decision, however, this Court can very well exercise its powers
to examine the correctness of the decision-making process. He
submits that the decision-making process in the present case is
totally flawed. He submits that neither the Central Board while
3
(2019) 1 SCC 1
4
(2020) 10 SCC 274
30
making the recommendation nor the Central Government while
taking the decision have followed the procedure as prescribed
in sub-section (2) of Section 26 of the RBI Act. He submits
that, in any case, they have failed to take into consideration the
relevant factors which were required to be taken into
consideration and have taken into consideration those factors
which were false from the very inception and have subsequently
been proved to be so. He, therefore, submits that this Court is
entitled to exercise its powers of judicial review and hold that
the decision-making process was not sustainable in law. In
this respect, learned Senior Counsel relied on the judgments of
5
this Court in the cases of Tata Cellular v. Union of India ,
Uttamrao Shivdas Jankar v. Ranjitsinh Vijaysinh Mohite
6
Patil , Centre for Public Interest litigation and others v.
7
Union of India and others , Lt. General Manomoy Ganguly
5
(1994) 6 SCC 651
6
(2009) 13 SCC 131
7
(2012) 3 SCC 1
31
8
Vsm v. Union of India and others and K.S. Puttaswamy
(Retired) and another (Aadhaar) (supra) .
41. Learned Senior Counsel further submitted that, despite
the passage of time, this Court has the power to grant
declaratory relief including the relief of declaring as to what is
the true meaning and interpretation of various provisions of the
RBI Act and also to mould the relief accordingly. Learned
Senior Counsel relied on the judgment of this Court in the case
of Somaiya Organics (India) Ltd. and another v. State of
9
U.P. and another , Orissa Cement Ltd. v. State of Orissa
10
and others , and I.C. Golak Nath & Others v. State of
11
Punjab & Another in support of the said submissions.
42. Learned Senior Counsel further submitted that the
impugned Notification is also violative of Article 19(1)(g) of the
Constitution of India. He submits that, if it is the contention of
the State that the restriction imposed is reasonable and in the
8
(2018) 18 SCC 83
9
(2001) 5 SCC 519
10
1991 Supp (1) SCC 430
11
(1967) 2 SCR 762
32
interest of the general public, then the burden is on the
respondents to establish the same. However, in the present
case, the respondents have failed to do so. He further submits
that this Court in the case of Jayantilal Ratanchand Shah v.
12
Reserve Bank of India and others has held the currency
notes to be property. He, therefore, submits that depriving a
person of his property by demonetization would be violative of
Article 300A of the Constitution of India.
43. Shri Shyam Divan, learned Senior Counsel appearing on
behalf of the applicant-Malvinder Singh, submitted that, apart
from the guarantee given by the Central Government with
regard to exchange of every bank note as legal tender at any
place in India, they are also the liabilities of the Issue
Department under Section 34 of the RBI Act to an amount
equal to the total of the amount of the currency notes of the
Government of India and bank notes for the time being in
circulation.
12
(1996) 9 SCC 650
33
44. Learned Senior Counsel submitted that the Hon’ble Prime
th
Minister, in his speech on 8 November 2016, gave a
categorical assurance that the rights and interests of honest,
hard-working people would be fully protected. A specific
assurance was also given that if there may be some who, for
some reason, are not able to deposit their old five hundred or
th
one thousand rupee notes by 30 December 2016, they could
st
go to specified offices of the RBI upto 31 March 2017 and
deposit the notes after submitting a declaration form. He
submits that a person of a stature no less than the Hon’ble
Prime Minister of India has given an assurance that such
persons would be able to go to specified offices of the RBI upto
st
31 March 2017 and deposit the notes after submitting a
declaration form. It is further submitted that in the Press Note
th
published on the same day, i.e. 8 November 2016, an
assurance was given to the following effect:
“(x) For those who are unable to
exchange their Old High Denomination
Bank Notes or deposit the same in their
34
bank accounts on or before December
30, 2016, an opportunity will be given to
them to do so at specified offices of the
RBI on later dates along with necessary
documentation as may be specified by
the Reserve Bank of India.”
45. Learned Senior Counsel submits that the said assurance
th
was also reiterated in the RBI Notice dated 8 November 2016.
Learned Senior Counsel, therefore, submits that
applicant’s/petitioner’s case (petitioner in Writ Petition (Civil)
No.149 of 2017) stands on peculiar facts. Shri Divan submits
that the applicant/petitioner withdrew an amount of
Rs.1,20,000/- from his bank account operating in Central
rd
Cooperative Bank, Sangrur, Punjab (Branch-Ghelan) on 3
December 2015 and kept the same with his previous savings of
Rs.42,000/- in cash, which totals to Rs.1,62,000/- (i.e. 60
notes of Rs. 500 denomination and 132 notes of Rs.1000/-
th
denomination). On 11 April, 2016, he went to visit his son
residing in the USA, leaving his above mentioned saving of
Rs.1,62,000/- at home in India for his future knee operation.
35
The applicant travelled with his wife. During their absence,
their home was locked and the money could not have been
deposited. Learned Senior Counsel submits that, after
rd
returning to India on 3 February, 2017, and relying on the
assurance given by the Hon’ble Prime Minister of India, he
made a representation to the RBI for exchange of the currency
notes in his possession. However, the same was not considered,
thus constraining him to file a writ petition (i.e. Writ Petition
rd
(Civil) No.149 of 2017). This Court, vide order dated 3
November 2017 disposed of the said writ petition giving him the
liberty to file an application for intervention/impleadment in
Writ Petition (Civil) No.906 of 2016 (Vivek Narayan Sharma vs.
Union of India), which was accordingly filed him vide I.A.
No.26757 of 2018 in Writ Petition (Civil) No.906 of 2016.
46. Shri Divan submits that the proviso to the Notification
th
dated 30 December 2016 issued by the Ministry of Finance,
Department of Economic Affairs, Government of India, totally
excludes persons like the applicant. He submits that, only on
36
account of the number of days residing abroad, the applicant
was categorized as non-resident Indian and as such, he was
only entitled to exchange currency notes to the extent as
th
provided in the proviso to the Notification dated 30 December
2016. Learned Senior Counsel submits that, however, the
applicant had not carried the cash while travelling abroad and
as such, there was no question of making a declaration under
clause (i) of sub-section (1) of Section 4 of the 2016 Notification.
47. Learned Senior Counsel further submitted that, in view of
clause (ii) of sub-section (1) of Section 4 of the 2017 Act, the
Central Government is empowered to provide a grace period to
such class of persons and for such reasons as may be specified,
by notification. He submits that the said power is coupled with
a duty. It is, therefore, submitted that when there are genuine
cases, the Central Government is bound to exercise the power
under clause (ii) of sub-section (1) of Section 4 of the 2017 Act
and provide grace period to the applicant and persons like him.
37
48. Shri Divan further submits that the Circular of the RBI
st
dated 31 December 2016 is also discriminatory, inasmuch as
in the case of Resident Indians, there is no monetary limit for
tender of SBNs. However, insofar as the Non-Resident Indians
(NRIs) are concerned, the tender is restricted to a maximum of
Rs.25,000/- per individual depending on when the notes were
taken out of India as per relevant FEMA Rules. Learned
counsel submits that an additional liability is imposed upon the
NRIs to produce a certificate issued by the Indian Customs on
th
arrival through Red Channel after 30 December 2016,
indicating the import of SBNs, with details and value thereof.
49. Shri Divan relied on the article titled “Using Fast
Frequency Household Survey Data to Estimate the Impact of
Demonetization on Employment” by Mr. Mahesh Vyas, Centre
for Monitoring Indian Economy (2018) in support of his
submission that on account of demonetization, there was
substantial reduction in employment, which was about 12
million lower than it was during the 2 months preceding
38
demonetization. And, over a 4-month period when the entire
sample was surveyed, the impact of demonetization reduced to
a loss of about 3 million jobs. He submits that an article in the
th
Indian Express dated 17 January 2017 based on a study
conducted by the All India Manufacturers’ Organisation (AIMO),
indicated that the manufacturing sector suffered from
considerable job loss post-demonetization.
50. Learned Senior Counsel also submits that in the absence
of a specific study with regard to the effect of demonetization on
the Indian economy, the decision of the Central Government for
demonetizing about 86.4% of the total currency in circulation
will have to be held to be vitiated on account of manifest
arbitrariness. It is submitted that the impugned notification is
also liable to be set aside applying the test of proportionality.
Applying the classical equality test, he submits that it will have
to be held that the decision of demonetization had no nexus to
the objectives to be achieved. Learned Senior Counsel relies on
the judgment of the Constitution Bench of this Court in the
39
case of K.S. Puttaswamy (Retired) and another (Aadhaar)
(supra) in this regard.
51. Shri Divan lastly submits that the right to life also
includes the right to live with dignity. Relying on the
Constitution Bench judgment of this Court in the case of
13
Maneka Gandhi v. Union of India , he submits that the right
to live with dignity also includes the right to travel abroad,
especially to visit the son of the petitioner/applicant in the
USA. He, therefore, submits that when the applicant/petitioner
had gone to the USA to visit his son during the period wherein
the currency notes could have been exchanged, he will be
deprived of his right under Article 21 of the Constitution of
India if he is not granted an opportunity now to exchange the
demonetized notes with the new notes.
IV. SUBMISSIONS OF UNION OF INDIA
52. Shri R. Venkataramani, learned Attorney General (“A.G.”
for short), at the outset, submits that the action taken vide the
13
(1978) 2 SCR 621
40
impugned notification stands ratified by the 2017 Act. It is,
therefore, submitted that with the executive action being
validated by the will of Parliament, the challenge to the same
would not survive.
53. The learned A.G. submits that the word “any” appearing
before the words “series of bank notes” in sub-section (2) of
Section 26 of the RBI Act should be construed as “all”. Learned
A.G. relies on the following judgments of this Court in support
of his submission that the word “any” will have to be construed
to be “all”.
(i) The Chief Inspector of Mines and another v. Lala
14
Karam Chand Thapar etc.
(ii) Banwarilal Agarawalla v. The State of Bihar and
15
others
(iii) Tej Kiran Jain and others v. N. Sanjiva Reddy and
16
others
14
(1962) 1 SCR 9
15
(1962) 1 SCR 33
16
(1970) 2 SCC 272
41
17
(iv) Lucknow Development Authority v. M.K. Gupta
(v) K.P. Mohammed Salim v. Commissioner of Income
18
Tax, Cochin
(vi) Raj Kumar Shivhare v. Assistant Director, Directorate
19
of Enforcement and another
54. The learned A.G. submits that the action under sub-
section (2) of Section 26 of the RBI Act cannot be construed in a
narrow compass. It is submitted that various factors, aspects
and challenging confrontations affecting the economic system
of the country and its stability will have to be given due
weightage while considering the validity of the action taken
under sub-section (2) of Section 26 of the RBI Act.
55. The learned A.G. submits that the comparison of the
action taken under sub-section (2) of Section 26 of the RBI Act
with the 1946 and the 1978 legislations is totally misconceived.
It is submitted that, in any case, the 2017 Act not only
17
(1994) 1 SCC 243
18
(2008) 11 SCC 573
19
(2010) 4 SCC 772
42
addresses the issues relating to cessation of legal tender under
sub-section (2) of Section 26 of the RBI Act, but also provides
for exchange of bank notes in order that Article 300A of the
Constitution of India is complied with, and also extinguishes
the liabilities of the Issue Department of the RBI under Section
34 of the RBI Act.
56. The learned A.G. submits that if the construction as
advanced by the petitioners is accepted, then the very purpose
for which the provision is made shall stand frustrated. The
learned A.G., relying on the judgment of this Court in the case
20
of C.I.T. v. S. Teja Singh , submits that it is a settled
principle of law that the Courts will strongly lean against a
construction of a provision which will render it futile. It is
submitted that the bolder construction, based on the view that
Parliament would legislate only for the purpose of bringing
about an effective result, is required to be accepted.
20
AIR 1959 SC 352
43
57. The learned A.G. submits that the argument that the word
“any” would not mean “all” is fallacious in nature. If the same
is accepted, the Government would technically be permitted to
issue separate notifications for each series but would be
prohibited from issuing a common notification for all series. It
is submitted that if such process is held to be permitted, it
would lead to chaos and uncertainty.
58. The learned A.G. further submits that the word “any” has
been used at two places in sub-section (2) of Section 26 of the
RBI Act. It is submitted that the word “any” preceding the
words “series of bank notes” has to be construed to mean “all”,
whereas the word “any” preceding the word “denomination”
may be construed to be singular or otherwise. He submits that
the same word used in the same provision twice could be
permitted to have a different meaning. He relies on the
44
judgment of this Court in the case of Maharaj Singh v. State
21
of Uttar Pradesh and others in support of his submission.
59. The learned A.G. submits that the alternative submission
that if the word “any” is not given any restricted meaning then
sub-section (2) of Section 26 of the RBI Act will have to be held
to be invalid on the ground of vesting of excessive delegation, is
also without substance. The learned A.G. submits that the RBI
is not just like any other statutory body created by an Act of
legislature. It is submitted that it is a creature created with a
mandate to get liberated even from its creator. It is submitted
that the guiding factors for exercise of power under sub-section
(2) of Section 26 of the RBI Act have to be found from Section 3
of the RBI Act as well as from its preamble. It is submitted that
the RBI Act was enacted for the purposes of taking over the
management and regulation of the currency from the Central
Government as per Section 3 of the RBI Act. The preamble of
the RBI Act also states that the RBI has been constituted to
21
(1977) 1 SCC 155
45
“regulate the issue of bank notes”. It is submitted that the
words “taking over the management of the currency” in Section
3 of the RBI Act and “regulate” in the Preamble have to be given
the widest possible import. It is submitted that a narrower
construction would defeat the very purpose of the RBI Act. It is
submitted that the word “regulate” would also include
“prohibit”.
60. The learned A.G., relying on the judgment of this Court in
the case of Municipal Corporation of Delhi v. Birla Cotton,
22
Spinning and Weaving Mills, Delhi and another submits
that, in order to find out as to whether the legislature has given
guidance for exercise of delegated powers, the Court will have
to consider the provisions of the particular Act with which the
Court has to deal with, including its preamble. It is submitted
that the preamble of the RBI Act read with Section 3 thereof
provides sufficient guidance to the delegatee Central
Government for exercising its powers. It is further submitted
22
AIR 1968 SC 1232 : (1968) 3 SCR 251
46
that, while considering the question as to whether the
delegation is excessive or not, the nature of the body to which
delegation is made is also a factor to be taken into
consideration. It is submitted that in the present case, the
delegation is to the Central Government and not to any
subordinate office or department.
61. The learned A.G. submitted that the judgment of this
Court in the case of Harakchand Ratanchand Banthia and
others (supra) would not be applicable to the facts of the
present case inasmuch as in the said case, the delegation was
to an Administrator and this Court found that the delegation to
the Administrator was too wide and, thus, suffered from the
vice of excessive delegation. It is submitted that, similarly, the
judgment of this Court in the case of Hamdard Dawakhana
(Wakf) Lal Kuan, Delhi and another (supra) also would not
be applicable to the facts of the present case.
47
62. The learned A.G., in addition to the reliance placed on the
judgment of this Court in the case of Birla Cotton, Spinning
and Weaving Mills Delhi (supra) also relies on the judgments
of this Court in the following cases:
23
(i) Delhi Laws Act, In Re
(ii) M.P. High Court Bar Association v. Union of India and
24
others
(iii) Kerala State Electricity Board v. The Indian
25
Aluminium Co. Ltd.
(iv) Ajoy Kumar Banerjee and others v. Union of India and
26
others
(v) Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt.
27
Commissioner of Sales Tax and others
(vi) Ramesh Birch and others v. Union of India and
28
others
23
AIR 1951 SC 332: 1951 SCC 568
24
(2004) 11 SCC 766
25
(1976) 1 SCC 466
26
(1984) 3 SCC 127
27
(1974) 4 SCC 98
28
1989 Supp. (1) SCC 430
48
(vii) M/s Gammon India Limited Etc. v. Union of India &
29
Others
(viii) Prabhudas Swami and Another v. State of Rajasthan
30
and Others
(ix) Rojer Mathew v. South Indian Bank Ltd. represented
31
by its Chief Manager and Ors.
(x) The Registrar of Co-operative Societies, Trivandrum
32
and another vs. K. Kunjabmu and others
(xi) Darshan Lal Mehra and others v. Union of India and
33
others
63. The learned A.G. also relies on the judgments of the U.S.
34
Supreme Court in the cases of Yakus v. U.S. and Federal
35
Energy Administration v. Algonquin SNG. Inc. in support
of his submission.
29
(1974) 1 SCC 596
30
AIR 2003 RAJ 190
31
(2020) 6 SCC 1
32
(1980) 1 SCC 340
33
(1992) 4 SCC 28
34
321 U.S. 414 (1944)
35
426 U.S. 548 (1976)
49
64. Insofar as the contention of the petitioners with regard to
the impugned action being susceptible to challenge on the
ground of proportionality is concerned, the learned A.G.
submits that the reliance placed on the judgment of this Court
in the case of Internet and Mobile Association of India
(supra) is wholly misconceived. Relying on various paragraphs
from the said judgment, the learned A.G. submits that the
observations made in paragraph 224 of the said judgment have
to be read in context with the issue that fell for consideration
before this Court in the said case. It is submitted that in the
said case, this Court was considering the action of the RBI in
restricting the banks and financial institutions regulated by it
from providing access to banking services to those engaged in
transactions in crypto assets. It is submitted that, though this
Court held that, in view of the provisions contained in the RBI
Act, the Banking Regulation Act, 1949 and the Payment and
Settlement Systems Act, 2007, and also in view of the special
place and role that the RBI has in the economy of the country,
50
the RBI had very wide and ample powers to take preventive and
curable measures. However, this Court found that applying the
test of proportionality, in the absence of the RBI pointing out
some semblance of any damage suffered by its regulatory
entities, the action was not sustainable. The learned A.G.
submitted that the action in the present case was taken after
considering the relevant factors and to address serious
concerns such as terror financing, black money and fake
currency. It is, therefore, submitted that the judgment of this
Court in the case of Internet and Mobile Association of India
(supra) would not be applicable to the facts of the present case.
65. The learned A.G., relying on the judgment of this Court in
the case of State of Tamil Nadu and another v. National
South Indian River Interlinking Agriculturist
36
Association , submitted that in a case of non-classificatory
arbitrariness, the test of proportionality would be applicable.
However, in a case of classificatory arbitrariness, the only test
36
(2021) SCC OnLine SC 1114
51
that will have to be satisfied is the rational nexus test, i.e.
whether the action taken has a reasonable nexus with the
object to be achieved. In such a case, the proportionality test
would not be applicable. It is submitted that the present case
would fall in the latter category and not in the former category.
66. Countering the argument made on behalf of the
petitioners that the power exercised under sub-section (2) of
Section 26 of the RBI Act has not been exercised in the manner
as provided therein and further that the decision-making
process is flawed on account of patent arbitrariness, the
learned A.G. submitted that in view of the settled legal position,
the said contention is also not tenable. It is submitted that
what is postulated under sub-section (2) of Section 26 of the
RBI Act is that the Central Government may take a decision on
the recommendation of the Central Board. It is submitted that
in the present case, there was, in fact, a recommendation by
the Central Board recommending demonetization. The decision
by the Central Government has been taken after considering
52
the said recommendation. It is, therefore, submitted that the
procedure as provided in sub-section (2) of Section 26 of the
RBI Act stands duly complied with. The learned A.G.
submitted that the RBI is not only an expert body but a very
special institution charged with a duty of conceiving and
implementing various facets of economic and monetary policy.
It is submitted that there cannot be a straitjacket formula in
the discharge of its duty. Learned A.G. submits that in any
case, it is a settled law that this Court should not interfere with
the opinion of experts and leave it to experts who are more
familiar with the problems they face. Reliance in this respect is
placed on the judgment of this Court in the case of Rajbir
Singh Dalal (Dr.) v. Chaudhari Devi Lal University, Sirsa
37
and another and Secretary and Curator, Victoria
Memorial Hall v. Howrah Ganatantrik Nagrik Samity and
38
others .
37
(2008) 9 SCC 284
38
(2010) 3 SCC 732
53
67. Relying on the judgment of this Court in the case of Bajaj
Hindustan Limited v. Sir Shadi Lal Enterprises Limited
39
and another , the learned A.G. submits that economic and
fiscal regulatory measures are a field where Judges should
encroach upon very warily as Judges are not experts in these
matters.
68. The learned A.G. submitted that the recommendation of
the RBI and the decision of the Central Government was taken
after taking into consideration that fake currency notes of the
SBNs have largely been in circulation and it was difficult to
identify genuine bank notes from the fake ones and to also
address three serious problems viz., fake currency notes,
storage of unaccounted wealth and terror financing. It is
submitted that the material with regard to such factors cannot
be considered overnight. It is submitted that the 2012 White
Paper on Black Money throws light on the complexity of the
problem. The information and data gathered from various
39
(2011) 1 SCC 640
54
agencies of the Government of India are required to be taken
into consideration. It is submitted that both the RBI and the
Central Government act in coordination with each other. The
learned A.G. submits that the discussions over the issue have
taken place over a long period of time and, after considering all
the aspects, the RBI recommended demonetization and the
Central Government took the decision to demonetize.
69. The learned A.G. further submitted that the contention of
the petitioners that demonetization has utterly failed to achieve
its objectives as stated in the impugned Notification is also
without substance. The learned A.G. submits that the
repercussion of an action like the one under consideration can
be best understood by considering the legal tender cessation
measure not in isolation but by looking at the overall benefits
flowing from such a measure. The learned A.G. submits that
the benefits and advantages of such an action are direct as well
as indirect. The learned A.G. submits that, as a result of the
impugned action, there are direct benefits, like:
55
(i) significant reduction in fake currency;
(ii) significant increase in the number of tax payers;
(iii) 25% growth in filing income-tax returns;
(iv) significant increase in returns filed by corporate tax
payers;
(v) substantial growth in new PAN numbers.
70. The learned A.G. submits that, whereas self-assessment
tax in the year 2015-16 was Rs.55,000 crore and Rs.68,000
crore in the year 2016-2017, it has jumped to Rs.1,00,000
crore in the year 2017-18. The learned A.G. further submitted
that, as a direct benefit of demonetization, the volume of
Unified Payments Interface (UPI) transactions shot up from
1.06 crore in 2016-2017 to 90.5 crore in 2017-18 and further
to about 5000 crore in 2021-22. The value of the UPI
transactions also grew 1210 times in 2021-22 as compared to
2016-17. It is submitted that the real GDP growth in the year
56
2017-18 was higher than the average annual growth of 6.6% in
the decade (2010-11 to 2019-20).
71. The learned A.G. further submitted that there have also
been various indirect benefits. Action against domestic black
money resulted in undisclosed income of Rs.82,168 crores.
Surveys conducted in 63,691 cases led to undisclosed income
of Rs.84,396 crores getting deducted. The employees provident
fund organization (EPFO) enrolment data saw an increase of
1.1 crore new enrolments. It also saw 55% increase in
Employees’ State Insurance Corporation (ESIC) registrations. It
is, therefore, submitted that if the effect of impugned action is
considered in a larger perspective, it will clearly show that there
have been several direct as well as indirect benefits on account
of the demonetization.
72. The learned A.G. further submitted that, merely because
in 1946 and 1978 the demonetization was effected by
enactments of Parliament, cannot be a ground to hold that the
57
Central Government does not have a power under sub-section
(2) of Section 26 of the RBI Act. It is submitted that, in any
case, the said argument does not hold water inasmuch as what
has been provided under the impugned notification is wholly
ratified by the 2017 Act. It is submitted that once the executive
action is ratified by Parliament by way of legislation, the
argument that since Parliament had chosen to do so in 1946
and 1978, the Central Government could not have done it
under the impugned notification itself is contradictory.
73. The learned A.G. submits that the perusal of the
Parliamentary debates while enacting the 1978 Act would
clearly show that, though by the said Act only high
denomination bank notes of the denominational value of
Rs.1,000/-, Rs.5,000/- and Rs.10,000/- were demonetized, the
Members of Parliament advocated for demonetization of even
the bank notes of the denominational value of Rs.100.
74. The learned A.G. submits that the provisions of the 1978
Act have been found to be constitutional by the Constitution
58
Bench Judgment of this Court in the case of Jayantilal
Ratanchand Shah (supra). It is submitted that, for the
reasoning adopted by the Constitution Bench in the said case,
the impugned notification, which now stands ratified by the
2017 Act, also deserves to be upheld.
75. In respect of the submission made on behalf of the
petitioners, that in order to address concern of the genuine
difficulties of various persons who could not deposit the
demonetized bank notes within the limited period, a window
should be opened for a limited period; the learned A.G.
submitted that if such is permitted, it would amount to
devising a norm which will alter the essential character of the
enactment. It is submitted that, firstly, it is difficult to
ascertain genuineness of the money. Such a request will have
to be based on certain declarations being made by the party
whose veracity cannot be verified. It is submitted that this
would also provide a loophole for non-genuine bank note
holders to channelize their unaccounted money through the
59
window. It is submitted that, incidentally, the law enforcing
agencies are still recovering significant amount of SBNs from
the individuals.
76. The learned A.G. further submitted that, as of now,
Rs.10,719 crore of SBNs are still in circulation. It is submitted
that in any case, in view of the provisions of clause (i) of sub-
section (1) of Section 4 of the 2017 Act, 77,748 applications
involving an amount of Rs.284.25 crore were received from
resident and non-resident Indians by the five designated
Regional Offices of the RBI during the grace period. Out of this,
a total of 57,405 cases (74% of the total applications received)
amounting to Rs.221.95 crore (78% of the total amount under
these applications) have been accepted and the amounts have
been credited to their KYC compliant bank accounts. It is
submitted that out of the total cases, 20,343 cases were
rejected due to various reasons. The learned A.G. submits
that it will not be permissible for the Court to devise a norm
which would result in altering the essential character of the
60
enactment. In support of this submission, he relies on the
judgment of United States Supreme Court in the case of
Metropolis Theater Company et al v. City of Chicago and
40
Ernest J. Magerstadt .
77. The learned A.G. lastly submits that the Court must not
proceed for a formal judgment when it cannot grant any
effectual relief. In this respect, he relies on the judgments of
United States Supreme Court in the cases of North Carolina v.
41 42
Wayne Claude RICE and Mills v. Green and the judgment
of the Court of Appeal of New York in the case of People ex rel.
43
Kingsland v. Clark .
78. Taking the line further, the learned A.G. submits that it is
also a settled proposition of law that the Court should not
decide academic questions. In this respect, he relies on the
judgment of this Court in the cases of Shrimanth Balasaheb
Patil v. Speaker, Karnataka Legislative Assembly and
40
228 US 61 (1913)
41
404 U.S. 244 (1971)
42
159 U.S. 651 (1895)
43
25 Sickels 518 (1877)(Court of Appeals of New York)
61
44
others , Central Areca Nut & Cocoa Marketing &
Processing Cooperative Ltd. v. State of Karnataka and
45 46
others and R.S. Nayak v. A.R. Antulay .
V. SUBMISSIONS OF THE RBI
79. Shri Jaideep Gupta, learned Senior Counsel appearing on
behalf of the RBI, would submit that the contention of the
petitioners that the power under sub-section (2) of Section 26 of
the RBI Act is uncanalised, unguided and arbitrary is without
any basis. He submits that sub-section (2) of Section 26 of the
RBI Act itself provides that the power by the Central
Government has to be exercised on the recommendation of the
Central Board. It is, therefore, submitted that there is an
inbuilt safeguard in the provision itself.
80. Relying on the judgment of this Court in the case of
Peerless General Finance and Investment Co. Limited and
44
(2020) 2 SCC 595
45
(1997) 8 SCC 31
46
(1984) 2 SCC 183
62
47
another v. Reserve Bank of India , it is submitted that the
RBI, which is a bankers’ bank, has a large contingent of experts
to render advice relating to matters affecting the economy of the
entire country. It is submitted that the RBI plays an important
role in the economy and financial affairs of India and one of its
important functions is to regulate the banking system in the
country. It is submitted that the recommendation of the Central
Board is based upon the advice of the experts that the RBI has
in its contingent. Shri Gupta also relies on the judgment of the
Constitution Bench of this Court in the case of Joseph
Kuruvilla Velukunnel v. Reserve Bank of India and
48
others in support of this submission.
81. Shri Gupta further submitted that the contention that the
decision-making process is faulty on account of not following
the procedure under sub-section (2) of Section 26 of the RBI
Act is also without substance. The learned Senior Counsel
submits that the procedure under sub-section (2) of Section 26
47
(1992) 2 SCC 343
48
1962 Supp (3) SCR 632
63
of the RBI Act contemplates two things i.e. recommendation of
the Central Board and the decision by the Central Government.
It is submitted that both these requirements stand fully
satisfied in the present case. He submits that though it is the
contention of the petitioners that the procedure is flawed,
however, the petition itself is bereft of such averments. Shri
Gupta submits that the Constitution Bench of this Court in the
case of Ram Kishore Sen and others v. Union of India and
49
others has held that the burden of proof primarily lies on a
person who complains that the procedure prescribed has not
been followed. In any case, he submits that in both the
affidavits filed on behalf of the RBI i.e. the counter affidavit
th
dated 19 December 2018 filed by Haokholal, Assistant
th
General Manager and the additional affidavit dated 15
November 2022 of Shri Kuntal Kaim, Deputy General Manager,
it has been specifically averred that the procedure as prescribed
under sub-section (2) of Section 26 of the RBI Act read with
49
(1966) 1 SCR 430
64
Regulation 8 of the 1949 Regulations was duly followed. He
submits that the quorum as prescribed under the 1949
Regulations was very much available when the meeting of the
th
Central Board was held on 8 November 2016. In any case, it
is submitted that in view of sub-section (5) of Section 8 of the
RBI Act, a decision of the Board cannot be questioned merely
on the ground of existence of any vacancy or any defect in the
constitution of the Board. The learned Senior Counsel has
th
placed on record an additional affidavit dated 6 December,
2022 reiterating the statements made in the aforesaid two
th th
affidavits dated 19 December 2018 and 15 November 2022.
82. Relying on the judgment of this Court in the case of
Internet and Mobile Association of India (supra), Shri Gupta
submits that to consider the question of proportionality, a four-
pronged test, as set out in the judgment of this Court in the
case of Modern Dental College and Research Centre and
65
50
Others v. State of Madhya Pradesh and Others is required
to be applied. It is submitted that since the measure is
designated for the purpose of dealing with fake currency, black
money and terror funding, the first test stands satisfied. The
measure, i.e. demonetization, has a reasonable nexus for the
fulfillment of the purpose of aforesaid three objectives and, as
such, the second test is also fulfilled. Insofar as the third test
is concerned, it is submitted that it is a matter of economic
policy as to what measure is found to be appropriate for
achieving the objective of dealing with the menace of aforesaid
three evils. It is submitted that it is for the experts in the
economic and monetary fields to take a decision in that regard
and, as such, the third test, as to whether there was no
alternative less invasive measure, would not be applicable to a
decision pertaining to economic policy. Insofar as the fourth
test is concerned, it is submitted that, as a matter of fact, there
has been no infringement of the rights of the citizens. As a
50
(2016) 7 SCC 353
66
matter of fact, no currency is being taken away. Full value of
the legitimate currency has been exchanged. It is submitted
that non-cash transactions such as credit card, debit card, on-
line transaction, etc. were permitted even during the period
th st
between 8 November 2016 and 31 December 2016. In any
case, it is submitted that immediately after the demonetization
was notified, in spite of enormity of operations, immediate steps
were taken for the betterment of the public and to ensure
adequate cash supply. It is submitted that various measures
were taken in order to alleviate the genuine grievances of the
citizens, which have been enumerated in paragraphs 11 to 17
th
of the affidavit dated 19 December 2018 filed on behalf of the
RBI. It is, therefore, submitted that the proportionality test
would not be applicable in the present case.
83. Shri Gupta relying on the judgment of this Court in the
case of Small Scale Industrial Manufactures Association
67
51
(Registered) v. Union of India and others submits that
normally, it is not within the domain of any court to weigh the
pros and cons of the policy or to scrutinize it except only when
it is found to be arbitrary and violative of any constitutional or
any statutory provisions of law.
84. Shri Gupta further submits that a similar provision
providing for a specified time for exchange of notes has already
been found to be valid by the Constitution Bench of this Court
in the case of Jayantilal Ratanchand Shah (supra). He
submits that the time provided in the present case is almost
similar to the time provided under the 1978 Act. The said
period has been found to be reasonable having regard to the
purpose sought to be achieved by the said Act. It is, therefore,
submitted that the challenge that the period provided was not
sufficient is without any substance. It is submitted that
everybody had sufficient opportunity either to deposit the notes
in their banks or to exchange the same. He further submits
51
(2021) 8 SCC 511
68
that it was not necessary even for the individuals to go to
Banks to exchange notes and on the prescribed procedure
being followed, an authorized representative could also
exchange the notes on their behalf.
85. Shri Gupta further submitted that the provisions of sub-
section (2) of Section 4 of the 2017 Act cannot be read in
isolation. He submits that if it is read in isolation, it will lead to
an anomalous situation where the RBI has an independent
power to act in violation of the provisions of Section 3 and sub-
section (1) of Section 4 of the 2017 Act. He submits that
Section 3 and sub-sections (1) and (2) of Section 4 of the 2017
Act will have to be read together to hold that the power
available to the RBI under sub-section (2) of Section 4 of the
2017 Act is with regard to the grace period as provided under
sub-section (1) of Section 4 of the 2017 Act. It is submitted
that the power vested in the Central Government under clause
(ii) of sub-section (1) of Section 4 of the 2017 Act is to provide
grace period to such class of persons and for such reasons as
69
may be specified by notification. However, such power has not
been exercised by the Central Government and, therefore, it
cannot be construed that the RBI will have an independent
power in this regard.
86. Shri Gupta reiterated the submission made by the learned
A.G. that since the relief sought in the petitions cannot be
granted, no declaration as sought should be granted by this
Court. In this respect, he relies on the judgment of this Court
in the case of Bholanath Mukherjee and others v.
Ramakrishna Mission Vivekananda Centenary College and
52
others .
VI. SUBMISSIONS IN REJOINDER
87. Shri P. Chidambaram, learned Senior Counsel, in
rejoinder, almost reiterated his earlier submissions. He
submitted that there are two methods of demonetization of
currency, one is by legislative method and the other under sub-
section (2) of Section 26 of the RBI Act. He reiterated that the
52
(2011) 5 SCC 464
70
word “any” will always have to be read in the context of the
provisions and if read in that manner, the only meaning that
can be given to the word “any” in sub-section (2) of Section 26
of the RBI is “some”. In this respect, he relies on the judgment
of this Court in the case of Union of India v. A.B. Shah and
53
others .
88. Shri Chidambaram further submitted that from the
perusal of the affidavit filed on behalf of the Central
Government as well as the RBI, it is clear that the procedure
emanated from the Central Government, which was through
the advice given by the Government to the RBI in its
th
communication dated 7 November 2016. The affidavit would
clearly show that the RBI acted on the advice of the Central
Government and gave its recommendation in a mechanical
manner. He reiterated that, as per sub-section (2) of Section 26
of the RBI Act, the proposal has to emanate from the RBI and
not from the Central Government. It is reiterated that the
53
(1996) 8 SCC 540
71
procedure is in total breach of sub-section (2) of Section 26 of
the RBI Act.
89. Shri Chidambaram submits that unless the documents, to
which he had already referred in his arguments while opening
the case, are placed for perusal of this Court, the Court cannot
come to a satisfaction about the correctness of the decision-
making process. Relying on the judgment of this Court in the
54
case of R.K. Jain v. Union of India , he submits that unless
the respondents plead privilege and the issue is decided, the
respondent cannot withhold the said documents, at least from
this Court.
90. Relying on an excerpt from “Forks in the Road: My Days at
RBI and Beyond”, a book by former RBI Governor C.
Rangarajan, Shri Chidambaram submits that demonetization
has nothing to do with monetary policy. Emphasizing on the
judgment of this Court in the case of Internet and Mobile
Association of India (supra), the learned Senior Counsel
54
(1993) 4 SCC 119
72
submits that the proportionality test will have to be satisfied in
the present case. It is submitted that the 2017 Act does not
validate the action taken under the impugned Notification. It
only extinguishes the liabilities of the Issue Department of the
RBI. The learned Senior Counsel, therefore, submits that this
is a fit case wherein this Court should decide the scope of sub-
section (2) of Section 26 of the RBI Act and declare that the
exercise of power by the Central Government under sub-section
(2) of Section 26 of the RBI Act was not valid in law. In this
respect, he relies on the judgment of this Court in the case of
55
S.R. Bommai and others v. Union of India and others .
91. Shri Shyam Divan, learned Senior Counsel, in rejoinder,
submits that the perusal of sub-section (1) of Section 26 of the
RBI Act would reveal that, though the tendering of any series of
bank notes of any denomination ceases to be a legal one under
sub-section (2) of Section 26 of the RBI Act, the guarantee of
the Central Government continues to exist. It is submitted that
55
(1994) 3 SCC 1
73
it would be clear from the provisions contained in the 2016
Ordinance, which became the 2017 Act, that Section 3 of the
2017 Act which provides that the SBNs which have ceased to
be legal tender in view of the impugned notification, shall cease
to be liabilities of the RBI under Section 34 of the RBI Act and
shall cease to have the guarantee of the Central Government
under sub-section (1) of Section 26 of the said Act. It is
th
submitted that this is also clear from the affidavit dated 16
November 2022 filed on behalf of the Union of India.
92. Shri Divan further submitted that the 2017 Act can
neither be construed to validate the impugned notification nor
can it be held that it is a piece of incorporation by reference. It
is submitted that the argument with regard to the impugned
notification having merged in the 2017 Act is also without
substance. The learned Senior Counsel submits that it is
simply a plenary parliamentary declaration.
74
93. Taking further his argument, Shri Divan submits that
clause (i) of sub-section (1) of Section 4 of the 2017 gives a
power to the Central Government which is coupled with a duty.
It is submitted that genuine cases like that of the
applicants/petitioners viz., Malvinder Singh and Sarla
Shrivastav, who is the applicant/petitioner in I.A. No. 152009
of 2022, should be given some window to exchange the SBNs.
It is submitted that there is a large section of NRIs who, during
th th
the period between 8 November 2016 and 30 December
2016, were not in India. It is submitted that they could have
also not travelled to India since either the tickets were not
available or the rates were prohibitively expensive.
94. Shri Divan, in the alternative, submitted that the proviso
th
to the Notification dated 30 December, 2016 has to be read in
a manner that it is silent on NRIs who have kept their money in
India. It is submitted that exclusion of NRIs who have left their
money in India would be manifestly arbitrary and in order to
save the proviso, it will have to be read in the manner making it
75
inapplicable to such NRIs who had kept their money in India
while residing abroad during that period.
VII. REFRAMED QUESTIONS
95. Though nine important questions have been framed by the
th
Bench of learned three Judges vide order dated 16 December
2016 in Writ Petition (Civil) No.906 of 2016, upon hearing the
submissions advanced before us on behalf of the petitioners as
well as the respondents, we find that only the following
questions of law arise for consideration. As such, the questions
are reframed as under:
(i) Whether the power available to the Central
Government under sub-section (2) of Section 26 of
the RBI Act can be restricted to mean that it can be
exercised only for “one” or “some” series of bank
notes and not “all” series in view of the word “any”
appearing before the word “series” in the said sub-
section, specifically so, when on earlier two
76
occasions, the demonetization exercise was done
through the plenary legislations?
(ii) In the event it is held that the power under sub-
section (2) of Section 26 of the RBI Act is construed
to mean that it can be exercised in respect of “all”
series of bank notes, whether the power vested with
the Central Government under the said sub-section
would amount to conferring excessive delegation and
as such, liable to be struck down?
th
(iii) As to whether the impugned Notification dated 8
November 2016 is liable to be struck down on the
ground that the decision making process is flawed in
law?
th
(iv) As to whether the impugned notification dated 8
November 2016 is liable to be struck down applying
the test of proportionality?
77
(v) As to whether the period provided for exchange of
th
notes vide the impugned notification dated 8
November 2016 can be said to be unreasonable?
(vi) As to whether the RBI has an independent power
under sub-section (2) of Section 4 of the 2017 Act in
isolation of provisions of Section 3 and Section 4(1)
thereof to accept the demonetized notes beyond the
period specified in notifications issued under sub-
section (1) of Section 4?
VIII. STATUTORY SCHEME
96. Before we proceed to consider the various issues reframed
by us, we find it appropriate to refer to the scheme of the RBI
Act.
97. The preamble of the RBI Act would itself reveal that the
RBI Act was enacted since it was found expedient to constitute
a Reserve Bank of India to regulate the issue of Bank notes and
for the keeping of reserves with a view to securing monetary
78
stability in India and generally to operate the currency and
credit system of the country to its advantage. The preamble of
the RBI Act would also show that it was amended in the year
th
2016 with effect from 27 June 2016 by Act No. 28 of 2016.
Post amendment, it was stated in the preamble that, whereas it
was essential to have a modern monetary policy framework to
meet the challenge of an increasingly complex economy, and
whereas the primary objective of the monetary policy is to
maintain price stability while keeping in mind the objective of
growth and whereas the monetary policy framework in India
shall be operated by the RBI, the RBI Act was enacted.
98. Section 3 of the RBI Act would reveal that the RBI was
constituted for the purposes of taking over the management of
the currency from the Central Government and of carrying on
the business of banking in accordance with the provisions of
the RBI Act.
79
99. Section 8 of the RBI Act deals with composition of the
Central Board and term of office of the Directors. It will be
relevant to refer to sub-sections (1) and (5) of Section 8 of the
RBI, which read thus:
“ 8. Composition of the Central Board,
and term of office of Directors .-- (1)
The Central Board shall consist of the
following Directors, namely:-
(a) a Governor and not more than four
Deputy Governors to be appointed
by the Central Government;
(b) four Directors to be nominated by
the Central Government, one from
each of the four Local Boards as
constituted by section 9;
(c) ten Directors to be nominated by the
Central Government; and
(d) two Government officials to be
nominated by the Central
Government.
xxx xxx xxx
xxx xxx xxx
(5) No act or proceeding of the Board
shall be questioned on the ground merely
80
of the existence of any vacancy in, or any
defect in the constitution of, the Board.”
100. Section 17 of the RBI Act would reveal that the RBI has
been authorised to carry on and transact several kinds of
business specified therein.
101. Section 22 of the RBI Act would reveal that the RBI shall
have the sole right to issue bank notes in India and may, for a
period which shall be fixed by the Central Government on the
recommendation of the Central Board, issue currency notes of
the Government of India supplied to it by the Central
Government. It further provides that the provisions of the RBI
Act applicable to bank notes shall, unless a contrary intention
appears, apply to all currency notes of the Government of India
issued either by the Central Government or by the RBI in like
manner as if such currency notes were bank notes. Sub-
section (2) of Section 22 of the RBI Act specifically provides that
on and from the date on which Chapter III of the RBI Act comes
81
into force, the Central Government shall not issue any currency
notes.
102. Section 23 of the RBI Act would reveal that the issue of
bank notes shall be conducted by the RBI through an Issue
Department which shall be separated and kept wholly distinct
from the Banking Department, and the assets of the Issue
Department shall not be subject to any liability other than the
liabilities of the Issue Department as defined in Section 34.
Sub-section (2) of Section 23 provides that the Issue
Department shall not issue bank notes to the Banking
Department or to any other person except in exchange for other
bank notes or for such coin, bullion or securities as are
permitted by the RBI Act to form part of the Reserve.
103. Sub-section (1) of Section 24 of the RBI Act provides that,
subject to the provisions of sub-section (2), bank notes shall be
of the denominational values to two rupees, five rupees, ten
rupees, twenty rupees, fifty rupees, one hundred rupees, five
82
hundred rupees, one thousand rupees, five thousand rupees
and ten thousand rupees or of such other denominational
values, not exceeding ten thousand rupees as the Central
Government may, on the recommendation of the Central Board,
specify in this behalf. Sub-section (2) of Section 24 of the RBI
Act provides that the Central Government may, on the
recommendation of the Central Board, direct the non-issue or
the discontinuance of issue of bank notes of such
denominational values as it may specify in this behalf.
104. Section 25 of the RBI Act provides that the design, form
and the material of bank notes shall be such as may be
approved by the Central Government after consideration of the
recommendations made by the Central Board.
105. Section 26 of the RBI is the provision which directly falls
for consideration. The same reads thus:
“ 26. Legal tender character of notes .-
(1) Subject to the provisions of sub-
section (2), every bank note shall be legal
tender at any place in India in payment,
83
or on account for the amount expressed
therein, and shall be guaranteed by the
Central Government.
(2) On recommendation of the Central
Board the Central Government may, by
notification in the Gazette of India,
declare that, with effect from such date
as may be specified in the notification,
any series of bank notes of any
denomination shall cease to be legal
tender save at such office or agency of the
Bank and to such extent as may be
specified in the notification.”
106. It can thus be seen that sub-section (1) of Section 26 of
the RBI Act provides that, subject to the provisions of sub-
section (2), every bank note shall be legal tender at any place in
India in payment, or on account for the amount expressed
therein, and shall be guaranteed by the Central Government.
Sub-section (2) of Section 26 of the RBI Act provides that on
recommendation of the Central Board, the Central Government
may, by notification in the Gazette of India, declare that, with
effect from such date as may be specified in the notification,
any series of bank notes of any denomination shall cease to be
84
legal tender save at such office or agency of the Bank and to
such extent as may be specified in the notification.
107. Section 34 of the RBI Act provides that the liabilities of the
Issue Department of the RBI shall be an amount equal to the
total of the amount of the currency notes of the Government of
India and bank notes for the time being in circulation.
108. Perusal of the aforesaid provisions of the RBI Act would
reveal that insofar as monetary policy and specifically with
regard to the matters of management and regulation of
currency are concerned, the RBI plays a pivotal role. As a
matter of fact, both the sides are ad idem on the said issue.
109. The importance of the role assigned to the RBI in such
matters would be amplified from the various judgments of this
Court, which we will refer to in the paragraphs to follow. In
this background, we will consider the issues that fall for our
consideration.
85
ISSUE NO. (i) : WHETHER THE POWER AVAILABLE TO THE
CENTRAL GOVERNMENT UNDER SUB-SECTION (2) OF
SECTION 26 OF THE RBI ACT CAN BE RESTRICTED TO
MEAN THAT IT CAN BE EXERCISED ONLY FOR “ONE” OR
“SOME” SERIES OF BANK NOTES AND NOT “ALL” SERIES
IN VIEW OF THE WORD “ANY” APPEARING BEFORE THE
WORD “SERIES” IN THE SAID SUB-SECTION,
SPECIFICALLY SO, WHEN ON EARLIER TWO OCCASIONS,
THE DEMONETIZATION EXERCISE WAS DONE THROUGH
THE PLENARY LEGISLATIONS?
110. It is strenuously urged by the learned Senior Counsel
appearing on behalf of the petitioners that the word “any” used
in sub-section (2) of Section 26 of the RBI Act will have to be
given a restricted meaning to mean “some”. It is submitted that
if sub-section (2) of Section 26 of the RBI Act is not read in
such manner, the very power available under the said sub-
section will have to be held to be invalid on the ground of
excessive delegation. It is submitted that it cannot be
86
construed that the legislature intended to bestow uncanalised,
unguided and arbitrary power to the Central Government to
demonetize the entire currency. It is, therefore, the submission
of the petitioners that in order to save the said Section from
being declared void, the word “any” requires to be interpreted in
a restricted manner to mean “some”.
111. Per contra, it is submitted on behalf of the respondents
that the word “any” under sub-section (2) of Section 26 of the
RBI Act, cannot be interpreted in a narrow manner and it will
have to be construed to include “all”.
Precedents construing the word “any”
112. A Constitution Bench of this Court in the case of The
Chief Inspector of Mines and another v. Lala Karam Chand
Thapar etc. (supra) was considering the question as to
whether the phrase “any one of the directors” as found in
Section 76 of the Mines Act, 1952 could mean “only one of the
directors” or could it be construed to mean “every one of the
directors”. In the said case, all the directors of the Company
87
were prosecuted for the offences punishable under Sections 73
and 74 of the Mines Act, 1952. The High Court had held that
any ‘one’ of the directors of the Company could only be
prosecuted. The Constitution Bench of this Court observed
thus:
“It is quite clear and indeed not
disputed that in some contexts, “any one”
means “one only it matters not which
one” the phrase “any of the directors” is
therefore quite capable of meaning “only
one of the directors, it does not matter
which one”. Is the phrase however
capable of no other meaning? If it is not,
the courts cannot look further, and must
interpret these words in that meaning
only, irrespective of what the intention of
the legislature might be believed to have
been. If however the phrase is capable of
another meaning, as suggested, viz.,
“every one of the directors” it will be
necessary to decide which of the two
meanings was intended by the
legislature.
If one examines the use of the
words “any one” in common
conversation or literature, there can
be no doubt that they are not
infrequently used to mean “every one”
88
— not one, but all. Thus we say of any
one can see that this is wrong, to
mean “everyone can see that this is
wrong”. “Any one may enter” does not
mean that “only one person may
enter”, but that all may enter. It is
permissible and indeed profitable to
turn in this connection to the Oxford
English Dictionary, at p. 378, of
which, we find the meaning of “any”
given thus: “In affirmative sentences,
it asserts, concerning a being or thing
of the sort named, without limitation
as to which, and thus collectively of
every one of them”. One of the
illustrations given is — “I challenge
anyone to contradict my assertions”.
Certainly, this does not mean that one
only is challenged; but that all are
challenged. It is abundantly clear
therefore that “any one” is not
infrequently used to mean “every one”.
But, argues Mr Pathak, granting
that this is so, it must be held that when
the phrase “any one” is used with the
preposition “of”, followed by a word
denoting a number of persons, it never
means “every one”. The extract from
the Oxford Dictionary , it is interesting to
notice, speaks of an assertion
“concerning a being or thing of the sort
89
named”; it is not unreasonable to say
that, the word “of” followed by a word
denoting a number of persons or things is
just such “naming of a sort” as
mentioned there. Suppose, the
illustration “I challenge any one to
contradict my assertions” was changed to
“I challenge any one of my opponents to
contradict my assertion”. “Any one of my
opponents” here would mean “all my
opponents” — not one only of the
opponents.
While the phrase “any one of them”
or any similar phrase consisting of “any
one”, followed by “of” which is followed in
its turn by words denoting a number of
persons or things, does not appear to
have fallen for judicial construction, in
our courts or in England — the phrase
“any of the present directors” had to be
interpreted in an old English case, Isle of
Wight Railway Co. v. Tahourdin [25
Chancery Division 320] . A number of
shareholders required the directors to call
a meeting of the company for two objects.
One of the objects was mentioned as “To
remove, if deemed necessary or expedient
any of the present directors, and to elect
directors to fill any vacancy on the
Board”. The directors issued a notice to
convene a meeting for the other object
90
and held the meeting. Then the
shareholders, under the Companies
Clauses Act, 1845, issued a notice of
their own convening a meeting for both
the objects in the original requisition. In
an action by the directors to restrain the
requisitionists, from holding the meeting,
the Court of Appeal held that a notice to
remove “any of the present directors”
would justify a resolution for removing all
who are directors at the present time.
“Any”, Lord Cotton, L.J. pointed out,
would involve “all”.
It is true that the language there
was “any of the present directors” and not
“any one of the present directors” and it
is urged that the word “one”, in the latter
phrase makes all the difference. We think
it will be wrong to put too much
emphasis on the word “one” here. It may
be pointed out in this connection that the
Permanent Edition of Words and Phrases ,
mentions an American case Front &
Hintingdon Building & Loan
Association v. Berzinski where the words
“any of them” were held to be the
equivalent of “any one of them”.
After giving the matter full and
anxious consideration, we have come
to the conclusion that the words “any
91
one of the directors” is ambiguous; in
some contexts, it means “only one of
the directors, does not matter which
one”, but in other contexts, it is
capable of meaning “every one of the
directors”. Which of these two
meanings was intended by the
legislature in any particular statutory
phrase has to be decided by the courts
on a consideration of the context in
which the words appear, and in
particular, the scheme and object of
the legislation. ”
[emphasis supplied]
113. The Constitution Bench found that the words “any one”
has been commonly used to mean “every one” i.e. not one, but
all. It found that the word “any”, in affirmative sentences,
asserts, concerning a being or thing of the sort named, without
limitation. It held that it is abundantly clear that the word “any
one” is not infrequently used to mean “every one”.
114. It could be seen that the Constitution Bench, after giving
the matter full and anxious consideration, came to the
conclusion that the words “any one of the directors” was an
92
ambiguous one. It held that in some contexts, it means “only
one of the directors, does not matter which one”, but in other
contexts, it is capable of meaning “every one of the directors”. It
held that which of these two meanings was intended by the
legislature in any particular statutory phrase has to be decided
by the courts on consideration of the context in which the
words appear, and in particular, the scheme and object of the
legislation.
115. After examining the scheme of the Mines Act, 1952, the
Constitution Bench of this Court further observed thus:
“But, argues Mr Pathak, one must not
forget the special rule of interpretation for
“penal statute” that if the language is
ambiguous, the interpretation in favour
of the accused should ordinarily be
adopted. If you interpret “any one” in the
sense suggested by him, the legislation
he suggests is void and so the accused
escapes. One of the two possible
constructions, thus being in favour of the
accused, should therefore be adopted. In
our opinion, there is no substance in this
contention. The rule of strict
93
interpretation of penal statutes in
favour of the accused is not of
universal application, and must be
considered along with other well-
established rules of interpretation. We
have already seen that the scheme
and object of the statute makes it
reasonable to think that the
legislature intended to subject all the
directors of a company owning coal
mines to prosecution and penalties,
and not one only of the directors. In
the face of these considerations there
is no scope here of the application of
the rule for strict interpretation of
penal statutes in favour of the
accused.
The High Court appears to have been
greatly impressed by the fact that in
other statutes where the legislature
wanted to make every one out of a group
or a class of persons liable it used clear
language expressing the intention; and
that the phrase “any one” has not been
used in any other statute in this country
to express “every one”. It will be
unreasonable, in our opinion, to
attach too much weight to this
circumstance; and as for the reasons
mentioned above, we think the phrase
“any one of the directors” is capable
of meaning “every one of the
94
directors”, the fact that in other
statutes, different words were used to
express a similar meaning is not of
any significance.
We have, on all these
considerations come to the conclusion
that the words “any one of the
directors” has been used in Section 76
to mean “every one of the directors”,
and that the contrary interpretation
given by the High Court is not
correct. ”
[emphasis supplied]
116. It could thus be seen that though it was sought to be
argued before the Court that since the rule of strict
interpretation of penal statutes in favour of the accused has to
be adopted and that the word “any” was suffixed by the word
“one”, it has to be given restricted meaning; the Court came to
the conclusion that the words “any one of the directors” used in
Section 76 of the Mines Act, 1952 would mean “every one of the
directors”. It is further to be noted that the word “any” in the
said case was suffixed by the word “one”, still the Court held
that the words “any one” would mean “all” and not “one”. It is
95
to be noted that in the present case, the legislature has not
employed the word “one” after the word “any”. It is settled law
that it has to be construed that every single word employed or
not employed by the legislature has a purpose behind it.
117. On the very date on which the judgment in the case of
The Chief Inspector of Mines and another v. Lala Karam
Chand Thapar etc. (supra) was pronounced, the same
Constitution Bench also pronounced the judgment in the case
of Banwarilal Agarawalla (supra), wherein the Constitution
Bench observed thus:
“The first contention is based on an
assumption that the word “any one” in
Section 76 means only “one of the
directors, and only one of the
shareholders”. This question as regards
the interpretation of the word “any one”
in Section 76 was raised in Criminal
Appeals Nos. 98 to 106 of 1959 (Chief
Inspector of Mines, etc.) and it has been
decided there that the word “any one”
should be interpreted there as “every
one”. Thus under Section 76 every one
of the shareholders of a private
company owning the mine, and every
96
one of the directors of a public
company owning the mine is liable to
prosecution. No question of violation
of Article 14 therefore arises. ”
[emphasis supplied]
118. Another Constitution Bench of this Court in the case of
Tej Kiran Jain and others (supra) was considering the
provisions of Article 105 of the Constitution of India and,
particularly, the immunity as available to the Member of
Parliament “in respect of anything said…….. in Parliament”.
The Constitution Bench observed thus:
“ 8. In our judgment it is not possible to
read the provisions of the article in the
way suggested. The article means what it
says in language which could not be
plainer. The article confers immunity
inter alia in respect of “anything said ...
in Parliament”. The word “anything” is
of the widest import and is equivalent
to “everything”. The only limitation
arises from the words “in Parliament”
which means during the sitting of
Parliament and in the course of the
business of Parliament. We are
concerned only with speeches in Lok
Sabha. Once it was proved that
Parliament was sitting and its business
97
was being transacted, anything said
during the course of that business was
immune from proceedings in any Court
this immunity is not only complete but is
as it should be. It is of the essence of
parliamentary system of Government that
people's representatives should be free to
express themselves without fear of legal
consequences. What they say is only
subject to the discipline of the rules of
Parliament, the good sense of the
members and the control of proceedings
by the Speaker. The Courts have no say
in the matter and should really have
none.”
[emphasis supplied]
119. This Court held that the word “anything” is of the widest
import and is equivalent to “everything”. The only limitation
arises from the words “in Parliament” which means during the
sitting of Parliament and in the course of the business of
Parliament. It held that, once it was proved that Parliament was
sitting and its business was being transacted, anything said
during the course of that business was immune from
proceedings in any Court.
98
120. This Court, in the case of Lucknow Development
Authority (supra), was considering clause (o) of Section (2) of
the Consumer Protection Act, 1986 which defines “service”,
wherein the word “any” again fell for consideration. This Court
observed thus:
“ 4. …… The words ‘any’ and ‘potential’
are significant. Both are of wide
amplitude. The word ‘any’ dictionarily
means ‘one or some or all’. In Black's Law
Dictionary it is explained thus, “word
‘any’ has a diversity of meaning and may
be employed to indicate ‘all’ or ‘every’ as
well as ‘some’ or ‘one’ and its meaning in
a given statute depends upon the context
and the subject-matter of the statute”.
The use of the word ‘any’ in the context it
has been used in clause ( o ) indicates that
it has been used in wider sense extending
from one to all……”
121. This Court held that the word “any” is of wide amplitude.
It means “one or some or all”. Referring to Black’s Law
Dictionary, the Court observed that the word “any” has a
diversity of meaning and may be employed to indicate “all” or
“every” as well as “some” or “one”. However, the meaning which
99
is to be given to it would depend upon the context and the
subject-matter of the statute.
122. In the case of K.P. Mohammed Salim (supra), this Court
was considering the power of the Director General or Chief
Commissioner or Commissioner to transfer any case from one
or more assessing officers subordinate to him to any other
assessing officer or assessing officers. This Court observed
thus:
“ 17. The word “any” must be read in the
context of the statute and for the said
purpose, it may in a situation of this
nature, means all. The principles of
purposive construction for the said
purpose may be resorted to. (See New
India Assurance Co. Ltd. v. Nusli Neville
Wadia [(2008) 3 SCC 279 : (2007) 13 SCR
598]) Thus, in the context of a statute,
the word “any” may be read as all in
the context of the Income Tax Act for
which the power of transfer has been
conferred upon the authorities
specified under Section 127 .”
[emphasis supplied]
123. The Court again reiterated that the word “any” must be
read in the context of the statute. The Court also applied the
100
principles of purposive construction to the term “any” to mean
“all”.
124. In the case of Raj Kumar Shivhare (supra), an argument
was sought to be advanced that since Section 35 of the Foreign
Exchange Management Act, 1999 uses the words “any decision
or order”, only appeals from final order could be filed. Rejecting
the said contention, this Court observed thus:
“ 19. The word “any” in this context would
mean “all”. We are of this opinion in view
of the fact that this section confers a right
of appeal on any person aggrieved. A right
of appeal, it is well settled, is a creature
of statute. It is never an inherent right,
like that of filing a suit. A right of filing a
suit, unless it is barred by statute, as it is
barred here under Section 34 of FEMA, is
an inherent right (see Section 9 of the
Civil Procedure Code) but a right of
appeal is always conferred by a statute.
While conferring such right a statute may
impose restrictions, like limitation or pre-
deposit of penalty or it may limit the area
of appeal to questions of law or sometime
to substantial questions of law. Whenever
such limitations are imposed, they are to
be strictly followed. But in a case where
101
there is no limitation on the nature of
order or decision to be appealed against,
as in this case, the right of appeal cannot
be further curtailed by this Court on the
basis of an interpretative exercise.
20. Under Section 35 of FEMA, the
legislature has conferred a right of appeal
to a person aggrieved from “any” “order”
or “decision” of the Appellate Tribunal. Of
course such appeal will have to be on a
question of law. In this context the word
“any” would mean “all”.
xxx xxx xxx
26. In the instant case also when a
right is conferred on a person
aggrieved to file appeal from “any”
order or decision of the Tribunal,
there is no reason, in the absence of a
contrary statutory intent, to give it a
restricted meaning. Therefore, in our
judgment in Section 35 of FEMA, any
“order” or “decision” of the Appellate
Tribunal would mean all decisions or
orders of the Appellate Tribunal and
all such decisions or orders are,
subject to limitation, appealable to
the High Court on a question of law. ”
[emphasis supplied]
102
125. While holding that the word “any” in the context would
mean “all”, this Court observed that a right of appeal is always
conferred by a statute. It has been held that, while conferring
such right, a statute may impose restrictions, like limitation or
pre-deposit of penalty or it may limit the area of appeal to
questions of law or sometime to substantial questions of law. It
has been held that whenever such limitations are imposed, they
are to be strictly followed. It has been held that in a case where
there is no limitation, the right of appeal cannot be curtailed by
this Court on the basis of an interpretative exercise.
126. Shri P. Chidambaram, learned Senior Counsel relied on
the judgment of this Court in the case of Union of India v.
A.B. Shah and others (supra). In the said case, the High
Court was considering an appeal preferred by the Union of
India wherein it had challenged the acquittal of the accused by
the learned trial court, which was confirmed in appeal by the
High Court. The learned trial court and the High Court had
103
held that the complaint filed was beyond limitation. This Court
reversed the judgments of the learned trial court and the High
Court. This Court while interpreting the expression “at any
time” observed thus:
“ 12. If we look into Conditions 3 and 6
with the object and purpose of the Act in
mind, it has to be held that these
conditions are not only relatable to what
was required at the commencement of
depillaring process, but the unstowing for
the required length must exist always.
The expression “at any time” finding
place in Condition 6 has to mean, in
the context in which it has been used,
“at any point of time”, the effect of
which is that the required length
must be maintained all the time. The
accomplishment of object of the Act, one
of which is safety in the mines, requires
taking of such a view, especially in the
backdrop of repeated mine disasters
which have been taking, off and on,
heavy toll of lives of the miners. It may
be pointed out that the word ‘any’ has
a diversity of meaning and in Black's
Law Dictionary it has been stated that
this word may be employed to indicate
‘all’ or ‘every’, and its meaning will
depend “upon the context and subject-
matter of the statute”. A reference to
what has been stated in Stroud's Judicial
104
Dictionary Vol. I, is revealing inasmuch as
the import of the word ‘any’ has been
explained from pp. 145 to 153 of the 4th
Edn., a perusal of which shows it has
different connotations depending
primarily on the subject-matter of the
statute and the context of its use. A
Bench of this Court in Lucknow
Development Authority v. M.K.
Gupta [(1994) 1 SCC 243] , gave a very
wide meaning to this word finding place
in Section 2( o ) of the Consumer
Protection Act, 1986 defining ‘service’.
( See para 4)”
[emphasis supplied]
127. Shri Chidambaram rightly argued that the word “any” will
have to be construed in its context, taking into consideration
the scheme and the purpose of the enactment. There can be no
quarrel with regard to the said proposition. Right from the
judgment of the Constitution Bench of this Court in the case of
The Chief Inspector of Mines and another v. Lala Karam
Chand Thapar etc. (supra), the position is clear. What is the
meaning which the legislature intended to give to a particular
statutory provision has to be decided by the Court on a
105
consideration of the context in which the word(s) appear(s) and
in particular, the scheme and object of the legislation.
Purposive interpretation
128. We find that for deciding the present issue, it will also be
necessary to refer an important principle of interpretation of
statutes i.e. of purposive interpretation.
129. “Legislation has an aim, it seeks to obviate some mischief,
to supply an inadequacy, to effect a change of policy, to
formulate a plan of government. That aim, that policy is not
drawn, like nitrogen, out of the air; it is evidenced in the
language of the statute, as read in the light of other
external manifestations of purpose [ Some Reflections on the
Reading of Statutes , 47 Columbia LR 527, at p. 538 (1947)].”
130. This is how Justice Frankfurter succinctly propounds the
principle of purposive interpretation. It is thus necessary to
cull out the legislative policy from various factors like the words
in the statute, the preamble of the Act, the statement of objects
106
and reasons, and in a given case, even the attendant
circumstances. After the legislative policy is found, then the
words used in the statute must be so interpreted such that it
advances the purpose of the statute and does not defeat it.
131. Francis Bennion in his treatise Statutory Interpretation , at
page 810 described purposive construction in an equally
eloquent manner as under:
| “A purposive construction of an | |
|---|
| enactment is one which gives effect to the | |
| legislative purpose by— | |
| (a) following the literal meaning of the |
| enactment where that meaning is in |
| accordance with the legislative purpose |
| (in this Code called a purposive-and- |
| literal construction), or |
| (b) applying a strained meaning where |
| the literal meaning is not in accordance |
| with the legislative purpose (in the Code |
| called a purposive-and-strained |
| construction).” |
132. A statute must be construed having regard to the
legislative intent. It has to be meaningful. A construction
which leads to manifest absurdity must not be preferred to a
107
construction which would fulfil the object and purport of the
legislative intent.
133. Aharon Barak, the former President of the Supreme Court
of Israel, whose exposition of “doctrine of proportionality” has
found approval by the Constitution Bench of this Court in the
case of Modern Dental College and Research Centre and
Others (supra), to which we will refer to in the forthcoming
paragraphs, in his commentary on “Purposive Interpretation in
Law”, has summarized ‘the goal of interpretation in law’ as
under:
“At some point, we need to find an
Archimedean foothold, external to the
text, from which to answer that
question. My answer is this: The goal of
interpretation in law is to achieve the
objective – in other words, the purpose –
56
of law. The role of a system of
interpretation in law is to choose, from
among the semantic options for a given
text, the meaning that best achieves the
purpose of the text. Each legal text –
will, contract, statute, and constitution –
was chosen to achieve a social objective.
56
D. Brink, “Legal Theory, Legal Interpretation, and Judicial Review,” 17 Phil. And
Pub. Aff. 105, 125 (1988).
108
Achieving this objective, achieving this
purpose, is the goal of interpretation.
The system of interpretation is the device
and the means. It is a tool through
which law achieves self-realization. In
interpreting a given text, which is, after
all, what interpretation in law does, a
system of interpretation must guarantee
that the purpose of the norm trapped in
the – in our terminology, the purpose of
the text – will be achieved in the best
way. Hence the requirement that the
system of interpretation be a rational
activity. A coin toss will not do. This is
also the rationale – which is at the core
of my own views – for the belief that
purposive interpretation is the most
proper system of interpretation. This
system is proper because it guarantees
the achievement of the purpose of law.
There is social, jurisprudential,
hermeneutical, and constitutional
support for my claim that the proper
criterion for interpretation is the search
for law’s purpose, and that purposive
interpretation best fulfills that criterion.
A comparative look at the law supports
it, as well. I will discuss each element of
that support below.”
134. The learned Judge emphasized that purposive
interpretation is the most proper system of interpretation. He
observed that this system is proper because it guarantees the
109
achievement of the purpose of law. The proper criterion for
interpretation is the search for law’s purpose, and that
purposive interpretation best fulfills that criterion.
135. The principle of purposive interpretation has also been
expounded through a catena of judgments of this Court. A
Constitution Bench of this Court in the case of M. Pentiah and
57
others v. Muddala Veeramallappa and others was
considering a question, as to whether the term prescribed in
Section 34 would apply to a member of a “deemed” committee
under the provisions of the Hyderabad District Municipalities
Act, 1956. An argument was put forth that, upon a correct
interpretation of the provisions of Section 16, the same would
be permissible. Rejecting the said argument, K. Subba Rao, J,
observed thus:
“Before we consider this argument in
some detail, it will be convenient at this
stage to notice some of the well
established rules of Construction which
would help us to steer clear of the
57
(1961) 2 SCR 295
110
| complications created by the | | |
|---|
| Act. Maxwell on the Interpretation of | | |
| Statutes, 10th Edn., says at p. 7 thus: | | |
| | |
| “… if the choice is between two | |
| interpretations, the narrower of | |
| which would fail to achieve the | |
| manifest purpose of the | |
| legislation, we should avoid a | |
| construction which would reduce | |
| the legislation to futility and | |
| should rather accept the bolder | |
| construction based on the view | |
| that Parliament would legislate | |
| only for the purpose of bringing | |
| about an effective result”. | |
| It is said in Craies on Statute Law, 5th | | |
| Edn., at p. 82— | | |
| “Manifest absurdity or futility, | |
| palpable injustice, or absurd | |
| inconvenience or anomaly to be | |
| avoided.” | |
| Lord Davey in Canada Sugar Refining | | |
| Co. v. R. [(1898) AC 735] provides | | |
| another useful guide of correct | | |
| perspective to such a problem in the | | |
| following words: | | |
| “Every clause of a statute should | |
| be construed with reference to the | |
| context and the other clauses of | |
| the Act, so as, so far as possible, | |
| to make a consistent enactment of | |
| the whole statute or series of | |
111
statutes relating to the subject-
matter.””
136. A.K. Sarkar, J. in his concurring opinion observed thus:
“There is no doubt that the Act raises
some difficulty. It was certainly not
intended that the members elected to the
Committee under the repealed Act
should be given a permanent tenure of
office nor that there would be no
elections under the new Act. Yet such a
result would appear to follow if the
language used in the new Act is strictly
and literally interpreted. It is however
well established that “Where the
language of a statute, in its ordinary
meaning and grammatical
construction, leads to a manifest
contradiction of the apparent
purpose of the enactment, or to some
inconvenience or absurdity, hardship
or in justice, presumably not
intended, a construction may be put
upon it which modifies the meaning
of the words, and even the structure
of the sentence.…Where the main
object and intention of a statute are
clear, it must not be reduced to a
nullity by the draftsman's
unskilfulness or ignorance of the
law, except in a case of necessity, or
the absolute intractability of the
language used. Nevertheless, the courts
112
| are very reluctant to substitute words in | | |
|---|
| a Statute, or to add words to it, and it | | |
| has been said that they will only do so | | |
| where there is a repugnancy to good | | |
| Sense.”: see Maxwell on Statutes (10th | | |
| Edn.) p. 229. In Seaford Court Estates | | |
| Ltd. v. Asher [(1949) 2 AER 155, 164] , | | |
| Denning, L.J. said: | | |
| “when a defect appears a judge | |
| cannot simply fold his hands and | |
| blame the draftsman. He must set | |
| to work on the constructive task | |
| of finding the intention of | |
| Parliament … and then he must | |
| supplement the written word so | |
| as to give “force and life” to the | |
| intention of the legislature …. A | |
| judge should ask himself the | |
| question how, if the makers of the | |
| Act had themselves come across | |
| this ruck in the texture of it, they | |
| would have straightened it out? | |
| He must then do as they would | |
| have done. A judge must not alter | |
| the material of which the Act is | |
| woven, but he can and should | |
| iron out the creases.”” | |
case of Chief Justice of Andhra Pradesh and others v.
113
58
L.V.A. Dixitulu and others reiterated the position in the
following words:
“ 67. Where two alternative constructions
are possible, the court must choose the
one which will be in accord with the
other parts of the statute and ensure its
smooth, harmonious working, and
eschew the other which leads to
absurdity, confusion, or friction,
contradiction and conflict between its
various provisions, or undermines, or
tends to defeat or destroy the basic
scheme and purpose of the enactment.
…….”
138. In the case of M/s Girdhari Lal and Sons v. Balbir Nath
59
Mathur and others , O. Chinnappa Reddy, J. explained the
position as under:
“ 9. So we see that the primary and
foremost task of a court in interpreting a
statute is to ascertain the intention of
the legislature, actual or imputed.
Having ascertained the intention, the
court must then strive to so interpret the
statute as to promote or advance the
object and purpose of the enactment.
For this purpose, where necessary the
58
(1979) 2 SCC 34
59
(1986) 2 SCC 237
114
| court may even depart from the rule that |
|---|
| plain words should be interpreted |
| according to their plain meaning. There |
| need be no meek and mute submission |
| to the plainness of the language. To |
| avoid patent injustice, anomaly or |
| absurdity or to avoid invalidation of a |
| law, the court would be well justified in |
| departing from the so-called golden rule |
| of construction so as to give effect to the |
| object and purpose of the enactment by |
| supplementing the written word if |
| necessary.” |
| |
jurisdictions, His Lordship observed thus:
“ 16. Our own court has generally
taken the view that ascertainment of
legislative intent is a basic rule of
statutory construction and that a
rule of construction should be
preferred which advances the
purpose and object of a legislation
and that though a construction,
according to plain language, should
ordinarily be adopted, such a
construction should not be adopted
where it leads to anomalies,
injustices or absurdities, vide K.P.
Varghese v. ITO [(1981) 4 SCC 173 :
1981 SCC (Tax) 293] , State Bank of
Travancore v. Mohd. M. Khan [(1981) 4
SCC 82] , Som Prakash Rekhi v. Union of
115
India [(1981) 1 SCC 449 : 1981 SCC
(L&S) 200] , Ravula Subba
Rao v. CIT [AIR 1956 SC 604 : 1956 SCR
577] , v.
Govindlal Agricultural Produce
Market Committee [(1975) 2 SCC 482 :
AIR 1976 SC 263 : (1976) 1 SCR 451]
and Babaji Kondaji v. Nasik Merchants
Coop. Bank Ltd. [(1984) 2 SCC 50]”
Bench of this Court in the case of Tinsukhia Electric Supply
60
Co. Ltd. v. State of Assam and others observed thus:
“ 118. The courts strongly lean against
any construction which tends to reduce
a statute to futility. The provision of a
statute must be so construed as to make
it effective and operative, on the
principle “ ut res magis valeat quam
pereat ”. It is, no doubt, true that if a
statute is absolutely vague and its
language wholly intractable and
absolutely meaningless, the statute
could be declared void for vagueness.
This is not in judicial review by testing
the law for arbitrariness or
unreasonableness under Article 14; but
what a court of construction, dealing
with the language of a statute, does in
60
(1989) 3 SCC 709
116
order to ascertain from, and accord to,
the statute the meaning and purpose
which the legislature intended for it.
In Manchester Ship Canal
Co. v. Manchester Racecourse Co. [(1904)
2 Ch 352 : 16 TLR 429 : 83 LT 274]
Farwell J. said: (pp. 360-61)
“Unless the words were so
absolutely senseless that I could do
nothing at all with them, I should be
bound to find some meaning and not
to declare them void for uncertainty.”
119. In Fawcett Properties
Ltd. v. Buckingham County
Council [(1960) 3 All ER 503] Lord
Denning approving the dictum of
Farwell, J., said:(All ER p. 516)
“But when a Statute has some
meaning, even though it is obscure, or
several meanings, even though there
is little to choose between them, the
courts have to say what meaning the
statute to bear rather than reject it as
a nullity.”
120. It is, therefore, the court's duty to
make what it can of the statute, knowing
that the statutes are meant to be
operative and not inept and the nothing
short of impossibility should allow a
117
court to declare a statute unworkable.
In Whitney v. IRC [1926 AC 37] Lord
Dunedin said: (AC p. 52)
“A statute is designed to be
workable, and the interpretation
thereof by a court should be to secure
that object, unless crucial omission or
clear direction makes that end
unattainable.””
141. In the case of State of Gujarat and another v. Justice
61
R.A. Mehta (Retired) and others , this Court held as under:
“ 98. The doctrine of purposive
construction may be taken recourse to
for the purpose of giving full effect to
statutory provisions, and the courts
must state what meaning the statute
should bear, rather than rendering the
statute a nullity, as statutes are meant
to be operative and not inept. The courts
must refrain from declaring a statute to
be unworkable. The rules of
interpretation require that
construction which carries forward
the objectives of the statute, protects
interest of the parties and keeps the
remedy alive, should be preferred
looking into the text and context of
the statute. Construction given by the
court must promote the object of the
61
(2013) 13 SCC 1
118
statute and serve the purpose for
which it has been enacted and not
efface its very purpose. “The courts
strongly lean against any construction
which tends to reduce a statute to
futility. The provision of the statute must
be so construed as to make it effective
and operative.” The court must take a
pragmatic view and must keep in
mind the purpose for which the
statute was enacted as the purpose
of law itself provides good guidance
to courts as they interpret the true
meaning of the Act and thus
legislative futility must be ruled out.
A statute must be construed in such a
manner so as to ensure that the Act
itself does not become a dead letter and
the obvious intention of the legislature
does not stand defeated unless it leads
to a case of absolute intractability in
use. The court must adopt a
construction which suppresses the
mischief and advances the remedy and
“to suppress subtle inventions and
evasions for continuance of the mischief,
and , and to add
pro privato commodo
force and life to the cure and remedy,
according to the true intent of the
makers of the Act, pro bono publico ”. The
court must give effect to the purpose and
object of the Act for the reason that
legislature is presumed to have enacted
a reasonable statute. (Vide M.
Pentiah v. Muddala Veeramallappa [AIR
119
1961 SC 1107] , S.P. Jain v. Krishna
Mohan Gupta [(1987) 1 SCC 191 : AIR
1987 SC 222] , RBI v. Peerless General
[(1987)
Finance and Investment Co. Ltd.
1 SCC 424 : AIR 1987 SC 1023]
, Tinsukhia Electric Supply Co.
Ltd. v. State of Assam [(1989) 3 SCC 709
: AIR 1990 SC 123] , SCC p. 754, para
118, UCO Bank v. Rajinder Lal
Capoor [(2008) 5 SCC 257 : (2008) 2 SCC
(L&S) 263] and Grid Corpn. of Orissa
Ltd. v. Eastern Metals and Ferro
Alloys [(2011) 11 SCC 334].)”
[emphasis supplied]
142. The principle of purposive construction has been
enunciated in various subsequent judgments of this Court.
However, we would not like to burden this judgment with a
plethora of citations. Suffice it to say, the law on the issue is
very well crystalized.
143. It is thus clear that it is a settled principle that the
modern approach of interpretation is a pragmatic one, and not
pedantic. An interpretation which advances the purpose of the
Act and which ensures its smooth and harmonious working
must be chosen and the other which leads to absurdity, or
120
confusion, or friction, or contradiction and conflict between its
various provisions, or undermines, or tends to defeat or destroy
the basic scheme and purpose of the enactment must be
eschewed. The primary and foremost task of the Court in
interpreting a statute is to gather the intention of the
legislature, actual or imputed. Having ascertained the
intention, it is the duty of the Court to strive to so interpret the
statute as to promote or advance the object and purpose of the
enactment. For this purpose, where necessary, the Court may
even depart from the rule that plain words should be
interpreted according to their plain meaning. There need be no
meek and mute submission to the plainness of the language.
To avoid patent injustice, anomaly or absurdity or to avoid
invalidation of a law, the court would be justified in departing
from the so-called golden rule of construction so as to give
effect to the object and purpose of the enactment.
Ascertainment of legislative intent is the basic rule of statutory
construction.
121
Construction of sub-section (2) of Section 26 of the RBI Act.
144. Applying the aforesaid pronouncements on the
construction of the term “any” and the principle of purposive
construction, we will now consider the scope of the term “any”
used in sub-section (2) of Section 26 of the RBI Act.
145. Sub-section (2) of Section 26 of the RBI Act empowers the
Central Government to issue a notification in the Gazette of
India thereby declaring that, with effect from such date as may
be specified in the notification, any series of bank notes of any
denomination shall cease to be legal tender. It further provides
that such an action has to be taken by the Central Government
on the recommendation of the Central Board.
146. As already discussed herein above, the RBI Act is a special
Act, vesting all the powers and functions with regard to
monetary policy and all matters pertaining to management and
regulation of currency with the RBI. The Central Government
122
is required to take its decision on the basis of the
recommendation of the Central Board.
147. It could thus be seen that power is vested with the Central
Government and that power has to be exercised on the
recommendation of the RBI. Both sides agree that RBI plays a
unique role in the matter of monetary policy and issuance of
currency. The Central Government is empowered under sub-
section (2) of Section 26 of the RBI Act to notify any series of
bank notes of any denomination to cease to be a legal tender.
The effect of such a notification would be that the liabilities as
provided under Section 34 of the RBI Act and the guarantee as
provided under sub-section (1) of Section 26 of the RBI Act
shall cease to have effect on such notification being issued
thereby demonetizing the bank notes.
148. As already discussed herein above, the RBI Act has been
enacted to regulate the issue of bank notes and generally to
operate the currency and credit system of the country. Section
123
3 of the RBI Act provides that the RBI has been constituted for
the purposes of taking over the management of the currency
from the Central Government and carrying on the business of
banking in accordance with the provisions of the RBI Act. Sub-
section (1) of Section 22 of the RBI Act provides that the RBI
shall have the sole right to issue bank notes in India. However,
for a period which is to be fixed by the Central Government on
the recommendation of the Central Board, it can issue currency
notes of the Government of India supplied to it by the Central
Government. Further, sub-section (2) of Section 22 of the RBI
Act specifically prohibits the Central Government from issuing
any currency notes on and from the date on which Chapter III
of the RBI Act comes into effect.
149. It can thus clearly be seen that a primary and very
important role is assigned to the RBI in the matter of issuance
of bank notes. As held by this Court in the case Peerless
General Finance and Investment Co. Limited and another
(supra), the RBI has a large contingent of expert advice
124
available to it. The Central Government would exercise its
power on the recommendation of the Central Board. When the
legislature itself has provided that the Central Government
would take a decision after considering the recommendation of
the Central Board of the RBI, which has been assigned a
primary role in matters with regard to monetary policy and
management and regulation of currency, we are of the view that
the legislature could not have intended to give a restricted
power under sub-section (2) of Section 26 of the RBI Act. In
any case, if the argument that the provisions of sub-section (2)
of Section 26 of the RBI Act have to be interpreted in a
restricted manner, is to be accepted, it may, at times, lead to an
anomalous situation.
150. For example, if there are 20 series of a particular
denomination, and if the argument of the petitioners is to be
accepted, the Central Government would be empowered to
demonetize 19 series of a particular denomination, leaving one
125
series of the said denomination to continue to be a legal tender,
which would lead to a chaotic situation.
151. As discussed hereinabove, the policy underlining the
provisions of Section 26 of the RBI Act is to enable the Central
Government on the recommendation of the Central Board, to
effect demonetization. The same can be done in respect of any
series of bank notes of any denomination. The legislative policy
is with regard to management and regulation of currency.
Demonetization of notes would certainly be a part of
management and regulation of currency. The legislature has
empowered the Central Government to exercise such a power.
The Central Government may take recourse to such a power
when it finds necessary to do so taking into consideration
myriad factors. No doubt that such factors must have
reasonable nexus with the object sought to be achieved. If the
Central Government finds that fake notes of a particular
denomination are widely in circulation or that they are being
used to promote terrorism, can it be said, for instance, that out
126
of 20 series of bank notes of a particular denomination, it can
demonetize only 19 series of bank notes but not all 20 series?
In our view, this will result in nothing else but absurdity and
the very purpose for which the power is vested shall stand
frustrated. An interpretation which, in effect, nullifies the
purpose for which a power is to be exercised, in our view, would
be opposed to the principle of purposive interpretation. Such
an interpretation, in our view, rather than advancing the object
of the enactment, would defeat the same.
152. Another line of argument that is sought to be advanced
with regard to the submission that the power under sub-
section (2) of Section 26 of the RBI Act has to be construed to
restricting it to “one” or “some” series of bank notes, is that the
Parliament also meant the same inasmuch as on earlier two
occasions i.e. in 1946 and 1978 the demonetization exercise in
respect of “all” series was done by resorting to plenary
legislations. Shri Chidambaram has taken us through various
volumes of the history of the RBI. Perusal of Volume I thereof
127
would reveal that, in 1946, it is not known when the
Government Authorities started thinking on the demonetization
measure, but the final consultation could take place with the
Governor and Deputy Governor. It appears that the RBI
authorities were not enthusiastic about the scheme. It
appears that in spite of the opposition by the then Governor of
the RBI, Shri C.D. Deshmukh, the Government went ahead
th
with the scheme and issued an ordinance on 12 January
1946.
153. Further, perusal of Volume III would reveal that the then
Governor I.G. Patel was not in favour of the demonetization
scheme of 1978. However, in spite of the opposition of the
Governor of the RBI, the Government went ahead with the
demonetization scheme and issued an ordinance in the early
th
hours of 16 January 1978 and the news was announced on
All India Radio’s news bulletin at 9 am on the same day.
128
154. It could thus be seen that on earlier two occasions, since
the RBI was not in favour of the demonetization, the
Government resorted to promulgating ordinances for the said
purpose.
155. It is to be noted that after the ordinance of 1946 was
promulgated, the RBI Act was amended vide Act No.62 of 1956
and Section 26A was added, thereby specifically providing that
no bank note of the denominational value of Rs.500/-, Rs.
th
1,000/- and Rs.10,000/- issued before the 13 day of January
1946 shall be legal tender in payment or on account for the
amount expressed therein.
th
156. After the ordinance was issued on 16 January 1978, the
same transformed into an Act of Parliament upon the President
th
of India giving his assent to the Act on 30 March 1978.
157. Merely because on earlier two occasions the Government
decided to take recourse to plenary power of legislation, this, by
itself, cannot be a ground to give a restricted meaning to the
129
word “any” in sub-section (2) of Section 26 of the RBI Act. As
already discussed herein above, in our considered view, the
legislative intent could not have been to give a restricted
meaning to the word “any” in sub-section (2) of Section 26 of
the RBI Act.
158. We are, therefore, unable to accept the contention that the
word “any” has to be given a restricted meaning taking into
consideration the overall scheme, purpose and the object of the
RBI Act and also the context in which the power is to be
exercised. We find that the word “any” would mean “all” under
sub-section (2) of Section 26 of the RBI Act.
ISSUE NO. (ii): IN THE EVENT IT IS HELD THAT THE
POWER UNDER SUB-SECTION (2) OF SECTION 26 OF THE
RBI ACT IS CONSTRUED TO MEAN THAT IT CAN BE
EXERCISED IN RESPECT OF “ALL” SERIES OF BANK
NOTES, WHETHER THE POWER VESTED WITH THE
CENTRAL GOVERNMENT UNDER THE SAID SUB-SECTION
130
WOULD AMOUNT TO CONFERRING EXCESSIVE
DELEGATION AND AS SUCH, LIABLE TO BE STRUCK
DOWN?
159. The second limb of argument on behalf of the petitioners
is that, if the word “any” used in sub-section (2) of Section 26 of
the RBI Act is not given a restricted meaning, then sub-section
(2) of Section 26 of the RBI Act will have to be held invalid on
the ground that it confers excessive delegation upon the
Central Government.
160. It is submitted that sub-section (2) of Section 26 of the
RBI Act vests uncanalised, unguided and arbitrary powers in
the Central Government and as such, on this ground alone, the
said provision is liable to be struck down.
161. Shri P. Chidambaram, learned Senior Counsel has relied
on the Constitution Bench judgment of this Court in the case of
Hamdard Dawakhana (Wakf) Lal Kuan, Delhi and another
(supra) to buttress his submissions.
131
Precedents considering delegated legislation
162. In the case of Hamdard Dawakhana (Wakf) Lal Kuan,
Delhi and another (supra), the Constitution Bench of this
Court while considering the validity of clause (d) of Section 3 of
the Drug and Magic Remedies (Objectionable Advertisement)
Act, (21 of 1954) observed thus:
“ 33. The interdiction under the Act is
applicable to conditions and diseases set
out in the various clauses of Section 3
and to those that may under the last part
of clause ( d ) be specified in the Rules
made under Section 16. The first sub-
section of Section 16 authorises the
making of rules to carry out the purposes
of the Act and clause ( a ) of sub-section (2)
of that section specifically authorises the
specification of diseases or conditions to
which the provisions of Section 3 shall
apply. It is the first sub-section of Section
16 which confers the general rule-making
power i.e. it delegates to the
administrative authority the power to
frame rules and regulations to subserve
the object and purpose of the Act. Clause
( a ) of the second sub-section is merely
illustrative of the power given under the
first sub-section; King-Emperor v. Sibnath
132
Banerji [(1945) LR 72 IA 241] . Therefore,
sub-section 2( a ) also has the same object
as sub-section (1) i.e. to carry out the
purposes of the Act. Consequently, when
the rule-making authority specifies
conditions and diseases in the Schedule
it exercises the same delegated authority
as it does when it exercises powers under
sub-section (1) and makes other rules
and therefore it is delegated legislation.
The question for decision then is, is
the delegation constitutional in that
the administrative authority has been
supplied with proper guidance. In our
view the words impugned are vague.
Parliament has established no
criteria, no standards and has not
prescribed any principle on which a
particular disease or condition is to
be specified in the Schedule. It is not
stated what facts or circumstances are to
be taken into consideration to include a
particular condition or disease. The
power of specifying diseases and
conditions as given in Section 3( d ) must
therefore be held to be going beyond
permissible boundaries of valid
delegation. As a consequence the
Schedule in the rules must be struck
down. But that would not affect such
conditions and diseases which properly
fall within the four clauses of Section 3
133
excluding the portion of clause ( d ) which
has been declared to be unconstitutional.
In the view we have taken it is
unnecessary to consider the applicability
of Baxter v. Ah Way [(1957) SCR 604].”
163. In the said case, this Court found that sub-section (1) of
Section 16 conferred a power on the Central Government to
make rules for carrying out the purposes of the Act. The Court
further found that, it is the first sub-section of Section 16
which confers the general rule-making power i.e. it delegates to
the administrative authority the power to frame rules and
regulations to subserve the object and purpose of the Act. The
Court found that the question, therefore, was, as to whether
the delegation to the administrative authority without
supplying proper guidance was constitutional or not. The
Court held that the words impugned were vague and
Parliament had established no criteria, no standards and had
not prescribed any principle on which a particular disease or
condition was to be specified in the Schedule. The Court,
134
therefore, held clause (d) of Section 3 to be amounting to
excessive delegation and as such unconstitutional.
164. In the case of Harakchand Ratanchand Banthia and
others (supra), the Constitution Bench of this Court was
considering the power given to the Administrator under the
Gold (Control) Act, 1968. Section 5 of the Gold (Control) Act,
1968, which confers power on the Administrator to issue
directions and orders, fell for consideration, which read thus:
“5. Power of Administrator issue
directions and orders.-- (1) The
Administrator may, if he thinks fit, make
orders, not inconsistent with the
provisions of this Act, for carrying out the
provisions of this Act.
(2) The Administrator may, so far as it
appears to him to be necessary or
expedient for carrying out the provisions
of this Act, by order—
( ) regulate, after consultation with
a
the Reserve Bank of India , the price at
which any gold may be bought or sold,
and
( b ) regulate by licences, permits or
otherwise, the manufacture, distribution,
transport, acquisition, possession,
135
transfer, disposal, use or consumption of
gold.”
[emphasis supplied]
165. It can be seen that under clause (b) sub-section (2) of
Section 5 of the Gold (Control) Act, 1968, the Administrator was
conferred with the power to regulate by licences, permits or
otherwise, the manufacture, distribution, transport,
acquisition, possession, transfer, disposal, use or consumption
of gold. In this premise, this Court observed thus:
“ 20. It is manifest upon a review of all
these provisions that the power
conferred upon the Administrator
under Section 5(2)(b) is legislative in
character and extremely wide. A
parallel power of subordinate
legislation is conferred to the Central
Government under Section 114(1) and
(2) of the Act. But Section 114(3)
however makes it incumbent upon the
Central Government to place the Rules
before each House of Parliament while
it is in session for a total period of
thirty days which may be comprised
in one session or in two successive
sessions. It is clear that the substantive
provisions of the Act namely Sections 8,
11, 21, 31(3), 34(3) confer powers on the
136
Administrator similar to those
contemplated by Section 5(2)( b ) of the
Act. In these circumstances we are of
opinion that the power of regulation
granted to the Administrator under
Section 5(2)(b) of the Act suffers from
excessive delegation of legislative
power and must be held to be
constitutionally invalid. ”
[emphasis supplied]
166. This Court in the case of Harakchand Ratanchand
Banthia and others (supra), therefore, was considering the
delegation of power to the Administrator under clause (b) of
sub-section (2) of Section 5 of the Gold (Control) Act, 1968. The
Court found that a parallel power of subordinate legislation was
conferred to the Central Government under Section 114(1) and
(2) of the said Act. However, under sub-section (3) of Section
114 of the said Act it is incumbent upon the Central
Government to place the Rules before each House of
Parliament. This Court further held that the substantive
provisions of the Act namely Sections 8, 11, 21, 31(3) and 34(3)
of the said Act also confer powers on the Administrator which
137
was similar to the one contemplated by Section 5(2)(b) of the
said Act. In these circumstances, the Court held that the
power of regulation granted to the Administrator under Section
5(2)(b) of the said Act suffers from excessive delegation and as
such unconstitutional.
167. It could thus be seen that clause (b) of sub-section (2) of
Section 5 of the Gold (Control) Act, 1968 conferred a power on
the Administrator which was legislative in nature, to regulate
the transactions with regard to use and consumption of gold.
168. It is to be noted that clause (a) of sub-section (2) of Section
5 of the Gold (Control) Act, 1968 also empowered the
Administrator to regulate, after consultation with the RBI ,
the price at which any gold may be bought or sold. It was also
argued before the Court that the said provision is also invalid
amounting to excessive delegation inasmuch as the power
conferred was unguided. This Court specifically rejected the
138
said contention. It will be apposite to refer to the following
observations of this Court:
“..…As the power to fix the price may
also be exercised not only in respect of
primary gold but also in respect of
articles and ornaments the business of
the petitioners and similarly other
persons will be adversely affected. But
the section provides the safeguard
that the regulation of the price
should be made by the Administrator
after consultation with the Reserve
Bank of India. It was argued that the
phrase “so far as it appears to him to be
necessary or expedient for carrying out
the provisions of this Act” was a
subjective formula and action of the
Administrator in making the orders
under Section 5 (2)( a ) may be arbitrary
and unreasonable. But in our opinion
the formula is not subjective and does
not constitute the Administrator the sole
judge as to what is in fact necessary or
expedient for the purposes of the Act. On
the contrary we hold that in the context
of the scheme and object of the
legislation as a whole the expression
cannot be construed in a subjective
sense and the opinion of the
Administrator as to the necessity or
expediency of making the order must be
reached objectively after having regard to
the relevant considerations and must be
139
| reasonably tenable in a court of law. It | |
|---|
| must be assumed that the Administrator | |
| will generally address himself to the | |
| circumstances of the situation before | |
| him and not try to promote purposes | |
| alien to the object of the Act….” | |
| [emphasis supplied] | |
| |
under Section 5(2)(b) of the Gold (Control) Act, 1968 suffered
from excessive delegation and, therefore, constitutionally
invalid; it, however, categorically rejected the contention insofar
as Section 5(2)(a) of the Gold (Control) Act, 1968 is concerned,
inasmuch as it provided a safeguard that the regulation of the
price should be made by the Administrator after consultation
with the RBI.
170. This Court rejected the argument that the phrase “so far
as it appears to him to be necessary or expedient for carrying
out the provisions of this Act” was a subjective formula and as
such, the action of the Administrator under Section 5(2)( a ) was
arbitrary and unreasonable. Rejecting the said contention, the
140
Court held that in the context of the scheme and object of the
legislation as a whole, the expression cannot be construed in a
subjective sense and the opinion of the Administrator as to the
necessity or expediency of making the order must be reached
objectively after having regard to the relevant considerations
and must be reasonably tenable in a court of law.
171. It could thus be seen that though the Court found the
power under Section 5(2)(b) of the Gold (Control) Act, 1968 to
be invalid on the ground of excessive delegation, yet it found
the power under Section 5(2)(a) of the Gold (Control) Act, 1968
to be valid since it provides an inbuilt safeguard that the
Administrator has to act after consultation with the RBI.
172. A Seven-Judge Bench of this Court in the case of Birla
Cotton, Spinning and Weaving Mills Delhi (supra) was
considering the validity of Section 150 of the Delhi Municipal
Corporation Act, 1957, which reads thus:
141
“ 150. Imposition of other taxes.
(1) The Corporation may, at a meeting,
pass a resolution for the levy of any of
the taxes specified in sub-section (2) of
Section 113, defining the maximum rate
of the tax to be levied, the class or
classes of persons or the description or
descriptions of articles and properties to
be taxed, the system of assessment to be
adopted and the exemptions, if any, to
be granted.
(2) Any resolution passed under sub-
section (1) shall be submitted to the
Central Government for its sanction, and
if sanctioned by that Government, shall
come into force on and from such date
as may be specified in the order of
sanction.
(3) After a resolution has come into force
under sub-section (2), the Corporation
may, subject to the maximum rate, pass
a second resolution determining the
actual rates at which the tax shall be
leviable; and the tax shall come into
force on the first day of the quarter of the
year next following the date on which
such second resolution is passed.
(4) After a tax has been levied in
accordance with the foregoing provisions
of this section, the provisions of sub-
142
| section (2) of Section 109, shall apply in | |
|---|
| relation to such tax as they apply in | |
| relation to any tax imposed under sub- | |
| section (1) of Section 113.” | |
| | |
completely unguided power to the Corporation in the matter of
optional taxes and suffers from the vice of excessive delegation
and, therefore, is unconstitutional.
174. This Court after considering various earlier cases
including Hamdard Dawakhana (Wakf) Lal Kuan, Delhi
and another (supra) observed thus:
“A review of these authorities
therefore leads to the conclusion that so
far as this Court is concerned the
principle is well established that
essential legislative function consists of
the determination of the legislative policy
and its formulation as a binding rule of
conduct and cannot be delegated by the
legislature. Nor is there any unlimited
right of delegation inherent in the
legislative power itself. This is not
warranted by the provisions of the
Constitution. The legislature must retain
in its own hands the essential legislative
143
functions and what can be delegated is
the task of subordinate legislation
necessary for implementing the purposes
and objects of the Act. Where the
legislative policy is enunciated with
sufficient clearness or a standard is laid
down, the courts should not interfere.
What guidance should be given and
to what extent and whether guidance
has been given in a particular case at
all depends on a consideration of the
provisions of the particular Act with
which the Court has to deal including
its preamble. Further it appears to us
that the nature of the body to which
delegation is made is also a factor to
be taken into consideration in
determining whether there is
sufficient guidance in the matter of
delegation.
What form the guidance should
take is again a matter which cannot
be stated in general terms. It will
depend upon the circumstances of
each statute under consideration; in
some cases guidance in broad
general terms may be enough; in
other cases more detailed guidance
may be necessary. ”
[emphasis supplied]
144
175. K.N. Wanchoo, CJ, speaking for himself and J.M. Shelat,
J. held that where the legislative policy is enunciated with
sufficient clarity or a standard is laid down, the courts should
not interfere. What guidance should be given and to what
extent and whether guidance has been given in a particular
case at all depends on a consideration of the provisions of the
particular Act with which the Court has to deal, including its
preamble. They further held that the nature of the body to
which delegation is made is also a factor to be taken into
consideration in determining whether there is sufficient
guidance in the matter of delegation. The Court further held
that what form the guidance should take is again a matter
which cannot be stated in general terms. It will depend upon
the circumstances of each statute under consideration. It
further held that in some cases guidance in broad general
terms may be enough, in other cases more detailed guidance
may be necessary.
176. The Court further observed thus:
145
| “The first circumstance which must | |
|---|
| be taken into account in this | |
| connection is that the delegation has | |
| been made to an elected body | |
| responsible to the people including | |
| those who pay taxes. The councillors | |
| have to go for election every four | |
| years. This means that if they have | |
| behaved unreasonably and the | |
| inhabitants of the area so consider it | |
| they can be thrown out at the ensuing | |
| elections. This is in our opinion a | |
| great check on the elected councillors | |
| acting unreasonably and fixing | |
| unreasonable rates of taxation. This | |
| is a democratic method of bringing to | |
| book the elected representatives who | |
| act unreasonably in such matters….” | |
| [emphasis supplied] | |
| |
elected body responsible to the people including those who pay
taxes. It has been observed that if the councillors behave
unreasonably and the inhabitants of the area so consider it,
they can be thrown out at the ensuing elections. As such, there
is a great check on the elected councillors acting unreasonably
and fixing unreasonable rates of taxation. This is a democratic
146
method of bringing to book the elected representatives who act
unreasonably in such matters.
178. The Court further found that another guide or control on
the limit of taxation is to be found in the purposes of the Act.
After careful consideration of the various provisions of the Delhi
Municipal Corporation Act, 1957, the Court held that the power
conferred by Section 150 thereof on the Corporation is not
unguided and cannot be said to be amounting to excessive
delegation.
179. It will also be apposite to refer to the concurring judgment
of S.M. Sikri, J., wherein he observed thus:
“But assuming I am bound by
authorities of this Court to rest the
validity of Section 113(2)( d ) and Section
150 of the Act by ascertaining whether a
guide or policy exists in the Act, I find
adequate guide or policy in the
expression “purposes of the Act” in
Section 113. The Act has pointed out
the objectives or the results to be
achieved and taxation can be levied
only for the purpose of achieving the
objectives or the results. This, in my
147
| view, is sufficient guidance especially to | |
|---|
| a self-governing body like the Delhi | |
| Municipal Corporation. It is not | |
| necessary to rely on the safeguards | |
| mentioned by the learned Chief Justice | |
| to sustain the delegation.” | |
| [emphasis supplied] | |
| |
found adequate guide or policy in the expression “purposes of
the Act” in Section 113. He observed that the Act has pointed
out the objectives or the results to be achieved and taxation can
be levied only for the purpose of achieving the objectives or the
results. In the view of His Lordship, this was sufficient
guidance especially to a self-governing body like the Delhi
Municipal Corporation.
181. It will also be apposite to refer to the following
observations of M. Hidayatullah, J., in his concurring
judgment:
“…..The question always is whether
the legislative will has been exercised or
not. Once it is established that the
legislature itself has willed that a
148
| particular thing be done and has | |
|---|
| merely left the execution of it to a | |
| chosen instrumentality (provided that | |
| it has not parted with its control) | |
| there can be no question of excessive | |
| delegation. If the delegate acts | |
| contrary to the wishes of the | |
| legislature the legislature can undo | |
| what the delegate has done. Even the | |
| courts, as we shall show presently, may | |
| be asked to intervene when the delegate | |
| exceeds its powers and functions…..” | |
| |
| “To insist that the legislature should | |
| provide for every matter connected with | |
| municipal taxation would make | |
| municipalities mere tax collecting | |
| departments of the Government and not | |
| self-governing bodies which they are | |
| intended to be. The Government might | |
| as well collect the taxes and make them | |
| available to the municipalities. That is | |
| not a correct reading of the history of | |
| Municipal Corporations and other self- | |
| governing institutions in our country.” | |
| [emphasis supplied] | |
| |
contention that provisions of Section 150 suffer from excessive
delegation. His Lordship has observed that once it is
established that the legislature itself has willed that a
149
particular thing be done and has merely left the execution of it
to a chosen instrumentality, there can be no question of
excessive delegation. This is, however, subject to the proviso
that the legislature has not parted with its control. It is
observed that if the delegatee acts contrary to the wishes of the
legislature the legislature can undo what the delegate has done.
183. Another Constitution Bench of this Court in the case of
Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. (supra) was
considering the validity of Section 8(2)(b) of the Central Sales
Tax Act, 1956 on the ground that it suffered from the vice of
excessive delegation. In the said case, H.R. Khanna, J.,
speaking for the majority, after surveying the earlier judgments
of this Court including that in the case of Birla Cotton,
Spinning and Weaving Mills Delhi (supra), observed thus:
“ 13. It may be stated at the outset that
the growth of the legislative powers of
the Executive is a significant
development of the twentieth century.
The theory of laissezfaire has been given
a go-by and large and comprehensive
powers are being assumed by the State
150
with a view to improve social and
economic well-being of the people. Most
of the modern socio-economic
legislations passed by the Legislature
lay down the guiding principles and
the legislative policy. The
Legislatures because of limitation
imposed upon by the time factor
hardly go into matters of detail.
Provision is, therefore, made for
delegated legislation to obtain
flexibility, elasticity, expedition and
opportunity for experimentation. The
practice of empowering the Executive to
make subordinate legislation within a
prescribed sphere has evolved out of
practical necessity and pragmatic needs
At the same
of a modern welfare State.
time it has to be borne in mind that
our Constitution-makers have
entrusted the power of legislation to
the representatives of the people, so
that the said power may be exercised
not only in the name of the people but
also by the people speaking through
their representatives. The role against
excessive delegation of legislative
authority flows from and is a necessary
postulate of the sovereignty of the
people. The rule contemplates that it is
not permissible to substitute in the
matter of legislative policy the views of
individual officers or other authorities,
however competent they may be, for that
151
| of the popular will as expressed by the | |
|---|
| representatives of the people.” | |
| [emphasis supplied] | |
| | |
powers of the Executive is a significant development of the
twentieth century. The theory of laissez faire has been given a
go-by and large and comprehensive powers are being assumed
by the State with a view to improve social and economic well-
being of the people. It has been held that most of the modern
socio-economic legislations passed by the Legislature lay down
the guiding principles and the legislative policy. It is not
possible for the Legislatures to go into matters of detail.
Therefore, a provision has been made for delegated legislation
to obtain flexibility, elasticity, expedition and opportunity for
experimentation. It has been held that the practice of
empowering the Executive to make subordinate legislation
within a prescribed sphere has evolved out of practical
necessity and pragmatic needs of a modern welfare State. It has
been observed that the role against excessive delegation of
152
legislative authority flows from and is a necessary postulate of
the sovereignty of the people. It has been held that the rule
contemplates that it is not permissible to substitute in the
matter of legislative policy the views of individual officers or
other authorities, however competent they may be, for that of
the popular will as expressed by the representatives of the
people.
185. It has further been observed thus:
“ 15. The Constitution, as observed by
this Court in the case of Devi Das Gopal
Krishnan v. State of Punjab [AIR 1967 SC
1895 : (1967) 3 SCJ 557 : (1967) 20 STC
430] confers a power and imposes a duty
on the Legislature to make laws. The
essential legislative function is the
determination of the legislative
policy and its formulation as a rule
of conduct. Obviously it cannot
abdicate its functions in favour of
another. But in view of the
multifarious activities of a welfare
State, it cannot presumably work out
all the details to suit the varying
aspects of a complex situation. It
must necessarily delegate the
working out of details to the
Executive or any other agency. But
153
there is danger inherent in such a
process of delegation. An over-burdened
Legislature or one controlled by a
powerful Executive may unduly overstep
the limits of delegation. It may not lay
down any policy at all; it may declare
its policy in vague and general terms;
it may not set down any standard for
the guidance of the Executive; it may
confer an arbitrary power on the
Executive to change or modify the
policy laid down by it without
reserving for itself any control over
subordinate legislation. This self-
effacement of legislative power in favour
of another agency either in whole or in
part is beyond the permissible limits of
It is for a court to hold on
delegation.
a fair, generous and liberal
construction of an impugned statute
whether the Legislature exceeded
such limits. ”
[emphasis supplied]
186. It has been held that the essential legislative function is
the determination of the legislative policy and its formulation as
a rule of conduct. The Legislature cannot abdicate its functions
in favour of another. However, in view of the multifarious
activities of a welfare State, it cannot presumably work out all
154
the details to suit the varying aspects of a complex situation. It
must, therefore, necessarily delegate the working out of details
to the Executive or any other agency. The Court also cautions
about the danger inherent in the process of delegation. It
observed that an over-burdened Legislature or one controlled
by a powerful Executive may unduly overstep the limits of
delegation. It may not lay down any policy at all; it may declare
its policy in vague and general terms; it may not set down any
standard for the guidance of the Executive; it may confer an
arbitrary power on the Executive to change or modify the policy
laid down by it without reserving for itself any control over
subordinate legislation. It has been held that it is for the Court
to hold on a fair, generous and liberal construction of an
impugned statute to examine whether the Legislature exceeded
such limits.
187. We may gainfully refer to the following observations in the
concurring judgment of K.K. Mathew, J.:
155
“ 57. Delegation of “law-making” power, it
has been said, is the dynamo of modern
Government. Delegation by the
Legislature is necessary in order that the
exertion of legislative power does not
become a futility. Today, while theory
still affirms legislative supremacy,
we see power flowing back
increasingly to the Executive.
Departure from the traditional
rationalization of the status quo
arouses distrust. The Legislature
comprises a broader cross-section of
interests than any one administrative
organ; it is less likely to be captured by
particular interests. We must not,
therefore, lightly say that there can
be a transfer of legislative power
under the guise of delegation which
would tantamount to abdication. At
the same time, we must be aware of
the practical reality, and that is,
that Parliament cannot go into the
details of all legislative matters. The
doctrine of abdication expresses a
fundamental democratic concept but at
the same time we should not insist that
law-making as such is the exclusive
province of the Legislature. The aim of
Government is to gain acceptance for
objectives demonstrated as desirable and
to realise them as fully as possible. The
making of law is only a means to achieve
a purpose. It is not an end in itself. That
end can be attained by the Legislature
156
making the law. But many topics or
subjects of legislation are such that
they require expertise, technical
knowledge and a degree of
adaptability to changing situations
which Parliament might not possess
and, therefore, this end is better
secured by extensive delegation of
legislative power. The legislative
process would frequently bog down if
a Legislature were required to
appraise beforehand the myriad
situations to which it wishes a
particular policy to be applied and to
formulate specific rules for each
situation. The presence of Henry VIII
clause in many of the statutes is a
pointer to the necessity of extensive
delegation. The hunt by Court for
legislative policy or guidance in the
crevices of a statute or the nook and
cranny of its preamble is not an
edifying spectacle. It is not clear what
difference does it make in principle by
saying that since the delegation is to a
representative body, that would be a
guarantee that the delegate will not
exercise the power unreasonably, for, if
ex hypothesi the Legislature must
perform the essential legislative function,
it is certainly no consolation that the
body to which the function has been
delegated has a representative character.
In other words, if, no guidance is
provided or policy laid down, the fact
157
| that the delegate has a | |
|---|
| representative character could make | |
| no difference in principle.” | |
| [emphasis supplied] | |
| | |
under the guise of delegation, he also emphasizes a necessity to
be aware about the practical reality, i.e. Parliament cannot go
into the details of all legislative matters. The learned Judge
observed that the aim of Government is to gain acceptance for
objectives demonstrated as desirable and to realise them as
fully as possible. The learned Judge observed that there are
many topics or subjects of legislation which are such that they
may require expertise, technical knowledge and a degree of
adaptability to changing situations which Parliament might not
possess and, therefore, this end is better secured by extensive
delegation of legislative power. It has been held that the
legislative process would frequently bog down if a Legislature
were required to appraise beforehand the myriad situations to
which it wishes a particular policy to be applied and to
158
formulate specific rules for each situation. The Court further
emphasized for a guidance for the delegate to exercise the
delegated power.
189. This Court, in the case of The Registrar of Co-operative
Societies, Trivandrum and another v. K. Kunjabmu and
others (supra), while reversing the judgment of the Kerala High
Court, which had held Section 60 of the Madras Co-operative
Societies Act, 1932 to be unconstitutional on the ground of vice
of excessive delegation, observed thus:
“ 3. …. Executive activity in the field of
delegated or subordinate legislation
has increased in direct, geometric
progression. It has to be and it is as
it should be. Parliament and the
State Legislatures are not bodies of
experts or specialists . They are skilled
in the art of discovering the aspirations,
the expectations and the needs, the
limits to the patience and the
acquiescence and the articulation of the
views of the people whom they represent.
They function best when they concern
themselves with general principles,
broad objectives and fundamental
issues instead of technical and
159
situational intricacies which are
better left to better equipped full time
expert executive bodies and specialist
public servants. Parliament and the
State Legislatures have neither the time
nor the expertise to be involved in detail
and circumstance. Nor can Parliament
and the State Legislatures visualise
and provide for new, strange,
unforeseen and unpredictable
situations arising from the
complexity of modern life and the
ingenuity of modern man. That is the
raison d'etre for delegated legislation.
That is what makes delegated legislation
inevitable and indispensable. The Indian
Parliament and the State Legislatures
are endowed with plenary power to
legislate upon any of the subjects
entrusted to them by the Constitution,
subject to the limitations imposed by the
Constitution itself. The power to legislate
carries with it the power to delegate. But
excessive delegation may amount to
abdication. Delegation unlimited may
invite despotism uninhibited. So the
theory has been evolved that the
legislature cannot delegate its essential
legislative function. Legislate it must
by laying down policy and principle
and delegate it may to fill in detail
and carry out policy. The legislature
may guide the delegate by speaking
through the express provision
empowering delegation or the other
160
| provisions of the statute, the | |
|---|
| preamble, the scheme or even the very | |
| subject-matter of the statute. If | |
| guidance there is, wherever it may be | |
| found, the delegation is valid. A good | |
| deal of latitude has been held to be | |
| permissible in the case of taxing statutes | |
| and on the same principle a generous | |
| degree of latitude must be permissible in | |
| the case of welfare legislation, | |
| particularly those statutes which are | |
| designed to further the Directive | |
| Principles of State Policy.” | |
| [emphasis supplied] | |
| | |
190. This Court has observed that the executive activity in the
field of delegated or subordinate legislation has increased in
direct, geometric progression. The Court observed that
Parliament and the State Legislatures are not bodies of experts
or specialists. It is observed that the legislative bodies function
best when they concern themselves with general principles,
broad objectives and fundamental issues instead of technical
and situational intricacies which are better left to better
equipped full time expert executive bodies and specialist public
servants. It has been held that Parliament and the State
161
Legislatures cannot visualize and provide for new, strange,
unforeseen and unpredictable situations arising from the
complexity of modern life and the ingenuity of modern man. It
has been further reiterated that guidance could be found from
various factors and once it is found, the delegation is valid. It
has been held that a good deal of latitude has to be held to be
permissible in the case of taxing statutes and welfare
legislations.
191. This Court in the case of Ramesh Birch and others
(supra) again, after referring to the earlier judgments and after
considering the views expressed by various learned Judges on
the aspect of delegated legislation, observed thus:
“ 23. But, these niceties apart, we think
that Section 87 is quite valid even on the
“policy and guideline” theory if one has
proper regard to the context of the Act
and the object and purpose sought to be
achieved by Section 87 of the Act. The
judicial decisions referred to above make
it clear that it is not necessary that the
legislature should “dot all the i's and
cross all the t's ” of its policy. It is
sufficient if it gives the broadest
162
indication of a general policy of the
legislature…...”
192. Recently, the Constitution Bench of this Court in the case
of Rojer Mathew (supra) considered the question, as to
whether Section 184 of the Finance Act, 2017, which does not
prescribe qualifications, appointment, term and conditions of
service, salary and allowances, etc. suffers from the vice of
excessive delegation. Rejecting the contention, this Court
observed thus:
“ 145. Cautioning against the potential
misuse of Section 184 by the executive,
it was vehemently argued by the learned
counsel for the petitioner(s) that any
desecration by the executive of such
powers threatens and poses a risk to the
independence of the tribunals. A mere
possibility or eventuality of abuse of
delegated powers in the absence of any
evidence supporting such claim, cannot
be a ground for striking down the
provisions of the Finance Act, 2017. It is
always open to a constitutional court on
challenge made to the delegated
legislation framed by the executive to
examine whether it conforms to the
parent legislation and other laws, and
163
| apply the “policy and guideline” test and | |
|---|
| if found contrary, can be struck down | |
| without affecting the constitutionality of | |
| the rule-making power conferred under | |
| Section 186 of the Finance Act, 2017.” | |
| |
193. It can thus be seen that this Court has held that a mere
possibility or eventuality of abuse of delegated powers in the
absence of any evidence supporting such claim, cannot be a
ground for striking down such a provision. It has been held
that if a challenge is made to the delegated legislation framed
by the executive, the same can be examined by the
constitutional court. It has been held that applying the “policy
and guideline” test, if it is found that the delegated legislation
does not satisfy the said test, the legislation can be struck
down without affecting the constitutionality of the rule-making
power conferred under Section 186 of the Finance Act, 2017.
164
Status of the RBI
194. Having adverted to the various judgments on the issue of
delegated legislation, we find it necessary to refer to certain
judgments of this Court outlining the status of the RBI.
195. The Constitution Bench of this Court in the case of
Joseph Kuruvilla Velukunnel (supra) was considering a
challenge to Section 38(1) and (3)(b)(iii) of the Banking
Companies Act, 1949 being violative of Articles 14, 19 and 301
of the Constitution of India, and was, therefore, ultra vires the
Constitution of India. Though this Court held that Section 38
is an unreasonable restriction on the right of the Palai Bank to
carry on its business and, therefore, unconstitutional, it will be
relevant to refer to paragraph 46 of the said judgment, which is
as follows:
“ 46. In the present case, in view of the
history of the establishment of the
Reserve Bank as a central bank for
India, its position as a Bankers' Bank,
its control over banking companies and
banking in India, its position as the
165
issuing bank, its power to license
banking companies and cancel their
licences and the numerous other powers,
it is unanswerable that between the
court and the Reserve Bank, the
momentous decision to wind up a
tottering or unsafe banking company in
the interests of the depositors, may
reasonably be left to the Reserve Bank.
No doubt, the court can also, given the
time, perform this task. But the decision
has to be taken without delay, and the
Reserve Bank already knows intimately
the affairs of banking companies and has
had access to their books and accounts.
If the court were called upon to take
immediate action, it would almost always
be guided by the opinion of the Reserve
Bank. It would be impossible for the
court to reach a conclusion unguided
by the Reserve Bank if immediate
action was demanded. But the law
which gives the same position to the
opinion of the Reserve Bank is
challenged as unreasonable. In our
opinion, such a challenge has no
force.…. ”
[emphasis supplied]
196. The Court has referred to the pivotal role that the RBI
plays as a Central Bank, as a bankers’ bank and numerous
166
other powers that it exercises. The Court held that the law
which gives an important position to the opinion of the Reserve
Bank was challenged unreasonably and such challenge had no
force.
197. It may also be relevant to refer to the following
observations of this Court in the case of Peerless General
Finance and Investment Co. Limited and another (supra):
“ 30. Before examining the scope and
effect of the impugned paragraphs (6)
and (12) of the directions of 1987, it is
also important to note that Reserve Bank
of India which is bankers' bank is a
creature of statute. It has large
contingent of expert advice relating
to matters affecting the economy of
the entire country and nobody can
doubt the bona fides of the Reserve
Bank in issuing the impugned
directions of 1987. The Reserve Bank
plays an important role in the
economy and financial affairs of
India and one of its important
functions is to regulate the banking
system in the country. It is the duty
of the Reserve Bank to safeguard the
economy and financial stability of
the country…. ”
167
RBI, which is a bankers' bank, is a creature of statute. It has
large contingent of expert advice relating to matters affecting
the economy of the entire country. It has been held that the
RBI plays an important role in the economy and financial
affairs of India and one of its important functions is to regulate
the banking system in the country. It has been held that it is
the duty of the RBI to safeguard the economy and financial
stability of the country.
199. It will also further be relevant to refer to the following
observations of this Court in the case of Peerless General
Finance and Investment Co. Limited and another (supra):
“ The function of the Court is not to
advise in matters relating to
financial and economic policies for
which bodies like Reserve Bank are
fully competent. The Court can only
strike down some or entire directions
issued by the Reserve Bank in case
the Court is satisfied that the
directions were wholly unreasonable
168
or violative of any provisions of the
Constitution or any statute. It would
be hazardous and risky for the courts
to tread an unknown path and
should leave such task to the expert
bodies. This Court has repeatedly
said that matters of economic policy
ought to be left to the government .”
[emphasis supplied]
200. The Court has held that it is not permissible for a Court to
advise in matters relating to financial and economic policies for
which bodies like Reserve Bank are fully competent. It has
been held that it would be risky and hazardous for the courts
to tread an unknown path and should leave such task to the
expert bodies.
201. Recently a three-Judge Bench of this Court, speaking
through one of us (V. Ramasubramanian, J.), in the case of
Internet and Mobile Association of India (supra) observed
thus:
“ 141. But as pointed out elsewhere, RBI
is the sole repository of power for the
management of the currency, under
Section 3 of the RBI Act. RBI is also
169
vested with the sole right to issue
bank notes under Section 22(1) and to
issue currency notes supplied to it by
the Government of India and has an
important role to play in evolving the
monetary policy of the country, by
participation in the Monetary Policy
Committee which is empowered to
determine the policy rate required to
achieve the inflation target, in terms
of the consumer price index. Therefore,
anything that may pose a threat to or
have an impact on the financial system of
the country, can be regulated or
prohibited by RBI, despite the said
activity not forming part of the credit
system or payment system . The
expression “management of the
currency” appearing in Section 3(1) need
not necessarily be confined to the
management of what is recognised in law
to be currency but would also include
what is capable of faking or playing the
role of a currency.”
is the sole repository of power for the management of currency.
It is also vested with the sole right to issue bank notes and to
issue currency notes supplied to it by the Government of India.
170
It has been held that the RBI has an important role to play in
evolving the monetary policy of the country.
Application of the aforesaid principles to the present case
203. It is thus clear that this Court has consistently recognised
the role assigned to the RBI in management and issuance of
currency notes, so also in evolving monetary policy of the
country. We have referred to the aforesaid judgments with
regard to the primary status of RBI in dealing with the
management and regulation of currency and in evolving the
monetary policy of the country. Insofar as the decision to be
taken by the Central Government under sub-section (2) of
Section 26 of the RBI Act is concerned, it is to be taken on the
recommendation of the Central Board. We, therefore, find that
there is an inbuilt safeguard in sub-section (2) of Section 26 of
the RBI Act inasmuch as the Central Government is required to
take a decision on the recommendation of the RBI.
171
204. As already discussed hereinabove, the RBI has large
contingent of expert advice available to it. It has a pivotal role
in issuance and management of and all other matters relating
to currency and also in evolving monetary policy of the country.
We may gainfully refer to the Constitution Bench Judgment of
this Court in the case of Harakchand Ratanchand Banthia
and others (supra) wherein, though the Constitution Bench
found clause (b) sub-section (2) of Section 5 of the Gold
(Control) Act, 1968 to be unconstitutional on the ground of vice
of excessive delegation, it upheld the provisions of clause (a)
sub-section (2) of Section 5 of the Gold (Control) Act, 1968,
finding that there was an inbuilt safeguard inasmuch as the
Administrator was required to take a decision after consultation
with the RBI.
205. For considering the question as to whether the RBI Act
provides guidance to the delegatee or not, the entire scheme,
object and the purpose of the Act has to be taken into
consideration. The guidance could be sought from the express
172
provision empowering delegation or the other provisions of the
statute, the preamble, the scheme or even the very subject-
matter of the statute. If the guidance could be found in
whatever part of the Act, the delegation has to be held to be
valid. A great amount of latitude has to be given in such
matters. It has been consistently held that Parliament and the
State Legislatures are not bodies of expert or specialists. They
are skilled in the art of discovering the aspirations, the
expectations and the needs of the people whom they represent.
It has been held that they function best when they concern
themselves with general principles, broad objectives and
fundamental issues instead of technical and situational
intricacies which are better left to better equipped full time
expert executive bodies and specialist public servants.
206. As already discussed herein above, the RBI has been
constituted to regulate the issue of bank notes. The RBI is an
expert body entrusted with various functions with regard to
monetary and economic policies. Perusal of the scheme of the
173
RBI Act would reveal that it has a primary role in the matters
pertaining to the management and regulation of currency. We,
therefore, find that there is sufficient guidance to the delegatee
when it exercises its powers under sub-section (2) of Section 26
of the RBI Act, from the subject matter of the statute, and the
other provisions of the Act. In any case, as already discussed
herein above, Parliament has provided an inbuilt safeguard i.e.
recommendation of the RBI. It is equally settled that insofar
as the economic, monetary and fiscal policies are concerned,
the same are best left to the experts possessing requisite
knowledge. The RBI as well as the Central Government are
bodies having contingent of experts in the field. It will,
therefore, not be proper for the Court to enter into an area
which should be best left to the experts.
207. We are of the considered view that there is sufficient
guidance in the preamble as well as the scheme and the object
of the RBI Act. As already discussed herein above, there cannot
be a straitjacket formula, and the question whether excessive
174
delegation has been conferred or not has to be decided on the
basis of the scheme, the object and the purpose of the statute
under consideration.
208. One another aspect that needs to be taken into
consideration is the nature of the body to which the delegation
is to be made. In the present case, the delegation is made to
the Central Government and not to any ordinary body.
209. In the case of Birla Cotton, Spinning and Weaving
Mills Delhi (supra), the seven-Judge Bench of this Court held
that the delegation was made to an elected body, responsible to
the people including those who pay taxes. It observed that the
councillors have to go for election every four years. It was also
observed that if the councillors behave unreasonably, and the
inhabitants of the area so consider it, they can be thrown out at
the ensuing elections. This Court found that this was a great
check on the elected councillors acting unreasonably and fixing
unreasonable rates of taxation. It has been held that this was a
175
democratic method of bringing to book the elected
representatives who act unreasonably in such matters.
210. In the present case also, the delegation is to the Central
Government, i.e. the highest executive body of the country. We
have a Parliamentary system in which the Government is
responsible to the Parliament. In case the Executive does not
act reasonably while exercising its power of delegated
legislation, it is responsible to Parliament who are elected
representatives of the citizens for whom there exists a
democratic method of bringing to book the elected
representatives who act unreasonably in such matters.
211. Taking into consideration all these factors, we are of the
considered view that sub-section (2) of Section 26 of the RBI
Act does not suffer from the vice of excessive delegation.
ISSUE NO. (iii) : AS TO WHETHER THE IMPUGNED
TH
NOTIFICATION DATED 8 NOVEMBER 2016 IS LIABLE TO
176
BE STRUCK DOWN ON THE GROUND THAT THE DECISION-
MAKING PROCESS IS FLAWED IN LAW?
212. It is sought to be urged on behalf of the petitioners that
the decision-making process both at the stage of making
recommendations by the Central Board and at the stage of
taking decision by the Central Government is flawed inasmuch
as the same had been done without considering the relevant
factors and eschewing the irrelevant ones. It is also sought to
be urged that, as per the scheme of sub-section (2) of Section
26 of the RBI Act, it is incumbent that the procedure should
emanate from the Central Board and not from the Central
Government. According to the petitioners, in the present case,
the procedure has emanated from the Central Government vide
th
its letter dated 7 November 2016 advising the Board to
convene a meeting and make a recommendation, which was
th
hurriedly convened on the next day, i.e., 8 November 2016, in
which the Board decided to recommend demonetization and,
177
within hours, the decision was announced by the Hon’ble Prime
Minister.
213. It is submitted that, taking into consideration the hasty
manner in which the recommendation was sought by the
Central Government, and was then made by the Central Board
and the decision was taken thereupon by the Cabinet, there
was no scope for the Central Board or the Cabinet to take into
consideration the relevant factors and eschew the irrelevant
factors. It is, therefore, submitted that the decision was taken
in a patently arbitrary manner and as such, the impugned
Notification is liable to be set aside on the ground of patent
arbitrariness. It is also the contention of the petitioners that, in
the meeting of the Central Board, there was no quorum as
required in the 1949 Regulations.
214. On the contrary, it is the submission of the respondents
that there are twin requirements in sub-section (2) of Section
26 of the RBI Act, viz., (i) recommendation of the Central Board;
178
and (ii) the decision of the Central Government. It is submitted
that both these requirements are satisfied in the present case.
It is submitted that, in an action like the present one,
confidentiality and speed are of utmost importance.
Scope of Judicial Review
215. The law with regard to scope of judicial review has been
very well crystalized in the case of Tata Cellular (supra). In
the said case, it has been held by this Court that the duty of
the court is to confine itself to the question of legality. Its
concern should be whether a decision-making authority
exceeded its powers, committed an error of law, committed a
breach of the rules of natural justice, reached a decision which
no reasonable tribunal would have reached or abused its
powers. The Court held that it is not for the court to determine
whether a particular policy or particular decision taken in the
fulfillment of that policy is fair. It is only concerned with the
manner in which those decisions have been taken.
179
216. After referring to various pronouncements on the scope of
judicial review, the Court has summed-up thus:
“ 94. The principles deducible from the
above are:
(1) The modern trend points to
judicial restraint in
administrative action.
(2) The court does not sit as a
court of appeal but merely
reviews the manner in which the
decision was made.
(3) The court does not have the
expertise to correct the
administrative decision. If a
review of the administrative
decision is permitted it will be
substituting its own decision,
without the necessary expertise
which itself may be fallible.
(4) The terms of the invitation to
tender cannot be open to judicial
scrutiny because the invitation to
tender is in the realm of contract.
Normally speaking, the decision
to accept the tender or award the
contract is reached by process of
negotiations through several
tiers. More often than not, such
decisions are made qualitatively
by experts.
180
(5) The Government must have
freedom of contract. In other
words, a fair play in the joints is
a necessary concomitant for an
administrative body functioning
in an administrative sphere or
quasi-administrative sphere.
However, the decision must not
only be tested by the application
of Wednesbury principle of
reasonableness (including its
other facts pointed out above) but
must be free from arbitrariness
not affected by bias or actuated
by mala fides.
(6) Quashing decisions may
impose heavy administrative
burden on the administration
and lead to increased and
unbudgeted expenditure.
Based on these principles we will
examine the facts of this case since they
commend to us as the correct
principles.”
217. Though various authorities are cited at the Bar with
regard to scope of judicial review, we do not find it necessary to
refer to various judgments. We may gainfully refer to the
judgment of this Court in the case of Rashmi Metaliks
Limited and Another v. Kolkata Metropolitan Development
181
62
Authority and Others , wherein this Court has deprecated
the practice of citing several decisions when the law on the
issue is still covered by what has been held in the case of Tata
Cellular (supra).
218. Our enquiry, therefore, will have to be restricted to
examining the decision-making process on the limited grounds
as have been laid down in the case of Tata Cellular (supra).
Scope of Judicial Interference in matters pertaining to
economic policy
219. Since the issue involved is also related to monetary and
economic policy of the country, we would also be guided by
certain other pronouncements of this Court.
220. We may gainfully refer to the following observations of the
Seven-Judge Bench in the case of M/s. Prag Ice & Oil Mills
63
and Another v. Union of India :
62
(2013) 10 SCC 95
63
(1978) 3 SCC 459
182
| “24. We have listened to long arguments | |
|---|
| directed at showing us that producers | |
| and sellers of oil in various parts of the | |
| country will suffer so that they would | |
| give up producing or dealing in mustard | |
| oil. It was urged that this would, quite | |
| naturally, have its repercussions on | |
| consumers for whom mustard oil will | |
| become even more scarce than ever | |
| ultimately. We do not think that it is | |
| the function of this Court or of any | |
| Court to sit in judgment over such | |
| matters of economic policy as must | |
| necessarily be left to the Government | |
| of the day to decide. Many of them, | |
| as a measure of price fixation must | |
| necessarily be, are matters of | |
| prediction of ultimate results on | |
| which even experts can seriously err | |
| and doubtlessly differ. Courts can | |
| certainly not be expected to decide | |
| them without even the aid of experts.” | |
| [emphasis supplied] |
another Constitution Bench of this Court observed thus:
“ 8. Another rule of equal importance is
that laws relating to economic activities
should be viewed with greater latitude
than laws touching civil rights such as
freedom of speech, religion etc. It has
been said by no less a person than
64
(1981) 4 SCC 675
183
Holmes, J., that the legislature should
be allowed some play in the joints,
because it has to deal with complex
problems which do not admit of
solution through any doctrinaire or
strait-jacket formula and this is
particularly true in case of
legislation dealing with economic
matters, where, having regard to the
nature of the problems required to be
dealt with, greater play in the joints
has to be allowed to the legislature.
The court should feel more inclined to
give judicial deference to legislative
judgment in the field of economic
regulation than in other areas where
fundamental human rights are involved.
……….”
[emphasis supplied]
222. Again, the Constitution Bench of this Court in the case of
Shri Sitaram Sugar Company Limited and Another v.
65
Union of India and Others , observed thus:
“ 57. Judicial review is not concerned
with matters of economic policy. The
court does not substitute its
judgment for that of the legislature
or its agents as to matters within the
province of either. The court does not
supplant the “feel of the expert” by
its own views. When the legislature acts
65
(1990) 3 SCC 223
184
| within the sphere of its authority and | | |
|---|
| delegates power to an agent, it may | | |
| empower the agent to make findings | | |
| of fact which are conclusive provided | | |
| such findings satisfy the test of | | |
| reasonableness. In all such cases, | | |
| judicial inquiry is confined to the | | |
| question whether the findings of fact are | | |
| reasonably based on evidence and | | |
| whether such findings are consistent | | |
| with the laws of the land. As stated by | | |
| Jagannatha Shetty, J. in Gupta Sugar | | |
| Works [1987 Supp SCC 476, 481] : (SCC | | |
| p. 479, para 4) | | |
| “... the court does not act like a | |
| chartered accountant nor acts | |
| like an income tax officer. The | |
| court is not concerned with any | |
| individual case or any particular | |
| problem. The court only | |
| examines whether the price | |
| determined was with due regard | |
| to considerations provided by the | |
| statute. And whether extraneous | |
| matters have been excluded from | |
| determination.”” | |
[emphasis supplied]
223. Recently, this Court in the case of Small Scale Industrial
Manufactures Association (Registered) v. Union of India
185
66
and Others had an occasion to consider the issue with regard
to scope of judicial review of economic and fiscal regulatory
measures. This Court observed thus:
“ 69. What is best in the national
economy and in what manner and to
what extent the financial
reliefs/packages be formulated, offered
and implemented is ultimately to be
decided by the Government and RBI on
the aid and advice of the experts. The
same is a matter for decision exclusively
within the province of the Central
Government. Such matters do not
ordinarily attract the power of judicial
review. Merely because some
class/sector may not be agreeable
and/or satisfied with such
packages/policy decisions, the courts, in
exercise of the power of judicial review,
do not ordinarily interfere with the policy
decisions, unless such policy could be
faulted on the ground of mala fides,
arbitrariness, unfairness, etc.
70. There are matters regarding which
the Judges and the lawyers of the courts
can hardly be expected to have much
knowledge by reasons of their training
and expertise. Economic and fiscal
66
(2021) 8 SCC 511
186
regulatory measures are a field where
Judges should encroach upon very
warily as Judges are not experts in these
matters.
71. The correctness of the reasons which
prompted the Government in decision
taking one course of action instead of
another is not a matter of concern in
judicial review and the court is not the
appropriate forum for such investigation.
The policy decision must be left to the
Government as it alone can adopt which
policy should be adopted after
considering of the points from different
angles. In assessing the propriety of the
decision of the Government the court
cannot interfere even if a second view is
possible from that of the Government.
72. Legality of the policy, and not the
wisdom or soundness of the policy, is
the subject of judicial review. The scope
of judicial review of the governmental
policy is now well defined. The courts do
not and cannot act as an appellate
authority examining the correctness,
stability and appropriateness of a policy,
nor are the courts advisers to the
executives on matters of policy which the
executives are entitled to formulate . ”
187
224. This Court observed that the Court would not interfere
with any opinion formed by the government if it is based on the
relevant facts and circumstances or based on expert’s advice.
The Court would be entitled to interfere only when it is found
that the action of the executive is arbitrary and violative of any
constitutional, statutory or other provisions of law. It has been
held that when the government forms its policy, it is based on a
number of circumstances and it is also based on expert’s
opinion, which must not be interfered with, except on the
ground of palpable arbitrariness. It is more than settled that
the Court gives a large leeway to the executive and the
legislature in matters of economic policy. A reference in this
respect could be made to the judgments of this Court in the
cases of P.T.R. Exports (Madras) Pvt. Ltd. v. Union of India
67
and others and Bajaj Hindustan Limited v. Sir Shadi Lal
Enterprises Limited and another (supra).
67
(1996) 5 SCC 268
188
225. It is not the function of this Court or of any other Court to
sit in judgment over such matters of economic policy and they
must necessarily be left to the Government of the day to decide
since in such matters with regard to the prediction of ultimate
results, even the experts can seriously err and doubtlessly
differ. The Courts can certainly not be expected to decide them
without even the aid of experts.
Application of the aforesaid principles to the present case
226. Therefore, while exercising the power of judicial review in
a matter like the present one, the scope of interference would
be still narrower. Applying the principles laid down in the
aforesaid judgments, we will have to examine as to whether the
decision-making process in the present case is flawed or not.
Our inquiry has to be limited only to find out as to whether
there is an illegality in the decision-making process, i.e.
whether the decision makers have understood the law correctly
which regulates the decision-making power and as to whether
189
the decision-making process is vitiated by irrationality, i.e. the
Wednesbury principles. The test that would have to be applied
is that the decision is such that no authority properly
conducting itself on the relevant law and acting reasonably
could have reached thereat, and as to whether there has been a
procedural impropriety.
227. The learned Senior Counsel for the petitioners vehemently
th
submitted that unless the letter dated 7 November 2016,
th
Minutes of the Meeting of the Central Board dated 8 November
th
2016 and the Note for the Cabinet Meeting dated 8 November
2016 are perused by this Court, it will not be possible for the
Court to satisfy itself as to whether the Central Board while
deciding to recommend demonetization and the Central
Government while deciding to take the decision in favour of
demonetization have taken into consideration the relevant
factors and eschewed the irrelevant factors. While closing the
matters for judgment/order, we had directed the Union of India
190
and the RBI to produce the relevant records for our perusal.
Accordingly, the records were produced by the respondents.
228. We have scrutinized the entire record, i.e., the
th
communication dated 7 November 2016 addressed by the
Secretary, Department of Economic Affairs, Ministry of Finance
to the Governor, RBI, the Minutes of the Meeting of the Central
th
Board dated 8 November 2016, the recommendations by the
th
RBI dated 8 November 2016 and the Note for the Cabinet
th
Meeting held on 8 November 2016.
th
229. A perusal of the communication dated 7 November 2016
addressed by the Secretary, Department of Economic Affairs,
Ministry of Finance, Government of India to the Governor, RBI
would reveal that the Government of India has shared its
concern with regard to infusion of Fake Indian Currency Notes
(FICN) and generation of black money. It has been pointed out
that FICN infusion is concentrated in the two highest
denominations of Indian banknotes of Rs.500/- and Rs.1000/-.
191
It has also been pointed out that the impact on the economy in
the high denomination notes is very adverse. The said
communication mentions the White Paper on Black Money by
the Department of Revenue in the year 2012, wherein it is
mentioned that cash has always been a facilitator of black
money since transactions made in cash do not leave any audit
trail. The White Paper also refers to the growth in the size of
the shadow economy of the country, and that a parallel shadow
economy corrodes and eats into the vitals of the country’s
economy.
230. The said communication thereafter refers to the
constitution of a Special Investigation Team (SIT) headed by two
former Judges of this Court, which has made strong
observations against the cash economy. It further refers to the
steps taken by the Government to reduce black money in the
economy. After pointing out the aforesaid factors, the
communication advises the Central Board to take note of the
above and consider making necessary recommendations. It
192
also requests the RBI to prepare a draft scheme to implement
the above in a non-disruptive manner with as little
inconvenience to the public and business entities as possible.
231. We have also perused the Minutes of the Five Hundred
st
and Sixty First (561 ) Meeting of the Central Board of Directors
th
of the RBI held on 8 November 2016. The said Minutes would
th
show that the communication dated 7 November 2016 was
placed before the Central Board by the Deputy Governor. There
was an elaborate discussion on the said proposal. The Central
Board has considered the pros and cons of the measure. The
Central Board has also considered that the proposed step
presents a big opportunity to take the process of financial
inclusion further by incentivizing the use of electronic modes of
payment, so that people see the benefits of bank accounts and
electronic means of payment over use of cash. The Central
Board has taken into consideration that the matter had been
under discussion between the Central Government and the RBI
193
for the last six months during which most of the issues raised
in the meeting were considered.
232. After detailed deliberations, the Central Board resolved to
recommend withdrawal of legal tender of bank notes in the
denomination of Rs.500/- and Rs.1000/- of existing and any
older series in circulation. Thereafter, the Deputy Governor,
th
vide communication dated 8 November 2016, informed the
Secretary, Department of Economic Affairs, Ministry of Finance,
Government of India about the above recommendations of the
Central Board. Not only that, but a draft scheme for
implementation of the same was also enclosed along with the
said recommendations.
233. We have also perused the Note for the Cabinet for
th
consideration of the Cabinet Meeting dated 8 November 2016.
The Note for the Cabinet contains details about the relevant
data available as per Economic Survey for 2014-15 and 2015-
16 and the report of the Intelligence Bureau with regard to
194
infusion of FICN and generation of black money. It also
contains the details with regard to the 2012 White Paper on
Black Money. It contains the details with regard to the report
of the SIT headed by two former Judges of this Court and their
recommendations. It considers the recommendation of the RBI.
234. Upon perusal of the material on record, we are of the
considered view that the Central Board had taken into
consideration the relevant factors while recommending
withdrawal of legal tender of bank notes in the denomination of
Rs.500/- and Rs.1000/- of existing and any older series in
circulation. Similarly, all the relevant factors were placed for
consideration before the Cabinet when it took the decision to
demonetize. It is to be noted that a draft scheme to implement
the proposal for demonetization in a non-disruptive manner
with as little inconvenience to the public and business entities
as possible was also prepared by the RBI along with the
recommendation for demonetization. The same was also taken
into consideration by the Cabinet. As such, we are of the
195
considered view that the contention that the decision-making
process suffers from non-consideration of relevant factors and
eschewing of the irrelevant factors, is without substance.
235. Insofar as the contention of the petitioners that there was
no quorum as required under the 1949 Regulations is
th
concerned, in both the affidavits of the RBI dated 15
th
November 2022 and 19 December 2018, a categorical
statement has been made that the requisite procedure as laid
down under sub-section (2) of Section 26 of the RBI Act read
with Regulations 8 and 10 of the 1949 Regulations was duly
followed.
236. A perusal of the Minutes of the Meeting of the Central
Board would also show that eight Directors were present in the
Meeting whereas the quorum for the meeting is four Directors
of whom not less than three shall be Directors nominated
under Section 8(1)(b) or Section 8(1)(c) or Section 12 (4) of the
196
th
RBI Act. In the affidavit filed before this Court on 6 December
2022, it is specifically averred as under:
st
“6. That the 561 meeting of the Central
Board of the answering respondent was
held on 08.11.2016 at New Delhi and
business was transacted therein with
the requisite quorum. During the said
meeting, apart from the then Governor
and two Deputy Governors, one director
nominated under Section 8(1)(b) of RBI
Act, two directors nominated under
section 8(1)(c) of RBI Act and two
directors nominated under section
8(1)(d) of RBI Act were present. Thus,
the requisite quorum of four directors of
whom not less than three directors
nominated under Section 8(1)(b) or
8(1)(c) were present for the meeting.”
237. In that view of the matter, the contention that the Meeting
th
of the Central Board dated 8 November 2016 is not validly
held for want of quorum is concerned, is without substance.
Recommendation of the RBI
238. The next submission in this regard is that the procedure
prescribed under sub-section (2) of Section 26 of the RBI Act is
197
breached inasmuch as the proposal has emanated from the
Central Government whereas the requirement under sub-
section (2) of Section 26 of the RBI Act is that the proposal
should emanate from the Central Board. The contention is
that, since the Central Government is required to act on the
recommendation of the Central Board, the proposal should
emanate from the Central Board.
239. As already discussed hereinabove, the RBI has a pivotal
role insofar as monetary and economic policies are concerned
and, particularly, in all the matters pertaining to management
and regulation of currency. Moreover, perusal of Sections 22,
24 and 26 of the RBI Act would reveal that in various matters
pertaining to currency, the course of action is to be taken by
the Central Government on the recommendation of the Central
Board. It cannot be disputed that the final say with regard to
economic and monetary policies of the country will be with the
Central Government. However, in such matters, it has to rely
on the expert advice of the RBI. In a matter like the present
198
one, it cannot be expected that the RBI and the Central
Government will act in two isolated boxes. An element of
interaction/consultation in such important matters pertaining
to economic and monetary policies cannot be denied to the RBI
and the Central Government.
240. As already discussed hereinabove, the record would reveal
that the matter was under active consideration for a period of
six months between the RBI and the Central Government. As
such, merely because the Central Government has advised the
Central Board to consider recommending demonetization and
that the Central Board, on the advice of the Central
Government, has considered the proposal for demonetization
and recommended it and, thereafter, the Central Government
has taken a decision, in our view, cannot be a ground to hold
that the procedure prescribed under Section 26 of the RBI Act
was breached. The two requirements of sub-section (2) of
Section 26 of the RBI Act are (i) recommendation by the Central
Board; and (ii) the decision by the Central Government. As
199
already discussed hereinabove, both the Central Board while
making recommendation and the Central Government while
taking the decision, have taken into consideration all the
relevant factors.
241. The dictionary meaning of the word “recommend” is “to
advise as to a course of action”, or “to praise or commend”.
In P. Ramanatha Aiyar's Law Lexicon , the meaning of the word
“recommendation” is “a statement expressing commendation or
a message of this nature”. The word “recommendation”,
therefore, will have to be construed in the context in which it is
used. Reference in this respect would be made to the
judgments of this Court in the cases of V.M. Kurian v. State of
68
Kerala and others and Manohar s/o Manikrao Anchule v.
69
State of Maharashtra and another .
242. The power to be exercised by the Central Government
under sub-section (2) of Section 26 of the RBI Act is for
68
(2001) 4 SCC 215
69
(2012) 13 SCC 14
200
effecting demonetization. The said power has to be exercised
on the recommendation of the Central Board. As already
discussed hereinabove, the RBI has a pivotal role in the matters
of monetary policy and issuance of currency. The scheme
mandates that before the Central Government takes a decision
with regard to demonetization, it would be required to consider
the recommendation of the Central Board. We find that, in the
context in which it is used, the word “recommendation” would
mean a consultative process between the Central Board and the
Central Government.
243. In our view, therefore, the enquiry would be limited as to
whether there was an effective consultation between the Central
Government and the Central Board before the decision was
taken. Reference in this respect would be made to the following
observations of this Court in the case of State of Gujarat and
another v. Justice R.A. Mehta (Retired) and others (supra):
“ 25. In State of Gujarat v. Gujarat
Revenue Tribunal Bar Assn. [(2012) 10
201
SCC 353 : (2012) 4 SCC (Civ) 1229 :
(2013) 1 SCC (Cri) 35 : (2013) 1 SCC
(L&S) 56 : JT (2012) 10 SC 422] (SCC p.
372, para 34), this Court held that the
object of consultation is to render its
process meaningful so that it may serve
its intended purpose. Consultation
requires the meeting of minds between
the parties that are involved in the
consultative process on the basis of
material facts and points in order to
arrive at a correct or at least a
satisfactory solution. If a certain power
can be exercised only after consultation
such consultation must be conscious,
effective, meaningful and purposeful. To
ensure this, each party must disclose to
the other all relevant facts for due
deliberation. The consultee must express
his opinion only after complete
consideration of the matter on the basis
of all the relevant facts and
quintessence. Consultation may have
different meanings in different situations
depending upon the nature and purpose
of the statute. (See also Union of
India v. Sankalchand Himatlal
Sheth [(1977) 4 SCC 193 : 1977 SCC
(L&S) 435 : AIR 1977 SC 2328] , State of
Kerala v. A. Lakshmikutty [(1986) 4 SCC
632 : (1986) 1 ATC 735 : AIR 1987 SC
331] , High Court of Judicature of
202
Rajasthan v. P.P. Singh [(2003) 4 SCC
239 : 2003 SCC (L&S) 424 : AIR 2003 SC
1029] , Union of India v. Kali Dass
Batish [(2006) 1 SCC 779 : 2006 SCC
(L&S) 225 : AIR 2006 SC 789] , Andhra
Bank v. Andhra Bank Officers [(2008) 7
SCC 203 : (2008) 2 SCC (L&S) 403 : AIR
2008 SC 2936] and Union of
India v. Madras Bar Assn. [(2010) 11
SCC 1]
26. In Chandramouleshwar
Prasad v. Patna High Court [(1969) 3
SCC 56 : AIR 1970 SC 370] (SCC p. 63,
para 7), this Court held that consultation
or deliberation can neither be complete
nor effective before the parties thereto
make their respective points of view
known to the other or others and discuss
and examine the relative merits of their
views. If one party makes a proposal to
the other, who has a counter-proposal in
mind which is not communicated to the
proposer, a direction issued to give effect
to the counter-proposal without any
further discussion with respect to such
counter-proposal with the proposer
cannot be said to have been issued after
consultation.”
203
244. As such, the enquiry would be limited to find out whether
both the Central Board and the Central Government had made
their respective points of view known to each other and
discussed and examined the relative merits of their views. It
will have to be considered whether each of the party had
disclosed to the other all relevant facts and factors for due
deliberation, or not. The limited enquiry would be whether the
recommendation by the Central Board was made after complete
consideration of the matter on the basis of all the relevant facts
and material before it, or not.
245. As already discussed herein above, the record itself reveals
that the RBI and the Central Government were in consultation
with each other for a period of six months before the impugned
notification was issued. The record would also reveal that all
the relevant information was shared by both the Central Board
as well as the Central Government with each other. As such, it
cannot be said that there was no conscious, effective,
meaningful and purposeful consultation.
204
Relevancy of attainment of objectives
246. Another submission that is being made is that the
objective with which the impugned Notification was issued, i.e.,
to combat fake currency, black money and parallel financing
are concerned, the same has utterly failed. It is submitted that
immediately after demonetization was effected, currency notes
of new series have been seized. It is also submitted that the
fake currency is also in vogue. New series of notes have been
seized from terrorists. Per contra, it is submitted that the long-
term benefits of demonetization have been enormous, direct
and indirect. The learned Attorney General has placed on
record an elaborate list of the same to which we have already
referred to in earlier paragraphs.
247. However, we do not wish to go into the question as to
whether the object with which demonetization was effected is
served or not or as to whether it has resulted in huge direct and
indirect benefits or not. We do not possess the expertise to go
205
into that question and it is best that it should remain in the
domain of the experts.
248. The question is succinctly answered by the Supreme
Court of United States in the case of Metropolis Theater
Company et al., Plffs. In Err., v. City of Chicago and Ernest
J. Magerstadt. (supra), which reads thus:
“ 2. The attack of complainants (we so
call plaintiffs in error) is upon the
classification of the ordinance. It is
contended that the purpose of the
ordinance is to raise revenue, and that
its classification has no relation to such
purpose, and therefore is arbitrarily
discriminatory, and thereby offends the
14th Amendment of the Constitution of
the United States. The character
ascribed to the ordinance by the
supreme court of the state is not without
uncertainty. But we may assume, as
complainants assert, that the court
considered the ordinance as a revenue
measure only. The court said: 'The
ordinance may be sustainable under the
taxing power alone, without reference to
its reasonableness as a regulatory
measure.' And, regarding it as a revenue
measure, complainants attack it as
unreasonable in basing its classification
upon the price of admission of a
206
particular theater, and not upon the
revenue derived therefrom; and to exhibit
the discrimination which is asserted to
result, a comparison is made between
the seating capacity of complainants'
theaters and the number of their
performances within given periods, and
the theaters of others in the same
respects, and the resulting revenues. But
these are accidental circumstances and
dependent, as the supreme court of the
state said, upon the advantages of the
particular theater or choice of its owner,
and not determined by the ordinance, It
will immediately occur upon the most
casual reflection that the distinction the
theater itself makes is not artificial, and
must have some relation to the success
and ultimate profit of its business. In
other words, there is natural relation
between the price of admission and
revenue, some advantage, certainly, that
determines the choice. The distinction
obtains in every large city of the country.
The reason for it must therefore be
substantial; and if it be so universal in
the practice of the business, it would
seem not unreasonable if it be adopted
as the basis of governmental action. If
the action of government have such a
basis it cannot be declared to be so
palpably arbitrary as to be repugnant
to the 14th Amendment. This is the
test of its validity, as we have so
many times said. We need not cite the
207
cases. It is enough to say that we have
tried, so far as that Amendment is
concerned, to declare in words, and the
cases illustrate by examples, the wide
range which legislation has in classifying
its objects. To be able to find fault
with a law is not to demonstrate its
invalidity. It may seem unjust and
oppressive, yet be free from judicial
interference. The problems of
government are practical ones and
may justify, if they do not require,
rough accommodations,—illogical, it
may be, and unscientific. But even
such criticism should not be hastily
expressed. What is best is not always
discernible; the wisdom of any choice
may be disputed or condemned. Mere
errors of government are not subject
to our judicial review. It is only its
palpably arbitrary exercises which
can be declared void under the 14
Amendment; and such judgment cannot
be pronounced of the ordinance in
controversy. Quong Wing v. Kirkendall,
223 U. S. 59, 56 L. ed. 350, 32 Sup. Ct.
Rep. 192.”
[emphasis supplied]
249. It has been held that if the action of the government has a
basis with the objectives to be achieved, it cannot be declared
as palpably arbitrary. It has been held that, to be able to find
208
fault with a law is not to demonstrate its invalidity. It has been
held that the result of the act may seem unjust and oppressive,
yet be free from judicial interference. The problems of
government are practical ones and may justify, if they do not
require, rough accommodations, illogical, it may be, and
unscientific. But even such criticism should not be hastily
expressed. It has been held that what is best is not always
discernible, and the wisdom of any choice may be disputed or
condemned. It has been held that mere errors of government
are not subject to judicial review. It is only the palpably
arbitrary exercises which can be declared void.
250. We may gainfully refer to the following observations of this
Court in the case of R.K. Garg (supra), wherein this Court
observed that it should constantly remind itself of what the
Supreme Court of the United States said in the case of
Metropolis Theater Company (supra):
“ 19. …… The Court would not have the
necessary competence and expertise
to adjudicate upon such an economic
209
| issue. The Court cannot possibly | |
|---|
| assess or evaluate what would be the | |
| impact of a particular immunity or | |
| exemption and whether it would | |
| serve the purpose in view or not. | |
| There are so many imponderables that | |
| would enter into the determination that | |
| it would be wise for the Court not to | |
| hazard an opinion where even | |
| economists may differ. The Court must | |
| while examining the constitutional | |
| validity of a legislation of this kind, | |
| “be resilient, not rigid, forward | |
| looking, not static, liberal, not | |
| verbal” and the Court must always bear | |
| in mind the constitutional proposition | |
| enunciated by the Supreme Court of the | |
| United States in Munn v. Illinois [94 US | |
| 13], namely, “that courts do not | |
| substitute their social and economic | |
| beliefs for the judgment of legislative | |
| bodies”. The Court must defer to | |
| legislative judgment in matters | |
| relating to social and economic | |
| policies and must not interfere, | |
| unless the exercise of legislative | |
| judgment appears to be palpably | |
| arbitrary……” | |
[emphasis supplied]
251. The Constitution Bench holds that the Court would not
have the necessary competence and expertise to adjudicate
210
upon such an economic issue. The Court cannot possibly
assess or evaluate what would be the impact of a particular
immunity or exemption and whether it would serve the purpose
in view or not. It has been held that it would be wise for the
Court not to hazard an opinion where even economists may
differ. It has been held that while examining the constitutional
validity of such a legislation, the Court must “be resilient, not
rigid, forward looking, not static, liberal, not verbal”.
252. We are, therefore, of the considered view that the Court
must defer to legislative judgment in matters relating to social
and economic policies and must not interfere unless the
exercise of executive power appears to be palpably arbitrary.
The Court does not have necessary competence and expertise to
adjudicate upon such economic issues. It is also not possible
for the Court to assess or evaluate what would be the impact of
a particular action and it is best left to the wisdom of the
experts. In such matters, it will not be possible for the Court to
assess or evaluate what would be the impact of the impugned
211
action of demonetization. The Court does not possess the
expertise to do so. As already discussed hereinabove, on one
hand, the petitioners urged that there has been an adverse
effect upon the economy and on the other hand, the learned
Attorney General had given a long list of direct and indirect
advantages of demonetization. In any case, mere errors of
judgment by the government seen in retrospect is not subject to
judicial review. In such matters, legislative and quasi-legislative
authorities are entitled to a free play, and unless the action
suffers from patent illegality, manifest or palpable arbitrariness,
the Court should be slow in interfering with the same.
253. Another contention in this regard is that, on account of a
hasty decision by the Central Government, citizens had to suffer
at large, that many people were required to stand in the queues
for hours, that many citizens were deprived of their meals, and
that many citizens lost their jobs.
212
254. As already discussed hereinabove, the Central Government
had advised the Central Board to draft a scheme to implement
demonetization in a non-disruptive manner with as little
inconvenience to the public and business entities as possible.
Accordingly, a draft scheme was also submitted by the Central
Board along with its recommendations for demonetization. It is
stated in the affidavit that the RBI has subsequently issued
relaxations from time to time taking into consideration the
difficulties of the people and availability of the new notes. No
doubt that on account of demonetization, the citizens were
faced with various hardships. However, we may again gainfully
refer to the following observations of this Court in the case of
R.K. Garg (supra):
“ 8. …… The Court must therefore
adjudge the constitutionality of such
legislation by the generality of its
provisions and not by its crudities or
inequities or by the possibilities of
abuse of any of its provisions. If any
crudities, inequities or possibilities of
abuse come to light, the legislature can
always step in and enact suitable
213
| amendatory legislation. That is the | | |
|---|
| essence of pragmatic approach which | | |
| must guide and inspire the legislature in | | |
| dealing with complex economic issues.” | | |
| [emphasis supplied] | |
Notification, we would have to examine on the basis as to
whether the objectives for which it was enacted has nexus with
the decision taken or not. If the impugned Notification had a
nexus with the objectives to be achieved, then, merely because
some citizens have suffered through hardships would not be a
ground to hold the impugned Notification to be bad in law.
| 256. In this respect, we may gainfully refer to the following | | |
|---|
| observations of this Court in the case of Km. Sonia Bhatia v. | | |
| State of U.P. and Others70: | | |
| “29. Lastly, it was urged by Mr Kacker | |
| that this is an extremely hard case | |
| where the grandfather of the donee | |
| wanted to make a beneficial provision for | |
| his granddaughter after having lost his | |
| two sons in the prime of their life due to | |
70
(1981) 2 SCC 585
214
air crash accidents while serving in the
Air Force. It is true that the District
Judge has come to a clear finding that
the gift in question is bona fide and has
been executed in good faith but as the
gift does not fulfil the other ingredients
of the section, namely, that it is not for
adequate consideration, we are afraid,
however laudable the object of the donor
may have been, the gift has to fail
because the genuine attempt of the
donor to benefit his granddaughter
seems to have been thwarted by the
intervention of sub-section (6) of Section
5 of the Act. This is undoubtedly a
serious hardship but it cannot be
helped. We must remember that the
Act is a valuable piece of social
legislation with the avowed object of
ensuring equitable distribution of the
land by taking away land from large
tenure-holders and distributing the
same among landless tenants or
using the same for public utility
schemes which is in the larger
interest of the community at large.
The Act seems to implement one of
the most important constitutional
directives contained in Part IV of the
Constitution of India. If in this
process a few individuals suffer
severe hardship that cannot be
helped, for individual interests must
yield to the larger interests of the
215
| community or the country as indeed | | |
|---|
| every noble cause claims its martyr.” | | |
| | [emphasis supplied] | |
| | | |
hardship, it held that the Act is a valuable piece of social
legislation. It held that the Act was enacted to implement one of
the most important constitutional directives contained in Part
IV of the Constitution of India. It further observed that, if in this
process, a few individuals suffer severe hardship, that cannot
be helped. It further held that individual interests must yield to
the larger interests of the community or the country as indeed
every noble cause claims its martyr.
258. In any case now, the action which was taken by the
Central Government by the impugned Notification, has been
validated by the 2016 Ordinance and which has fructified in the
2017 Act. The Central Government is answerable to the
Parliament and the Parliament, in turn, represents the will of
the citizens of the country. The Parliament has therefore put its
216
imprimatur on the executive action. This is apart from the fact
that we have not found any flaw in the decision-making process
as required under sub-section (2) of Section 26 of the RBI Act.
259. The decision-making process is also sought to be attacked
on the ground that the decision was taken in a hasty manner.
We find that the ‘hasty’ argument would be destructive of the
very purpose of demonetization. Such measures undisputedly
are required to be taken with utmost confidentiality and speed.
If the news of such a measure is leaked out, it is difficult to
imagine how disastrous the consequences would be.
260. It will be interesting to note again from Volume III of the
th
“History of the Reserve Bank of India” that, on 14 January
1978, one R. Janakiraman, a senior official in the RBI was
asked by some officers of the Government of India to come
immediately to Delhi for some urgent work. When he asked for
what purpose he was called, he was told that the matters
relating to exchange control need to be discussed. He, however,
217
took along with him one M. Subramaniam, a senior official of
the Exchange Control Department. On reaching Delhi, he was
informed that the Government had decided to demonetize the
high denomination notes and was required to draft the
necessary Ordinance within twenty-four hours. During the said
period, no communication was allowed with anyone including
the Bank’s central office at Bombay. R. Janakiraman and M.
Subramaniam made a request for the 1946 Ordinance on
demonetization to get an idea how it was to be drafted, which
request was acceded to by the Finance Ministry. The draft
Ordinance was completed on schedule. It was finalized and
sent for signature of the President of India in the early hours of
th
16 January 1978 and on the same day, the announcement to
that effect was made on All India Radio’s news bulletin at 09.00
a.m.
261. It can thus be seen that confidentiality and secrecy in
such sort of measures is of paramount importance. When
demonetization was being done in the year 1978, R.
218
Janakiraman, who had drafted the Ordinance, was not
permitted to communicate with anyone including the Bank’s
central office at Bombay. It would thus show as to what great
degree of confidentiality was maintained. In any case, the
material placed on record would show that the RBI and the
Central Government were in consultation with each other for at
least a period of six months preceding the action.
th
262. We, therefore, find that the impugned notification dated 8
November 2016 does not suffer from any flaws in the decision-
making process.
ISSUE NO. (iv): AS TO WHETHER THE IMPUGNED
TH
NOTIFICATION DATED 8 NOVEMBER 2016 IS LIABLE TO
BE STRUCK DOWN APPLYING THE TEST OF
PROPORTIONALITY?
263. It is sought to be urged on behalf of the petitioners that
before taking such a drastic measure, which caused enormous
hardship to a number of citizens, the government ought to have
219
found out as to whether there was an alternate course of action
which could have resulted in lesser hardship to the citizens. In
this respect, reliance is placed on the judgment of this Court in
the case of Internet and Mobile Association of India (supra)
and K.S. Puttaswamy (Retired) and another (Aadhaar)
(supra).
264. In the case of Internet and Mobile Association of India
(supra), the RBI had issued a directive to the entities regulated
by RBI ( i ) not to deal with or provide services to any individual
or business entities dealing with or settling virtual currencies
and ( ii ) to exit the relationship, if they already have one, with
such individuals/business entities, dealing with or settling
virtual currencies.
265. The said action came to be challenged by writ petition filed
under Article 32 of the Constitution of India. The challenge was
on several grounds, including the ground of proportionality.
Though the Court did not find favour with the other grounds
220
raised on behalf of the petitioners therein, it held that the
concern of the RBI is and ought to be about the entities
regulated by it. It found that, till date, RBI had not come out
with a stand that any of the entities regulated by it, namely, the
nationalized banks/scheduled commercial banks/cooperative
banks/NBFCs had suffered any loss or adverse effect directly or
indirectly, on account of the interface that the virtual currency
exchanges had with any of them. The Court held that there
must have been at least some empirical data about the degree
of harm suffered by the regulated entities. The Court, therefore,
while upholding the power of the RBI to take pre-emptive
action, upon testing the proportionality of the measure, found
that in the absence of RBI pointing out at least some semblance
of any damage suffered by its regulated entities, the impugned
measure was disproportionate.
Four-pronged test of proportionality
221
266. The Constitution Bench of this Court in the case of
Modern Dental College and Research Centre (supra), while
considering a balance between the right under Article 19(1)(g)
and the reasonable restrictions under clause (6) of Article 19 of
the Constitution of India, observed thus:
“ 60. ……Thus, while examining as to
whether the impugned provisions of the
statute and rules amount to reasonable
restrictions and are brought out in the
interest of the general public, the
exercise that is required to be
undertaken is the balancing of
fundamental right to carry on
occupation on the one hand and the
restrictions imposed on the other hand.
This is what is known as “ doctrine of
proportionality ”. Jurisprudentially,
“ proportionality ” can be defined as the
set of rules determining the necessary
and sufficient conditions for limitation of
a constitutionally protected right by a
law to be constitutionally permissible.
According to Aharon Barak (former Chief
Justice, Supreme Court of Israel), there
are four sub-components of
proportionality which need to be
satisfied [ Aharon Barak, Proportionality:
Constitutional Rights and Their
Limitation (Cambridge University Press
2012).], a limitation of a constitutional
222
right will be constitutionally permissible
if:
( i ) it is designated for a proper
purpose;
( ii ) the measures undertaken to
effectuate such a limitation are
rationally connected to the
fulfilment of that purpose;
( iii ) the measures undertaken
are necessary in that there are
no alternative measures that
may similarly achieve that
same purpose with a lesser
degree of limitation; and finally
( iv ) there needs to be a proper
relation (“ proportionality stricto
sensu ” or “ balancing ”) between
the importance of achieving the
proper purpose and the social
importance of preventing the
limitation on the constitutional
right.”
267. The Constitution Bench held that while examining as to
whether the impugned provisions of the statute and rules
amount to reasonable restrictions and are brought out in the
interest of the general public, the exercise that is required to be
undertaken is balancing of the fundamental right to carry on
occupation on the one hand and the restrictions imposed on the
223
other hand. The Court refers to four tests of proportionality
which need to be satisfied. The first one is that it should be
designated for a proper purpose. The second one is that the
measures undertaken to effectuate such a limitation are
rationally connected to the fulfilment of that purpose. The third
one is that the measures undertaken are necessary in that
there are no alternative measures that may similarly achieve
that same purpose with a lesser degree of limitation. Finally,
the fourth one is that there needs to be a proper relation
between the importance of achieving the proper purpose and
the social importance of preventing the limitation on the
constitutional right. The Court held that there has to be a
balance between a constitutional right and public interest. It
held that a constitutional licence to limit those rights is granted
where such a limitation will be justified to protect public
interest or the rights of others. It will also be relevant to refer to
the following observations of the Constitution Bench:
224
“ 65. …..At the same time,
reasonableness of a restriction has to be
determined in an objective manner and
from the standpoint of the interests of
the general public and not from the
point of view of the persons upon whom
the restrictions are imposed or upon
abstract considerations (see Mohd. Hanif
Quareshi v. State of Bihar [ Mohd. Hanif
Quareshi v. State of Bihar , AIR 1958 SC
731 : 1959 SCR 629] ). In M.R.F.
Ltd. v. State of Kerala [ M.R.F.
Ltd. v. State of Kerala , (1998) 8 SCC 227
: 1999 SCC (L&S) 1] , this Court held
that in examining the reasonableness of
a statutory provision one has to keep in
mind the following factors:
(1) The directive principles of
State policy.
(2) Restrictions must not be
arbitrary or of an excessive
nature so as to go beyond the
requirement of the interest of
the general public.
(3) In order to judge the
reasonableness of the
restrictions, no abstract or
general pattern or a fixed
principle can be laid down so
as to be of universal
application and the same will
vary from case to case as also
with regard to changing
conditions, values of human
225
life, social philosophy of the
Constitution, prevailing
conditions and the surrounding
circumstances.
(4) A just balance has to be
struck between the restrictions
imposed and the social control
envisaged by Article 19(6).
(5) Prevailing social values as
also social needs which are
intended to be satisfied by the
restrictions.
(6) There must be a direct and
proximate nexus or reasonable
connection between the
restrictions imposed and the
object sought to be achieved. If
there is a direct nexus between
the restrictions, and the object
of the Act, then a strong
presumption in favour of the
constitutionality of the Act will
naturally arise.”
268. It is pertinent to note that in the case of Modern Dental
College and Research Centre (supra), the Court was
considering the validity of the Act and the Rules which
regulated primarily the admission of the students in post-
graduate courses in private educational institutions and the
226
| provisions made thereunder. Applying the test of | |
|---|
| proportionality, the Court held that the larger public interest | |
| warrants such a measure. It held that, having regard to the | |
| malpractices which are noticed in the Common Entrance Test | which are noticed in the Common Entrance Test |
| (CET) conducted by such private institutions themselves, it is, | |
| |
| undoubtedly, in the larger interest and welfare of the student | |
| |
| community to promote merit and excellence and to curb | |
| |
| malpractices. The Court held that the impugned provisions | |
| |
| which may amount to “restrictions” on the right of the | |
| |
| appellants therein to carry on their “occupation”, are clearly | |
| |
| “reasonable” and satisfy the test of proportionality. | |
269. The proportionality doctrine is sought to be placed in
service on the ground that in the case of Jayantilal
Ratanchand Shah (supra), the Court held the bank notes to be
property and as such, impugned Notification imposed
unreasonable restrictions, violative of Article 300-A of the
Constitution of India.
227
270. Let us test the four-pronged test culled out by Aharon
Barak, former Chief Justice, Supreme Court of Israel which
have been reproduced in the case of Modern Dental College
and Research Centre (supra).
271. The impugned Notification has been issued with an
objective to meet the following three concerns:
(i) Fake currency notes of the SBNs have been largely in
circulation and it has been found to be difficult to easily
identify genuine bank notes from the fake ones;
(ii) It has been found that high denomination bank notes
were used for storage of unaccounted wealth which was
evident from the large cash recoveries made by law
enforcement agencies; and
(iii) It has also been found that fake currency is being used
for financing subversive activities such as drug
trafficking and terrorism, causing damage to the
economy and security of the country.
228
272. For the purpose of achieving these objectives, the Central
Government, on the recommendations of the Central Board,
took a decision to demonetize the bank notes of denominational
value of Rs.500/- and Rs.1000/-. Assuming that holding bank
notes is a right under Article 300-A of the Constitution of India,
the limitation that is imposed is designated for a proper
purpose. By no stretch of imagination could it be said that the
aforesaid three purposes, i.e., elimination of fake currency,
black money and terror financing are not proper purposes. As
such, the first test is satisfied.
273. The second test is as to whether the measure undertaken
to effectuate such a limitation is rationally connected to the
fulfilment of that purpose - that would be the nexus test. The
question, therefore, is, as to whether the measures taken in the
present case have a reasonable nexus with the purpose to be
achieved? As already discussed hereinabove, the purpose of
demonetization was to eliminate the fake currency notes, black
money, drug trafficking & terror financing. Can it be said that
229
demonetizing high denomination bank notes of Rs.500/- and
Rs.1000/- does not have a reasonable nexus with the three
purposes sought to be achieved? We find that there is a
reasonable nexus between the measure of demonetization with
the aforesaid purposes of addressing issues of fake currency
bank notes, black money, drug trafficking & terror financing.
As such, the second test stands satisfied.
274. Insofar as the third test is concerned, it is required to be
examined as to whether the measure undertaken is necessary
in that there are no alternative measures that may similarly
achieve the same purpose with the lesser degree of limitation.
As held in the case of M.R.F. Ltd. v. Inspector Kerala Govt.
71
and Others , to judge the reasonableness of the restrictions,
no abstract or general pattern or a fixed principle can be laid
down so as to be of universal application and the same will vary
from case to case. As to what measure is required to meet the
aforesaid objectives is exclusively within the domain of the
71
(1998) 8 SCC 227
230
experts. The RBI, as already held, plays a material role in
economic and monetary policy and issues relating to
management and regulation of currency. The Central
Government is the best judge since it has all the inputs with
regard to fake currency, black money, terror financing & drug
trafficking. As such, what measure is required to be taken to
curb the menace of fake currency, black money and terror
financing would be best left to the discretion of the Central
Government, in consultation with the RBI. Unless the said
discretion has been exercised in a palpably arbitrary and
unreasonable manner, it will not be possible for the Court to
interfere with the same.
275. In any case, what alternate measure could have been
undertaken with a lesser degree of limitation is very difficult to
define. Whether the Courts possess an expertise to decide as to
whether demonetization of only Rs.500/- denomination notes
ought to have been done or the denomination of only the notes
of Rs.1000/- ought to have been done or as to whether
231
particular series of the bank notes ought to have been
demonetized. These are all the areas which are purely within
the domain of the experts and beyond the arena of judicial
review.
276. Insofar as the fourth test, that is the proper relation
between the importance of achieving the proper purpose and
the social importance of preventing the limitation on the
constitutional right is concerned, can it really be said that there
is no proper relation between the importance of curbing the
menace of fake currency, black money, drug trafficking & terror
financing on one hand and demonetizing the Rs.500/- and
Rs.1000/- notes, thereby imposing restriction on the use of
demonetized currency?
277. In any case, by demonetization, the right vested in the
notes was not taken away. The only restrictions were with
regard to exchange of old notes with the new notes, which were
also gradually relaxed from time to time. Insofar as deposit of
232
the demonetized notes in banks is concerned, there was no
limitation. If a citizen had a ‘Know Your Customer (KYC)
compliant bank account’, he could deposit any amount and get
to his credit the full value of legitimate currency. As such, the
right to property in bank notes was not taken away. A full
value of legitimate currency was entitled to be deposited in the
bank account, however, up to a particular date. In any case,
there was no restriction on non-cash transactions like debit
card, credit card, net banking, online transactions etc.
278. We find that the argument that the right to property was
sought to be taken away is without substance. In any case,
even if there were reasonable restrictions on the said right, the
said restrictions were in the public interest of curbing evils of
fake currency, black money, drug trafficking & terror financing.
As such, we find that applying the four-pronged test, the
doctrine of proportionality is fully satisfied.
233
279. Insofar as reliance on the judgment of the Constitution
Bench of this Court in the case of K.S. Puttaswamy (Retired)
and another (Aadhaar) (supra) is concerned, in the facts of the
said case, the Constitution Bench found that, on account of
various measures taken by the Government to give a boost to
digital economy, millions of persons, who are otherwise poor,
had opened their bank accounts. They were also becoming
habitual to the good practice of entering into transactions
through their banks and even by using digital modes for
operation of their bank accounts. The Court, in this
background, found that making the requirement of Aadhaar
compulsory for all such and other persons in the name of
checking money laundering or black money was grossly
disproportionate. The observations made therein were in the
context of the factual background that fell for consideration in
the said case. In our view, the said observations would not be
applicable to the facts of the present case. We have already
considered in detail as to how, upon application of the four-
234
pronged test of proportionality, the impugned notification
cannot be struck down.
280. In any case, in our view, there is a direct and proximate
nexus between the restrictions imposed and the objectives
sought to be achieved. As held by this Court in the case of
M.R.F. Ltd. (supra), if there is a direct nexus between the
restrictions and the object of the action, then a strong
presumption in favour of the constitutionality of the action
naturally arises.
281. We, therefore, hold that the impugned notification dated
th
8 November 2016 does not violate the principle of
proportionality and as such, is not liable to be struck down on
the said ground.
ISSUE NO. (v): AS TO WHETHER THE PERIOD PROVIDED
FOR EXCHANGE OF NOTES VIDE THE IMPUGNED
TH
NOTIFICATION DATED 8 NOVEMBER 2016 CAN BE SAID
TO BE UNREASONABLE?
235
282. It is sought to be urged that the period provided for
exchange of old notes with the new notes under the impugned
Notification is unreasonable.
th
283. Under the 1978 Act, the Ordinance was notified on 16
th
January 1978, which transformed into the Act on 30 March
1978. Under Section 3 of the 1978 Act, all high denomination
bank notes, notwithstanding anything contained in Section 26
of the RBI Act, ceased to be legal tender in payment or on
account at any place. Under Section 7 of the 1978 Act, every
person desiring to tender for exchange demonetized notes was
required to submit a declaration giving the particulars not later
th
than 19 January 1978.
284. Under Section 8 of the 1978 Act, a person who failed to
apply for exchange of any demonetized notes within the time
provided under Section 7 thereof, was entitled to tender the
notes together with a declaration required under Section 7
thereof along with the statement explaining the reasons for his
236
or her failure to apply within the specified time limit. Under
sub-section (2) of Section 8 of the 1978 Act, if the RBI was
satisfied with the reasons for the failure to submit the notes
th
prior to 19 January 1978 being genuine, it could pay the value
of the notes in the manner specified in sub-section (4) of Section
7 thereof. Under sub-section (3) of Section 8 thereof, an appeal
was provided before the Central Government against the refusal
of the RBI to pay the value of the notes.
285. It could thus be seen that under the 1978 Act, three days’
period was provided for exchanging the demonetized notes. If a
person could not avail of the said period, five days’ grace period
was made available during which period the money could be
exchanged subject to the RBI being satisfied with the
genuineness of the reasons for not submitting the same within
three days. As such, the period available to everyone was three
days which could be further extended by five days. A challenge
was raised on the ground that the period was unreasonable and
violative of the fundamental rights. Rejecting the said
237
contention, the Constitution Bench in the case of Jayantilal
Ratanchand Shah (supra) observed thus:
“ 10. It was, however, contended on
behalf of the petitioners that even if it
was assumed that Article 31 had not
been violated, the time prescribed for
exchange of the high denomination
banknotes under Sections 7 and 8 of the
Demonetisation Act was unreasonable
and violative of their fundamental rights.
When the above provisions of the Act
are considered in the context of the
purpose the Demonetisation Act
sought to achieve, namely, to stop
circulation of high denomination
banknotes as early as possible, the
above contention of the petitioners
cannot be accepted. Consequent upon
the high denomination banknotes
ceasing to be legal tender on the
expiry of 16-1-1978 and in view of the
prohibition in the transfer of
possession of such notes from one
person to another thereafter as
envisaged under Section 4, it was
absolutely necessary to ensure that
no opportunity was available to the
holders of high denomination
banknotes to transfer the same to the
possession of others. At the same
time it was necessary to afford a
reasonable opportunity to the holders
of such notes to get the same
238
exchanged. However, if the time for
such exchange was not limited the
high denomination banknotes could
be circulated and transferred without
the knowledge of the authorities
concerned from one person to another
and any such transferee could walk
into the Bank on any day thereafter
and demand exchange of his notes. In
that case it would have been wellnigh
impossible for the Bank to prove that
such a person was not the owner or
holder of the notes on 16-1-1978.
Needless to say in such an
eventuality the very object which the
Demonetisation Act sought to achieve
would have been defeated. Obviously,
to strike a balance between these
competing and disparate
considerations Section 7(2) of the
Demonetisation Act limited the time
to exchange the notes till 19-1-1978.
However, even thereafter, in view of
Section 8, the high denomination
banknotes could be exchanged from
the Bank till 24-1-1978 provided the
tenderer was able to explain the
reasons for his failure to apply for
such exchange within the time
stipulated under Section 7(2) of the
Demonetisation Act. Apart from the
above provisions regarding exchange
of high denomination banknotes by
the Bank within the time stipulated
therein, provision has been made in
239
sub-section (7) of Section 7,
permitting the Central Government,
for reasons to be recorded in writing,
to extend in any case or class of
cases the period during which high
denomination banknotes may be
tendered for exchange. From a
combined reading of Sections 7 and 8 it
is evidently clear that on furnishing a
declaration complete in all particulars in
accordance with sub-section (2) of
Section 7 by 19-1-1978, the holder was
entitled to get the exchange value of his
notes from the Bank without any let or
hindrance; thereafter, till 24-1-1978, he
was also entitled to such exchange from
the Bank if he could satisfactorily
explain the reasons for his inability to
apply by 19-1-1978 and after that date
the Central Government was empowered
to extend the period of such exchange.
Such being the scheme of the Act
regarding exchange of high
denomination banknotes it cannot be
said that the time and the manner in
which the high denomination
banknotes could be exchanged were
unreasonable, unjust and violative of
the petitioners' fundamental rights. ”
exchange was not limited, the high denomination bank notes
240
could be circulated and transferred without the knowledge of
the authorities concerned, from one person to another and any
such transferee could walk into the Bank on any day thereafter
and demand exchange of his notes. It was held that, in such an
eventuality, the very object which the Demonetization Act
sought to achieve would have been defeated. The Court found
th th
that between 16 January 1978 and 19 January 1978, the
holder was entitled to get the exchange value of his notes from
the Bank without any limit or hindrance. The challenge that
the period of three days was unreasonable, unjust and violative
of the petitioners’ fundamental rights, stood specifically
rejected.
| 287. In the present case, the period for exchanging any amount | In the present case, the period for exchanging any amount |
|---|
| of SBNs and depositing the same in the KYC compliant bank | |
| |
| account without any limit or hindrance was 52 days, whereas | |
| |
| the said period in the case of | |
(supra) was only three days, which is much less as compared to
the one provided by the impugned Notification. In the light of
241
what has been held by the Constitution Bench in the case of
Jayantilal Ratanchand Shah (supra), we fail to understand
as to how the said period of 52 days could be construed to be
unreasonable, unjust and violative of the petitioners’
fundamental rights.
288. We, therefore, hold that the period provided for exchange
th
of notes vide the impugned Notification dated 8 November
2016 cannot be said to be unreasonable.
ISSUE NO. (vi): AS TO WHETHER THE RBI HAS AN
INDEPENDENT POWER UNDER SUB-SECTION (2) OF
SECTION 4 OF THE 2017 ACT IN ISOLATION OF THE
PROVISIONS OF SECTION 3 AND SECTION 4(1) THEREOF
TO ACCEPT THE DEMONETIZED NOTES BEYOND THE
PERIOD SPECIFIED IN NOTIFICATIONS ISSUED UNDER
SUB-SECTION (1) OF SECTION 4 OF THE 2017 ACT?
242
289. It is sought to be urged by Shri Divan that the RBI has
independent power under sub-section (2) of Section 4 of the
2017 Act.
Contextual and harmonious construction of the provisions
of the 2017 Act.
290. For appreciating the said contention, it will be appropriate
to refer to Sections 3 and 4 of the 2017 Act, which read thus:
“ 3. Specified bank notes to cease to be
liability of Reserve Bank or Central
Government .— On and from the
appointed day, notwithstanding anything
contained in the Reserve Bank of India
Act, 1934 (2 of 1934) or any other law for
the time being in force, the specified
bank notes which have ceased to be legal
tender, in view of the notification of the
Government of India in the Ministry of
Finance, number S.O. 3407( E ), dated the
8th November, 2016, issued under sub-
section ( 2 ) of section 26 of the Reserve
Bank of India Act, 1934, shall cease to
be liabilities of the Reserve Bank under
section 34 and shall cease to have the
guarantee of the Central Government
under sub-section ( 1 ) of section 26 of the
said Act.
4. Exchange of specified bank notes .—
( 1 ) Notwithstanding anything contained
243
in section 3, the following persons
holding specified bank notes on or before
the 8th day of November, 2016 shall be
entitled to tender within the grace period
with such declarations or statements, at
such offices of the Reserve Bank or in
such other manner as may be specified
by it, namely:—
( i ) a citizen of India who makes a
declaration that he was outside India
between the 9th November, 2016 to 30th
December, 2016, subject to such
conditions as may be specified, by
notification, by the Central Government;
or
( ii ) such class of persons and for such
reasons as may be specified by
notification, by the Central Government.
( 2 ) The Reserve Bank may, if satisfied,
after making such verifications as it may
consider necessary that the reasons for
failure to deposit the notes within the
period specified in the notification
referred to in section 3, are genuine,
credit the value of the notes in his Know
Your Customer compliant bank account
in such manner as may be specified by
it.
( 3 ) Any person, aggrieved by the refusal
of the Reserve Bank to credit the value of
the notes under sub-section ( 2 ), may
make a representation to the Central
Board of the Reserve Bank within
244
fourteen days of the communication of
such refusal to him.
Explanation .— For the purposes of this
section, the expression “Know Your
Customer compliant bank account”
means the account which complies with
the conditions specified in the
regulations made by the Reserve Bank
under the Banking Regulation Act, 1949
(10 of 1949).”
291. The effect of Section 3 of the 2017 Act is that the SBNs,
which have ceased to be legal tender, in view of the impugned
Notification, shall cease to be liabilities of the RBI under Section
34 of the RBI Act and shall cease to have the guarantee of the
Central Government under sub-section (1) of Section 26 of the
RBI Act. The legislative intent under Section 3 of the 2017 Act
is to provide clarity and finality to the liabilities of the RBI and
the Central Government arising from such bank notes which
th
have ceased to be legal tender with effect from 9 November
2016.
292. Sub-section (1) of Section 4 of the 2017 Act provides that
notwithstanding anything contained in Section 3 of the 2017
245
Act, a class of persons would be entitled to tender within the
grace period with such declarations or statements, at such
offices of the RBI or in such other manner as may be specified
by it. Clause (i) of sub-section (1) of Section 4 of the 2017 Act
deals with a citizen of India who makes a declaration that he
th th
was outside India between 9 November 2016 and 30
December, 2016, however, subject to such conditions as may be
specified, in the notification, by the Central Government.
Clause (ii) of sub-section (1) of Section 4 of the 2017 Act
empowers the Central Government to issue a notification with
regard to persons holding SBNs who would be entitled to tender
within the grace period for such reasons as may be specified in
the said notification.
293. It is thus clear that, though in view of the impugned
Notification and in view of Section 3 of the 2017 Act,
demonetized notes have ceased to be a legal tender and have
ceased to be the liabilities of the RBI under Section 34 of the
RBI Act and the guarantee of the Central Government under
246
sub-section (1) of Section 26 of the RBI Act, a window is
provided by Section 4 of the 2017 Act. Clause (i) of sub-section
(1) of Section 4 of the 2017 Act deals with a citizen of India who
th
makes a declaration that he was outside India between 9
th
November 2016 and 30 December, 2016, subject to such
conditions as may be specified, by notification, by the Central
Government. Accordingly, a notification is issued by the
th
Central Government on 30 December 2016. In view of clause
(ii) of sub-section (1) of Section 4 of the 2017 Act, the Central
Government is empowered to provide a window for tendering
the SBNs which have otherwise ceased to be a legal tender to
such class of persons and for the reasons as may be specified in
the notification. Sub-section (2) of Section 4 of the 2017 Act
provides that the RBI, if satisfied with the reasons for failure to
deposit the notes within the period specified in the impugned
th
Notification, i.e., prior to 30 December 2016, are genuine,
credit the value of the notes in his KYC compliant bank account
in such manner as may be specified by it. However, prior to
247
| doing so, the RBI is required to make such verifications as it | |
|---|
| may consider necessary for finding out the genuineness of the | |
| reasons for failure to deposit the notes prior to 30th December | |
| 2016. The provisions of sub-section (2) of Section 4 of the 2017 | |
| Act are somewhat analogous to the provisions in sub-sections | |
| (1) and (2) of Section 8 of the 1973 Act. Sub-section (3) of | |
| Section 4 of the 2017 Act provides that any person, aggrieved by | aggrieved by |
| the refusal of the RBI to credit the value of the notes under sub- | |
| |
| section (2), can make a representation to the Central Board of | |
| |
| the RBI within fourteen days of the communication of such | |
| |
| refusal to him. This provision is somewhat analogous with sub- | |
| |
| section (3) of Section 8 of the 1973 Act. | |
294. It is thus clear that Section 4 of the 2017 Act provides an
integrated scheme. Sub-section (1) of Section 4 of the 2017 Act
empowers the Central Government to provide a window to the
th
persons holding SBNs on or before 8 November 2016 to tender
the same within the grace period with such declarations or
statements. Clause (i) thereof is applicable to the citizens who
248
th th
were outside India between 9 November 2016 and 30
December 2016. Clause (ii) thereof enables the Central
Government to provide a window to such class of persons and
for such reasons as may be specified in the notification by the
Central Government. Sub-section (2) of Section 4 of the 2017
Act provides for consideration of the cases covered by sub-
section (1) thereof. It provides that the RBI, upon its
satisfaction, after making such verifications as it may consider
necessary that the reasons for failure to deposit the notes prior
th
to 30 December 2016, are genuine, will credit the value of the
notes in KYC compliant bank account of such a person. If any
person is aggrieved by the refusal of the RBI under sub-section
(2), an appellate opportunity is provided to such a person,
under sub-section (3).
| 295. The Constitution Bench of this Court in the case of | The Constitution Bench of this Court in the case of |
|---|
| Popatlal Shah v. The State of Madras72, observed thus: | |
72
[1953] 4 SCR 677
249
| “It is a settled rule of construction that<br>to ascertain the legislative intent, all the<br>constituent parts of a statute are to be<br>taken together and each word, phrase or<br>sentence is to be considered in the light<br>of the general purpose and object of the<br>Act itself.” | |
|---|
| |
| 296. We may gainfully refer to the following observations of this | We may gainfully refer to the following observations of this |
| Court in the case of Peerless General Finance and | |
| |
| Investment Company Limited (supra): | |
| “It is a settled rule of construction that | |
|---|
| to ascertain the legislative intent, all the | |
| constituent parts of a statute are to be | |
| taken together and each word, phrase or | |
| sentence is to be considered in the light | |
| of the general purpose and object of the | |
| Act itself.” | |
| “33. Interpretation must depend on the | |
|---|
| text and the context. They are the bases of | |
| interpretation. One may well say if the text | |
| is the texture, context is what gives the | |
| colour. Neither can be ignored. Both are | |
| important. That interpretation is best | |
| which makes the textual interpretation | |
| match the contextual. A statute is best | |
| interpreted when we know why it was | |
| enacted. With this knowledge, the statute | |
| must be read, first as a whole and then | |
| section by section, clause by clause, | |
| phrase by phrase and word by word. If a | |
| statute is looked at, in the context of its | |
| enactment, with the glasses of the statute- | |
| maker, provided by such context, its | |
| scheme, the sections, clauses, phrases and | |
| words may take colour and appear | |
| different than when the statute is looked at | |
| without the glasses provided by the | |
| context. With these glasses we must look | |
250
| at the Act as a whole and discover what<br>each section, each clause, each phrase and<br>each word is meant and designed to say as<br>to fit into the scheme of the entire Act. No<br>part of a statute and no word of a statute<br>can be construed in isolation. Statutes<br>have to be construed so that every word<br>has a place and everything is in its place.<br>….” | |
|---|
| |
| 297. The interpretation which makes the textual interpretation | The interpretation which makes the textual interpretation |
| match the contextual has to be preferred. A statute is best | |
| |
| interpreted when the reason and purpose for its enactment is | |
| |
| ascertained. The statute must be read first as a whole, and | |
| |
| then section by section, clause by clause, phrase by phrase and | |
| |
| word by word. It has been held that if the statute is looked at in | |
| |
| the context of its enactment with the glasses of the statute- | |
| |
| maker, provided by such context, its scheme, the sections, | |
| |
| clauses, phrases and words may take colour and appear | |
| |
| different than when the statute is looked at without the glasses | |
| |
| provided by the context. With these glasses we must look at the | |
| |
| Act as a whole and discover what each section, each clause, | |
| |
| each phrase and each word means and what it is designed to | |
| |
| at the Act as a whole and discover what | |
|---|
| each section, each clause, each phrase and | |
| each word is meant and designed to say as | |
| to fit into the scheme of the entire Act. No | |
| part of a statute and no word of a statute | |
| can be construed in isolation. Statutes | |
| have to be construed so that every word | |
| has a place and everything is in its place. | |
| ….” | |
251
say as to fit into the scheme of the entire Act. No part of a
statute and no word of a statute can be construed in isolation.
| 298. If we look at the purpose of the 2017 Act, it is for | If we look at the purpose of the 2017 Act, it is for |
|---|
| extinguishing the liabilities of the SBNs which have ceased to be | |
| |
| legal tender with effect from 9th November 2016 so as to give | |
| |
| clarity and finality to the liabilities of the RBI and the Central | |
| |
| Government arising | |
be legal tender. However, in order to provide a grace period to
genuine cases, Section 4 of the 2017 Act has been incorporated.
Section 5 of the 2017 Act provides for prohibition on holding,
transferring or receiving SBNs. Sections 6 and 7 of the 2017
Act are penal sections which provide for penalty for
contravention of Sections 4 and 5 of the 2017 Act, respectively.
299. It is thus clear that Section 4 of the 2017 Act provides for
an integrated scheme. It is a complete code in itself. Under
sub-section (1) of Section 4 of the 2017 Act, the Central
Government is entitled to provide grace period. Under sub-
252
section (2) thereof, the RBI is required to satisfy as to whether a
person seeking to take benefit of grace period under sub-section
(1) is entitled thereto after satisfying that the reasons for not
th
depositing the SBNs prior to 30 December 2016, are genuine,
and thereafter, credit the value of the said notes in his ‘KYC
compliant bank account’. Sub-section (3) thereof provides for
an appeal. We are therefore of the considered view that sub-
section (2) of Section 4 of the 2017 Act cannot be read
independently to provide power to the RBI in isolation of sub-
sections (3) and (4) thereof. It is to be read as a part of the
scheme of Section 4 of the 2017 Act.
300. Shri Divan and various other learned counsel contended
that there were various genuine cases wherein the persons
could not deposit the demonetized notes within the specified
period. The impugned Notification was sought to be challenged
on the ground that it has caused hardship to number of
persons. It was therefore urged that this Court should either
hold the impugned Notification to be arbitrary or direct the
253
| Central Government to exercise the powers under Section | |
|---|
| 4(1)(ii) of the 2017 Act or by exercising the powers under Article | |
| 142 of the Constitution of India to provide a window so as to | |
| enable genuine persons to exchange their demonetized notes. | |
| We have already referred to the judgment of this Court in the | |
| case of Km. Sonia Bhatia (supra) hereinbefore. | |
| 301. As such, the contention that the impugned notification is | As such, the contention that the impugned notification is |
| liable to be set aside on the ground that it caused hardship to | |
| |
| individual/citizens will hold no water. The individual interests | |
| |
| must yield to the larger public interest sought to be achieved by | |
| |
| impugned Notification. | |
302. Insofar as the suggestion to frame a scheme and provide a
window for a limited period so as to enable citizens having
genuine reasons to exchange the notes is concerned, we do not
find that it will be appropriate for us in the absence of any
expertise in economic, monetary and fiscal matters to frame
such a scheme. In our view, it will be encroaching upon the
254
areas reserved for the experts. If the Central Government finds
that there exists any such class of persons and there are any
reasons for extending the benefit under Section 4 of the 2017
Act, it is within its discretion to do so. In our view, it cannot be
done by a judicial mandate.
| 303. We therefore hold that the RBI does not have independent | We therefore hold that the RBI does not have independent |
|---|
| power under sub-section (2) of Section 4 of the 2017 Act in | |
| |
| isolation of the provisions of Sections 3 and 4(1) thereof to | |
| |
| accept the demonetized notes beyond the period specified in | |
| |
| notifications issued under sub-section (1) of Section 4 of the | |
| |
| 2017 Act. | |
IX. ANSWERS TO THE QUESTIONS
304. We accordingly answer the Reference as under:
(i) The power available to the Central Government under
sub-section (2) of Section 26 of the RBI Act cannot be
restricted to mean that it can be exercised only for ‘one’
or ‘some’ series of bank notes and not for ‘all’ series of
255
bank notes. The power can be exercised for all series of
bank notes. Merely because on two earlier occasions,
the demonetization exercise was by plenary legislation,
it cannot be held that such a power would not be
available to the Central Government under sub-section
(2) of Section 26 of the RBI Act;
(ii) Sub-section (2) of Section 26 of the RBI Act does not
provide for excessive delegation inasmuch as there is an
inbuilt safeguard that such a power has to be exercised
on the recommendation of the Central Board. As such,
sub-section (2) of Section 26 of the RBI Act is not liable
to be struck down on the said ground;
th
(iii) The impugned Notification dated 8 November 2016
does not suffer from any flaws in the decision-making
process;
th
(iv) The impugned Notification dated 8 November 2016
satisfies the test of proportionality and, as such, cannot
be struck down on the said ground;
256
| (v) The period provided for exchange of notes vide the | The period provided for exchange of notes vide the |
|---|
| impugned Notification dated 8th November 2016 cannot | impugned Notification dated 8th November 2016 cannot |
| be said to unreasonable; and | |
| (vi) The RBI does not possess independent power under | The RBI does not possess independent power under |
| sub-section (2) of Section 4 of the 2017 Act in isolation | sub-section (2) of Section 4 of the 2017 Act in isolation |
| of the provisions of Sections 3 and 4(1) thereof to accept | of the provisions of Sections 3 and 4(1) thereof to accept |
| the demonetized notes beyond the period specified in | the demonetized notes beyond the period specified in |
| notifications issued under sub-section (1) of Section 4 of | notifications issued under sub-section (1) of Section 4 of |
| the 2017 Act. | |
| 305. Having answered the Reference, we direct the Registry of | | |
| this Court to place the matter before Hon’ble the Chief Justice | | |
| of India for placing it before the appropriate Bench(es). | | |
| Needless to state that all other contentions are kept open to be | | |
| considered by the Bench(es) before which the matters would be | | |
| placed. | | |
| 306. Before parting with the judgment, we place on record our | | |
| deep appreciation for the valuable assistance rendered by Shri | | |
| R. Venkataramani, learned Attorney General, Shri P. | | |
257
Chidambaram, Shri Shyam Divan and Shri Jaideep Gupta,
learned Senior Counsel and all other counsel appearing for the
parties.
…….........................J.
[S. ABDUL NAZEER]
…….........................J.
[B.R. GAVAI]
…….........................J.
[A.S. BOPANNA]
\
…..…….........................J.
[V. RAMASUBRAMANIAN]
NEW DELHI;
JANUARY 02, 2023
258
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL/CRIMINAL APPELLATE/ORIGINAL JURISDICTION
WRIT PETITION (C) NO. 906 OF 2016
VIVEK NARAYAN SHARMA …PETITIONER
VERSUS
UNION OF INDIA …RESPONDENT
WITH
CONNECTED MATTERS
NAGARATHNA, J.
I N D E X
| Sr.<br>No. | Particulars | Page<br>No.(s) |
|---|
| 1. | Introduction: | 29 |
| 2. | Controversy in these cases: | 911 |
| 3. | The Reserve Bank of India Act, 1934: An overview | 1118 |
| 4. | Submissions: | 1831 |
| 5. | History and instances of Demonetisation: | 3234 |
| 6. | History of Demonetisation in India: | 3443 |
| 7. | The Actual Controversy: | 4343 |
| 8. | The Reserve Bank of India: Bulwark of the Indian<br>Economy | 4350 |
| 9. | Economic/Fiscal Policies: Interference by Courts | 5058 |
| 10. | Section 26 of the Act: Interpretation:<br>(i) Deciphering the plain meaning of subsection (2)<br>of Section 26 of the Act:<br>(ii) Affidavits and Record of the Case:<br>(iii) Legal Principles applicable to the instant case: | 58113<br>8494<br>94104<br>104113 |
| 11. | What relief may be awarded in the present case? | 113118 |
| 12. | Conclusions: | 118124 |
2
J U D G M E N T
I have had the benefit of reading the judgment proposed by His
Lordship, B.R. Gavai, J.
2. However, I wish to differ on the reasoning and conclusions
arrived at in his judgement with regard to exercise of power by the
Central Government under subsection (2) of Section 26 of the Reserve
Bank of India Act, 1934 (hereinafter referred to as “the Act” for the
sake of brevity) by issuance of the impugned notification dated 8th
November, 2016.
Hence, my separate judgment.
Preface:
3. By way of a preface, I state that the judgment proposed by His
Lordship, Gavai, J. does not recognise the essential fact that the Act
does not envisage initiation of demonetisation of bank notes by the
Central Government. Subsection (2) of Section 26 of the Act,
contemplates demonetisation of bank notes at the instance of the
Central Board of the Reserve Bank of India (hereinafter referred to as
“the Bank”). Hence, if demonetisation is to be initiated by the Central
Government, such power is derived from Entry 36 of List I of the
Seventh Schedule to the Constitution which speaks of currency,
coinage and legal tender; foreign exchange.
In view of the interpretation given by me to subsection (2) of
Section 26 of the Act in the context of the powers of the Central Board
3
of the Bank and the Central Government visàvis demonetisation of
bank notes, my answer is only with regard to question No.1 of the
reference order. Incidentally, while considering the same, I would
touch upon question No. 7 of the reference order.
4. The questions for consideration of this Constitution Bench
th
framed by the Predecessor Bench on 16 December, 2016 are
extracted as under:
(i) “Whether the notification dated 8th November
2016 is ultra vires Section 26(2) and Sections
7,17,23,24,29 and 42 of the Reserve Bank of
India Act, 1934;
(ii) Does the notification contravene the provisions
of Article 300(A) of the Constitution;
(iii) Assuming that the notification has been validly
issued under the Reserve Bank of India Act,
1934 whether it is ultra vires Articles 14 and 19
of the Constitution;
(iv) Whether the limit on withdrawal of cash from
the funds deposited in bank accounts has no
basis in law and violates Articles 14,19 and 21;
(v) Whether the implementation of the impugned
notification(s) suffers from procedural and/or
substantive unreasonableness and thereby
violates Articles 14 and 19 and, if so, to what
effect?
(vi) In the event that Section 26(2) is held to permit
demonetization, does it suffer from excessive
delegation of legislative power thereby rendering
it ultra vires the Constitution;
4
(vii) What is the scope of judicial review in matters
relating to fiscal and economic policy of the
Government;
(viii) Whether a petition by a political party on the
issues raised is maintainable under Article 32;
and
(ix) Whether District Cooperative Banks have been
discriminated against by excluding them from
accepting deposits and exchanging demonetized
notes.”
Keeping in view the general public importance and
the farreaching implications which the answers to
the questions may have, we consider it proper to
direct that the matters be placed before the larger
Bench of five Judges for an authoritative
pronouncement. The Registry shall accordingly place
the papers before Hon’ble the Chief Justice for
constituting an appropriate Bench.”
5. His Lordship, Gavai, J. has reframed the questions referred to
this Constitution Bench and culled out six questions, which have been
answered in the erudite judgment proposed by him. My views on each
of such questions, as contrasted with those of His Lordship’s have
been expressed in a tabular form hereinunder, for easy reference.
| Question, as reframed<br>by His Lordship, B.R.<br>Gavai, J. | His Lordship’s views | My views |
|---|
| 1. “Whether the<br>power available to the<br>Central Government<br>under subsection (2) of<br>Section 26 of the RBI<br>Act can be restricted to<br>mean that it can be | i) The power available<br>to the Central Government<br>under subsection (2) of<br>Section 26 of the RBI Act<br>cannot be restricted to<br>mean that it can be<br>exercised only for one or | i) The Central<br>Government possesses<br>the power to initiate<br>and carry out the<br>process of<br>demonetisation of all |
5
| Question, as reframed<br>by His Lordship, B.R.<br>Gavai, J. | His Lordship’s views | My views |
|---|
| exercised only for "one"<br>or "some" series of bank<br>notes and not "all"<br>series in view of the<br>word "any" appearing<br>before the word "series"<br>in the subsection,<br>specifically so, when on<br>earlier two occasions,<br>the demonetisation<br>exercise was done by<br>the plenary<br>legislations?” | some series of bank notes<br>and not to all series of<br>bank notes.<br>ii) The power can be<br>exercised for all series of<br>bank notes.<br>iii) Merely because on<br>two earlier occasions, the<br>demonetization exercise<br>had done by plenary<br>legislation, it cannot be<br>held that such a power<br>could not be available<br>under subsection (2) of<br>Section 26 of the RBI<br>Act.” | series of bank notes, of<br>all denominations.<br>However, all series of<br>bank notes, of all<br>denominations could<br>not be recommended to<br>be demonetised, by the<br>Central Board of the<br>Bank under Section 26<br>(2) of the Act.<br>ii) Subsection (2) of<br>Section 26 of the Act<br>applies only when a<br>proposal for<br>demonetisation<br>is initiated by the<br>Central Board of the<br>Bank by way of a<br>recommendation being<br>made to the Central<br>Government.<br>iii) On receipt of a<br>recommendation from<br>the Central Board of<br>the Bank for<br>demonetisation under<br>Section 26 (2) of the Act,<br>the Central Government<br>may accept the said<br>recommendation or<br>may not do so. If the<br>Central Government<br>accepts the<br>recommendation, it<br>may issue a<br>notification in the |
| the | Central Government | | | | |
|---|
| may accept the said | | | | | |
| recommendation or | | | | | |
| may not do so | | . | | | If the |
| Central Government | | | | | |
| accepts the | | | | | |
| recommendation, it | | | | | |
| may issue a | | | | | |
| notification | | in the | | | |
6
| Question, as reframed<br>by His Lordship, B.R.<br>Gavai, J. | His Lordship’s views | My views |
|---|
| | Gazette in this regard.<br>iv) The Central<br>Government may also<br>initiate and carry out<br>demonetisation, even<br>in the absence of a<br>recommendation by the<br>Central Board of the<br>Bank. However, this<br>must be carried out only<br>by enacting a plenary<br>legislation or law in this<br>regard, and not through<br>issuance of a<br>Notification under sub<br>section (2) of Section<br>26 of the Act as this<br>provision is not<br>applicable in cases<br>where the proposal for<br>demonetisation is<br>initiated by the Central<br>Government. |
| 2. “In the event it is<br>held that the power<br>under subsection (2) of<br>Section 26 of the RBI<br>Act is construed to<br>mean "all" series,<br>whether the power<br>vested with the Central<br>Government under the<br>said subsection would<br>amount to conferring<br>excessive delegation<br>and as such, liable to | “The power vested with the<br>Central Government under<br>subsection (2) of Section<br>26 of the RBI Act cannot<br>be struck down on the<br>ground of conferring<br>excessive delegation.” | i) This question does<br>not arise for<br>consideration as it has<br>been held that the power<br>under subsection (2) of<br>Section 26 of the Act<br>cannot be construed to<br>mean "all" series or “all”<br>denominations.<br>ii) In my view, if the<br>Central Board of the<br>Bank is vested with the<br>power to recommend |
7
| Question, as reframed<br>by His Lordship, B.R.<br>Gavai, J. | His Lordship’s views | My views |
|---|
| be struck down?” | | demonetisation of "all"<br>series or “all”<br>denominations of bank<br>notes, the same would<br>amount to a case of<br>excessive vesting of<br>powers with the Bank. |
| 3. “Whether the<br>impugned notification<br>dated 8th November,<br>2016 is liable to be<br>struck down on the<br>ground that the<br>decisionmaking<br>process is flawed in<br>Law?” | “The impugned<br>Notification dated 8th<br>November, 2016, does not<br>suffer from any flaws in<br>the decisionmaking<br>process.” | i) That the measure of<br>demonetisation ought to<br>have been carried out by<br>the Central Government<br>by way of enacting an<br>Act or plenary<br>legislation.<br>ii) The proposal for<br>demonetisation arose<br>from the Central<br>Government and<br>therefore, could not be<br>given effect to by way of<br>issuance of a<br>Notification as<br>contemplated under sub<br>section (2) of Section 26<br>of the Act, as, such<br>provision would not apply<br>in cases where the<br>proposal for<br>demonetisation has<br>originated from the<br>Central Government,<br>such as the instant case.<br>iii) That the decision<br>making process was also<br>tainted with elements of<br>“nonexercise of |
8
| Question, as reframed<br>by His Lordship, B.R.<br>Gavai, J. | His Lordship’s views | My views |
|---|
| | discretion” by the Central<br>Board of the Bank in<br>rendering its advise on the<br>impugned measure. That<br>the Bank acted at the<br>behest of the Central<br>Government and did not<br>render an independent<br>opinion to the Central<br>Government.<br>iv) Therefore, the<br>impugned Notification<br>dated 8th November,<br>2016 issued under sub<br>section (2) of Section 26<br>of the Act is unlawful.<br>Further, the subsequent<br>Ordinance of 2016 and<br>Act of 2017 incorporating<br>the terms of the impugned<br>Notification are also<br>unlawful. |
| 4. “Whether the<br>impugned notification<br>dated 8th November,<br>2016, is liable to be<br>struck down applying<br>the test of<br>proportionality?” | “The impugned<br>Notification dated 8th<br>November 2016 satisfies<br>the test of proportionality<br>and, as such, cannot be<br>struck down on the said<br>ground.” | This question need not be<br>answered in view of the<br>above answers. |
| 5. “Whether the<br>period provided for<br>exchange of notes vide<br>the impugned<br>notification dated 8th<br>November, 2016, can be<br>said to be<br>unreasonable?” | “The period provided for<br>exchange of notes vide the<br>impugned Notification<br>dated 8th November 2016<br>cannot be said to<br>unreasonable.” | This question need not be<br>answered in view of the<br>above answers. |
| urther, the subsequent | | |
| Ordinance of 2016 and | | | |
| Act of 2017 | | | incorporating |
| the terms of the impugned | | | |
| Notification are also | | | |
| unlawful. | | | |
9
| Question, as reframed<br>by His Lordship, B.R.<br>Gavai, J. | His Lordship’s views | My views |
|---|
| | |
| 6. “Whether the RBI<br>has an independent<br>power under sub<br>section (2) of Section 24<br>of the 2017 Act in<br>isolation of the<br>provisions of Section 3<br>and Section 4(1) thereof<br>to accept the<br>demonetised notes<br>beyond the period<br>specified in notifications<br>issued under<br>subsection (1) of Section<br>4 of the 2017 Act?" | “The RBI does not possess<br>independent power under<br>subsection (2) of Section<br>4 of the 2017 Act in<br>isolation of the provisions<br>of Sections 3 and 4(1)<br>thereof to accept the<br>demonetized notes beyond<br>the period specified in<br>notifications issued under<br>subsection (1) of Section 4<br>of the 2017 Act." | This question need not be<br>answered in view of the<br>above answers. |
The reasons for the aforesaid conclusions shall now be
discussed.
Controversy in these cases:
6. Practices such as hoarding “black” money, counterfeiting, etc.,
when coupled with corruption, are eating into the vitals of our society
and economy. Any measure intended to strike at such practices, and
thereby eliminate off shoots thereof, such as, terror funding, drug
trafficking, emergence of a parallel economy, money laundering
including Havala transactions, must be commended. Such measures
are necessary to sanitize the economy and society, and enable it to
recover from the plague caused by the evils listed hereinabove.
Therefore, it cannot be denied that demonetisation in the instant case
10
was a wellintentioned proposal. However, in my separate opinion I
shall proceed to legalistically examine whether demonetisation, as
wellintentioned as it may have been, was carried out in accordance
with the procedure established under law.
6.1 The controversy in these cases revolves around the exercise of
power by the Central Government under subsection (2) of
Section 26 of the Reserve Bank of India Act, 1934. Subsection
(1) of Section 26 of the Act provides that every bank note shall
be a legal tender as per the amount expressed therein and shall
be guaranteed by the Central Government. However, as per sub
section (2) of Section 26 of the Act, bank notes can cease to be
legal tender when the Central Government issues a notification
in the Gazette of India declaring that with effect from such date
as may be specified in the said notification any series of bank
notes of any denomination shall cease to be legal tender. Such
a notification may be issued on the recommendation of the
Central Board of the Bank. There is a challenge to the vires of
the said provision and also the validity of the Notification dated
th
8 November, 2016 issued by the Central Government. As a
result of the said Notification, all series of Rs.500/ and
Rs.1,000/ denomination notes were demonetised or ceased to
be legal tender by issuance of a notification on the said date. At
this stage itself, it may be mentioned that subsequent to the
11
notification there was an Ordinance called “The Specified Bank
Notes (Cessation of Liabilities) Ordinance, 2016” (hereinafter
referred to as “the 2016 Ordinance” for the sake of brevity)
promulgated by the Hon’ble President of India, which was later
made an Act of the Parliament, namely, “The Specified Bank
Notes (Cessation of Liabilities) Act, 2017” (hereinafter called
st
“2017 Act” for the sake of brevity) and was notified on 1 March
2017, replacing the Ordinance. The issuance of the aforesaid
Notification and the action of the Central Government of
demonetisation of all series of Rs.500/ and Rs.1,000/ are
assailed in these Writ Petitions.
The Reserve Bank of India Act, 1934: An overview
7. Before proceeding further, it would be useful to refer to the
provisions of the Act for the sake of convenience.
7.1 The object and purpose of the Act is to constitute a Reserve
Bank of India to regulate the issue of bank notes and for
keeping reserves with a view to secure monetary stability in
India, and to generally operate the currency and credit system
of the country to its advantage.
7.2 The Preamble of the Act states that it is essential to have a
modern monetary policy framework to meet the challenge of an
increasingly complex economy and the primary objective of the
12
monetary policy is to maintain price stability while keeping in
mind the objective of growth. The monetary policy framework in
India shall be operated by the Reserve Bank of India.
7.3 The following provisions of the Act are relevant for the purposes
of this case and are extracted as under:
“Section 2 Definitions: In this Act, unless there is
anything repugnant in the subject or context,
xxxx
[a(ii)] “the Bank” means the Reserve Bank of
India constituted by this Act;
[a(iii)] “Bank for International Settlements” mean
the body corporate established with the said name
under the law of Switzerland in pursuance of an
th
agreement dated the 20 January, 1930, signed at
the Hague;]
[a(iv)] “bank note” means a bank note issued by
the Bank, whether in physical or digital form, under
section 22;]
xxxxx
(b) “the Central Board” means the Central Board of
Directors of the Bank;
xxxx
(cc) “International Monetary Fund” and
“International Bank for Reconstruction and
Development” means respectively the “International
Fund” and the “International Bank”, referred to in
the International Monetary Fund and Bank Act,
1945;]
xxxx
(d) “rupee coin” means (*) rupees which are legal
tender in India under the provisions of the Coinage
Act, 2011 (11 of 2011)”
13
7.4 Chapter II of the Act deals with Incorporation, Capital,
Management and Business. Section 3 speaks of establishment
and incorporation of the Reserve Bank while Section 7 deals
with Management of the Bank. Section 8 prescribes the
composition of the Central Board, and term of office of Directors
of the Bank. Section 30 pertains to the powers of the Central
Government to supersede the Central Board of the Bank.
7.5 Chapter III of the Act which is relevant for the purpose of these
cases deals with Central Banking Function. For the purposes of
these cases, Sections 22, 23, 24, 25, 26, 26A, 27, 28 and 34 are
relevant and the same read as under:
“22. Right to issue Bank notes. (1) The Bank shall
have the sole right to issue Bank notes in 1[India],
and may, for a period which shall be fixed by the
[Central Government] on the recommendation of the
Central Board, issue currency notes of the
Government of India supplied to it by the [Central
Government], and the provisions of this Act
applicable to Bank notes shall, unless a contrary
intention appears, apply to all currency notes of the
Government of India issued either by the [Central
Government] or by the Bank in like manner as if
such currency notes were Bank notes, and
references in this Act to Bank notes shall be
construed accordingly.
(2) On and from the date on which this Chapter
comes into force the 5[Central Government] shall not
issue any currency notes.”
14
“23. Issue Department (1) The issue of Bank notes
shall be conducted by the Bank in an Issue
Department which shall be separated and kept
wholly distinct from the Banking Department, and
the assets of the Issue Department shall not be
subject to any liability other than the liabilities of the
Issue Department as hereinafter defined in Section
34.
(2) The Issue Department shall not issue Bank notes
to the Banking Department or to any other person
except in exchange for other Bank notes or for such
coin, bullion or securities as are permitted by this
Act to form part of the Reserve.”
“[24. Denominations of notes (1) Subject to the
provisions of subsection (2), Bank notes shall be of
the denominational values of two rupees, five rupees,
ten rupees, twenty rupees, fifty rupees, one hundred
rupees, five hundred rupees, one thousand rupees,
five thousand rupees and ten thousand rupees or of
such other denominational values, not exceeding ten
thousand rupees, as the Central Government may,
on the recommendation of the Central Board, specify
in this behalf.
(2) The Central Government may, on the
recommendation of the Central Board, direct the
nonissue or the discontinuance of issue of Bank
notes of such denominational values as it may
specify in this behalf.]”
“25. Form of Bank notes The design, form and
material of Bank notes shall be such as may be
approved by the [Central Government] after
consideration of the recommendations made by
Central Board.”
“26. (1) Subject to
Legal tender character of notes
the provisions of subsection (2), every Bank note
shall be legal tender at any place in [India] in
15
payment or on account for the amount expressed
therein, and shall be guaranteed by the [Central
Government].
(2) On recommendation of the Central Board the
[Central Government] may, by notification in the
Gazette of India, declare that, with effect from such
date as may be specified in the notification, any
series of Bank notes of any denomination shall cease
to be legal tender [save at such office or agency of the
Bank and to such extent as may be specified in the
notification].”
“[26A. Certain Bank notes to cease to be legal
tender Notwithstanding anything contained in
section 26, no Bank note of the denominational
value of five hundred rupees, one thousand rupees
or ten thousand rupees issued before the 13th day of
January, 1946, shall be legal tender in payment or
on account for the amount expressed therein.]”
“27. Reissue of notes The Bank shall not reissue
Bank notes which are torn, defaced or excessively
spoiled.”
xxx
“34. Liabilities of the Issue Department (1) The
liabilities of the Issue Department shall be an
amount equal to the total of the amount of the
currency notes of the Government of India and Bank
notes for the time being in circulation.”
7.6 Section 22 states that the Bank has the sole right to issue bank
notes in India, and may, for a period which shall be fixed by the
Central Government on the recommendation of the Central
Board of the Bank, issue currency notes of the Government of
India supplied to it by the Central Government. On and from the
16
date on which Chapter III comes into force, the Central
Government shall not issue any currency notes except the
denomination of Rupee One.
7.7 The issue of bank notes shall be by the Issue Department of the
Bank which shall be separated and kept wholly distinct from
the Banking Department, and the assets of the Issue
Department shall not be subject to any liability other than the
liability of the Issue Department as defined under Section 34 of
the Act, Section 23 of the Act. The liabilities of the Issue
vide
Department under Section 34 of the Act shall be an amount
equal to the total of the amount of the currency notes of the
Government of India and bank notes for the time being in
circulation.
7.8 Subsection (1) of Section 24 states that, subject to the
provisions of subsection (2) of Section 24, the bank notes shall
be of the denominational values of two rupees, five rupees, ten
rupees, twenty rupees, fifty rupees, one hundred rupees, five
hundred rupees, one thousand rupees, five thousand rupees
and ten thousand rupees or of such other denominational
values, not exceeding ten thousand rupees, as the Central
Government may, on the recommendation of the Central Board
of the Bank, specify in this behalf. However, this provision is
17
subject to subsection (2) of Section 24 which states that the
Central Government may on the recommendation of the Central
Board of the Bank, direct the nonissue or the discontinuance of
issue of bank notes of such denominational values as it may
specify in that behalf. The Central Government has to approve
the design for all the bank notes after consideration of the
recommendation made by the Central Board vide Section 25 of
the Act.
7.9 Subsection (1) of Section 26 of the Act states that every bank
note shall be legal tender at any place in India in payment, or
on account for the amount expressed therein and shall be
guaranteed by the Central Government. This is, however,
subject to subsection (2) of Section 26 of the Act, which states
that the Central Government on the recommendation of the
Central Board may, by issuance of a notification in the Gazette
of India, declare that with effect from such date as may be
specified in the notification, any series of Bank notes of any
denomination shall cease to be legal tender, save at such office
or agency of the Bank and to such extent as may be specified in
the notification. Further discussion on this provision shall be
made at a later stage as the said provision is the centre of the
controversy in these cases.
18
7.10 Pursuant to the demonetisation which was carried out in the
year 1946, bank notes of denominational value of Rs.500/,
th
Rs.1,000/ and Rs.10,000/, issued before 13 January, 1946,
ceased to be legal tender. Section 26A was inserted into the Act
pursuant to the demonetisation which took place in the year
1946, which was initially by an Ordinance and subsequently by
an Act of Parliament. Section 26A was inserted into the Act by
Act 62 of 1956, with effect from 01.11.1956.
7.11 Section 27 provides that if a note is torn, defaced or excessively
spoiled, the Bank shall not reissue such a note. Similarly,
Section 28 provides that if a currency note of the Government of
India or bank note is lost, stolen, mutilated or imperfect, the
value of same cannot be recovered from the Central Government
or the Bank by any person.
7.12 Section 28A speaks of issue of special bank notes and special
onerupee notes in certain cases. The said provision was
inserted by Act 14 of 1959 with effect from 01.05.1959.
Submissions:
8. We have heard learned senior counsel as well as counsel for the
petitioners, and the learned Attorney General for India and learned
senior counsel for the respondentBank, all assisted by learned
counsel.
19
8.1 According to the learned senior counsel, Shri P. Chidambaram,
appearing for some of the petitioners, the Central Government
has the power to issue a notification in the Gazette of India
declaring any series of bank notes of any denomination as
having ceased to be legal tender and demonetise such currency
notes, subject to compliance of certain procedural conditions
prescribed under subsection (2) of Section 26 of the Act.
According to him, first, there has to be a recommendation of the
Central Board of the Bank to the Central Government before the
latter can issue a notification in the Gazette of India,
demonetising any series of bank note of any denomination. That
the Central Government cannot, by a simple notification in the
Gazette of India, suo moto and in the absence of any
recommendation of the Central Board of the Bank, demonetise
any currency note in circulation by issuance of a gazette
notification under the said provision.
8.2 Also, the Central Government can demonetise only a particular
series of bank notes of a particular denomination on the
recommendation of the Central Board of the Bank. In other
words, the expression “any” series of bank notes of “any
denomination” cannot be understood as “all” series of bank
notes of “all” denominations. That the expression “any”
20
occurring twice in the section must be given the intended
meaning and not supposed meaning and interpretation.
8.3 Shri Chidambaram submitted that in the instant case, the
Central Government without complying with the procedure
envisaged under subsection (2) of Section 26 of the Act, simply
th
issued a notification in the Gazette of India on 8 November,
2016 demonetising all series of bank notes of the denominations
of Rs.500/ and Rs.1,000/. Consequently, approximately 86
per cent of all notes in circulation were demonetised. The
serious effects of demonetisation are wellknown and judicial
notice of the same may be taken. Even otherwise, carrying out
the demonetisation by simply issuing a notification, in the
absence of a recommendation made by the Central Board of the
Bank, which is a condition precedent, is unlawful. Further, all
series of bank notes of Rs.500/ and Rs.1,000/ could not have
been demonetised by a stroke of a pen. The expression “any” in
subsection (2) of Section 26 of the Act means, “a particular”
series of “a particular denomination” of a bank note, and not
“all” series of “all” denominations. He contended that in the
instant case, the issuance of the Notification, demonetising the
entire currency of Rs.500/ and Rs.1,000/ in circulation at the
time, is unlawful and the exercise of power was erroneous and
arbitrary and hence, the same ought to be declared so.
21
8.4 Learned senior counsel emphasized that subsection (2) of
Section 26 of the Act must be given an interpretation which is
legally workable and practicable and this Court ought not give a
blanket power to the Central Government to demonetise all
currency of a particular denomination, as such action would be
contrary to the object envisaged under subsection (2) of Section
26 of the Act.
8.5 Further elaborating on his submission, learned senior counsel
for the petitioners contended that the expression “any” ought
not be interpreted as “all” as such an interpretation would be
disastrous to the Indian economy and contrary to the true letter
and spirit of the Act. He contended that the word “any” means
“one of the many” and not “all”. Therefore, according to him,
any one series of bank notes of a denomination could be
demonetised and not all series of notes of a particular
denomination or all series of bank notes of all denominations,
by issuance of an executive notification. He contended that if
the Section is read down, then, it would be saved from the vice
of unconstitutionality; otherwise, the power of the Central
Government to demonetise all series of bank notes of all
denominations would be arbitrary and an excessive power,
which is devoid of any guidance. That such power if vested with
the Central Government, would be contrary to the provisions of
22
the Act. He further contended that exercise of discretion by the
Central Government could be only to the extent of
demonetisation of particular series of bank notes of any
particular denomination that too on the recommendation of the
Central Board of the Bank. Such vast powers so as to
recommend demonetisation of all series of bank notes of any or
all denominations, cannot also be vested with the Bank.
8.6 Learned senior counsel, Shri Shyam Diwan appearing for the
petitioner, namely, Malvinder Singh in Writ Petition (Civil)
No.149 of 2017, submitted that apart from the guarantee given
by the Central Government with regard to every bank note as a
legal tender at any place in India, such notes are also the
liabilities of the Issue Department of the Bank under Section 34
of the Act to the extent of an amount equal to the total of the
value of the currency notes of the Government of India and
bank notes for the time being in circulation.
8.7 Learned senior counsel submitted that in the absence of a
specific duty with regard to mitigating the longlasting effects of
demonetisation on the Indian economy, the decision of the
Central Government to demonetise about 86.4% of the total
currency in circulation is vitiated on account of manifest
arbitrariness.
23
8.8 The learned senior counsel further contended that by applying
th
the test of proportionality, the impugned notification dated 8
November, 2016, is liable to be set aside.
8.9 Reliance was placed on
K.S. Puttaswamy (Retired) (Aadhaar)
to contend that the classical
vs. Union of India (2019) 1 SCC 1
equality test can be applied to the present case to come to the
conclusion that the decision of demonetisation had no nexus to
the objective sought to be achieved.
st
8.10 It was further contended that the circular dated 31 December,
2016, is discriminatory, insofar as it prescribed no upper
monetary limit applicable to Resident Indians for submission
and exchange of Specified Bank Notes, which were declared to
have ceased to be legal tender; however, the monetary limit of
Rs. 25,000/ per individual was fixed for NonResident Indians
(NRIs), depending on when the notes were taken out of India in
accordance with the FEMA Rules. That an additional liability
was imposed on NRIs as they had to produce a certificate issued
th
by the Indian Customs upon arrival after 30 December, 2016,
indicating the import of SBNs and the details and value of the
same.
8.11 The learned senior counsel brought to the Court’s notice an
article titled “Using Fast Frequency Household Survey Data to
24
Estimate the Impact of Demonetisation on Employment”
authored by Mr. Mahesh Vyas, Centre for Monitoring Indian
Economy (2018) to contend that owing to the demonetisation
carried out, there was a substantial reduction in employment
and employment rates were 12 million lower than it was two
months’ preceding demonetisation. Relying on the said article,
he submitted that demonetisation resulted in a loss of millions
of jobs.
9 . Per contra, learned Attorney General for India, Shri
R.Venkataramani, vehemently countered the arguments of Shri
P.Chidambaram, learned senior counsel, by contending that the power
vested with the Central Government under subsection (2) of Section
26 of the Act is not arbitrary or without guidance. That the power to
demonetise any currency note or legal tender is vested with the Central
Government and such power is of a wide import and amplitude and
this Court may not give an interpretation, restricting the said power.
He contended that the power vested with the Central Government is
exercised by the issuance of a notification in the Gazette of India which
is on the basis of a recommendation of the Central Board of the Bank.
9.1 In this regard, learned Attorney General emphasized that earlier
demonetisations were carried out in the years 1946 and 1978 by
issuance of Ordinances and thereafter, converting the said
25
Ordinances into Acts of Parliament. But in the instant case, the
th
demonetisation dated 8 November, 2016 was for all series of
bank notes of Rs.500/ and of Rs.1,000/ denominations, by
the issuance of a gazette notification, which is perfectly valid in
the eyes of law and in accordance with subsection (2) of Section
26 of the Act.
9.2 Learned Attorney General contended that the impugned gazette
notification was issued having regard to the salient objectives
that had to be achieved by the demonetisation of Rs.500/ and
Rs.1,000/ currency notes which are set out clearly in the
th
notification dated 8 November, 2016. The salient objectives of
demonetisation in the year 2016 were to eradicate black money,
to eliminate fake currency from the Indian economy and to
prevent terror funding. He therefore, contended that there is no
merit in the submissions made by the learned senior counsel
appearing for the petitioners as the impugned notification dated
th
8 November, 2016 is in accordance with subsection (2) of
Section 26 of the Act and therefore, is valid.
9.3 Shri R.Venkataramani, learned Attorney General, next
submitted that the action taken by way of the impugned
notification stands ratified by the 2017 Act and as the executive
action has been validated by the will of the Parliament, the
challenge to the notification would not survive.
26
9.4 The learned Attorney General contended that the word “any”
appearing before the words “series of bank notes” in subsection
(2) of Section 26 of the Act should be construed to mean “all”.
He submitted that the argument of the petitioners that the word
“any” would not mean “all” is flawed and if the same is accepted,
it would permit the Government to issue separate notifications
for each series, however, the Government would be prohibited
from issuing a common notification for all series.
9.5 The learned Attorney General submitted that the word “any” has
been used in two places in subsection 2 of Section 26 of the Act
and the word “any” preceding the word “series of bank notes”
has to be construed to mean “all” whereas the word “any”
preceding the word “denomination” may be construed to be a
singular or otherwise. The learned Attorney General placed
reliance on
Maharaj Singh vs. State of Uttar Pradesh (1977)
to contend that the same word used in the same
1 SCC 155
provision twice could be permitted to have a different meaning
in each of such usages.
9.6 The learned Attorney General contended that the submission
made by the petitioners that the powers under subsection (2) of
Section 26 of the Act have not been exercised in the manner
provided therein and that the decisionmaking process was
27
flawed on account of patent arbitrariness, is not tenable. He
submitted that subsection (2) of Section 26 of the Act
postulates that the Central Government may take a decision to
carry out demonetisation pursuant to the recommendation of
the Central Board of the Bank and in the present case, there
was a recommendation made by the Central Board to the
Central Government, recommending demonetisation. Thus, after
considering the proposal of the Central Board, the Central
Government took the decision to carry out demonetisation.
Thus, the procedure as envisaged in subsection (2) of Section
26 of the Act was duly complied with.
9.7 The learned Attorney General placed reliance on
Bajaj
Hindustan Limited vs. Sir Lal Enterprises Limited (2011) 1
SCC 640 wherein it was observed that economic and fiscal
regulatory measures are fields on which Judges should
encroach upon very warily as Judges are not experts in these
matters. The learned Attorney General submitted that the Bank
is an expert body charged with the duty of conceiving and
implementing various facets of economic and monetary policy
and that there cannot be a straitjacket formula guiding the
discharge of its duties. That therefore, it must be allowed to
carry out its functions as it deems fit. The learned Attorney
28
General further placed reliance on
Rajbir Singh Dalal (Dr.) vs.
and
Chaudhari Devi Lal University, Sirsa (2008) 9 SCC 284
Secretary and Curator, Victoria Memorial Hall vs. Howrah
Ganatantrik Nagrik Samity (2010) 3 SCC 640 to contend
that it is settled law that the courts should not interfere with
the opinion of experts.
9.8 Shri Jaideep Gupta, learned senior counsel for the Bank
contended that the withdrawal of all series of bank notes of the
two denominations of Rs.500/ and Rs.1,000/ was well within
the jurisdiction and power conferred upon the Bank and the
Central Government under subsection (2) of Section 26 of the
Act and it is incorrect to say that the process under subsection
(2) of Section 26 of the Act had not been followed. Thus, the
process cannot be criticized on the ground of procedural lapse
on part of the Bank or the Central Government.
9.9 Learned senior counsel for the Bank further contended that the
submission of the petitioners that unless the phrase “any” in
subsection (2) of Section 26 of the Act is read as “some” or
“one”, the power conferred upon the Bank and the Central
Government under the said section would be unguided and
arbitrary, is without any basis. It was submitted that the
expression “any” when construed literally refers to one, several
29
or all of a total number. Thus, the expression “any” used in sub
section (2) of Section 26 of the Act is broad enough to include
“all”, and consequently, the power of the Government under
subsection (2) of Section 26 of the Act is not limited merely to a
specific set or “series” alone. It was thus contended that sub
section (2) of Section 26 of the Act is an enabling provision
conferring authority on the Central Government to declare that
any series of bank notes of any denomination shall cease to be
legal tender on the recommendation of the Central Board.
9.10 Learned senior counsel for the Bank also submitted that the
decision of the Central Board of the Bank to recommend the
measure of demonetisation and the decision of the Central
Government to accept the recommendation cannot be subject to
judicial review. It was further contended that in the sphere of
economic policy making, the Wednesbury principles are of no or
little significance and that the proportionality principle can also
not be applied for judicial review of economic policy. Learned
senior counsel thus asserted that it is imperative that no
restrictions are placed on economic policies formulated by the
Bank or by the Central Government. Reliance was placed on
Peerless General Finance and Investment Co. Ltd. vs.
Reserve Bank of India (1992) 2 SCC 343 and BALCO
30
Employees’ Union (Regd.) vs. Union of India (2002) 2 SCC
to contend that courts cannot interfere with economic
333
policy which is the function of experts.
9.11 Learned senior counsel for the Bank further submitted that the
contention of the petitioners that the decisionmaking process
was faulty on account of not following the procedure under sub
section (2) of Section 26 of the Act, is without substance. Shri
Jaideep Gupta, submitted that the procedure under subsection
(2) of Section 26 contemplates two things i.e., recommendation
of the Central Board, and the decision by the Central
Government and that in the present case, both the
requirements have been duly followed, thus, the argument
advanced on behalf of the petitioners does not hold any water.
9.12 Learned senior counsel for the Bank placed reliance on
Jayantilal Ratanchand Shah vs. Reserve Bank of India
(1996) 9 SCC 650 to contend that a similar provision providing
for a specified time for exchange of notes was found to be valid
by a Constitution Bench of this Court, while adjudicating on the
legality of the 1978 demonetisation. He submitted that the time
provided in the present case is similar to the time provided
under the 1978 Act and the time period provided in the said act
was found to be reasonable, having regard to the purpose
31
sought to be achieved by the said Act. The learned senior
counsel further submitted that everybody had sufficient
opportunity either to deposit the notes in their banks or to
exchange the same.
9.13 Learned senior counsel for the Bank submitted that
demonetisation was carried out in furtherance of national
economic interest and the same ought to be given deference.
That the inconvenience caused to the public cannot be a ground
to challenge the validity of such actions, particularly when
prompt and adequate measures were taken by the Bank to
mitigate the temporary hardships expected to be caused.
9.14 Learned senior counsel for the Bank submitted that the
Specified Bank Notes (Cessation of Liabilities) Act, 2017, has
given relief to certain categories of persons subject to
verification. It was thus contended that individual cases of
hardship that have not been provided for in the Specified Bank
Notes (Cessation of Liabilities) Act, 2017, cannot be gone into.
9.15 It was further submitted that Section 8 of the RBI Act, 1934,
provides for the composition of the Central Board and sub
section 1 of Section 4 stipulates that the Central Board shall
consist of the following Directors, namely:
32
i) A Governor and not more than four Deputy Governors to be
appointed by the Central Government;
ii) Four Directors to be nominated by the Central
Government, one from each of the four Local Boards as
constituted under Section 9;
iii) Ten Directors to be nominated by the Central Government;
and
iv) Two Government officials to be nominated by the Central
Government.
st
It was submitted that the 561 meeting of the Central
Board of the Bank was held on 08.11.2016 at New Delhi and
business was transacted therein with the requisite quorum.
That during the said meeting, apart from the then Governor and
two Deputy Governors, one Director nominated under Section
8(1)(b) of the Act, two Directors nominated under Section 8(1)(c)
of the Act and two Directors nominated under Section 8(1)(d) of
the Act were present. Thus, the requisite quorum of four
directors of whom not less than three directors nominated
under Section 8(1)(b) or 8(1)(c) were present for the meeting.
Thus, the requisite procedure was duly followed by the Bank in
st
the conduct of the 561 meeting of the Central Board.
33
Other learned senior counsel as well as learned counsel
and partiesinperson have also addressed the Court.
History and instances of Demonetisation:
10. Before proceeding to consider the rival contentions, it would be
useful to delineate on the concept of demonetisation and how it has
been carried out, the world over as well as in India.
10.1 In prosaic terms, demonetisation is the process by which a
nation’s economic unit of exchange loses its legally enforceable
validity. Currencies that are terminated through the process of
demonetisation are no more legally considered exchanges and
have no financial value. Demonetisation is therefore, the
process of eliminating the lawful acceptance status of a
monetary unit, by withdrawal of certain kinds or denominations
of existing currency from circulation. The currency withdrawn
may be supplanted with new currency.
10.2 The French were the first to use the term “Demonetise” in the
years between the years 18501855. In world history, one can
see several instances of demonetisations as many countries
have adopted the policy of demonetisation. Some instances of
demonetisation globally, may be recorded as under:
34
a) United States of America: One of the oldest examples of
demonetisation may be found in the United States, when
the Coinage Act of 1873, ordered the elimination of silver
as legal tender in favour of the gold standard. Again, in the
year 1969, to combat the existence of black money in the
country and to restore the country’s economy, President
Richard Nixon declared all currencies over $100 to be null.
Before the year 1971, the currency of pound and
b) Britain:
penny used to be in circulation in Britain but to bring
uniformity in currency, the government stopped circulation
of old currency in 1971, and introduced coins of 5 and 10
pounds.
Mobutu Sese Seko made some changes with
c) Congo:
respect to the currency in circulation in Congo, for the
smooth running of its economy during the Nineties.
d) Ghana: In the year 1982, Ghana demonetised notes of 50
Cedis denomination to tackle tax evasion and empty excess
liquidity.
e) Nigeria: Demonetisation was carried out during the
government of Muhammadu Buhari in the year 1984, when
Nigeria introduced new currency and banned old notes.
35
f) Myanmar: In the year 1987, Myanmar’s military
invalidated around 80% of the value of money to curb black
marketing.
g) Russia (formerly U.S.S.R): In the year 1991, in an attempt
to combat the parallel economy, 50 and 100 Ruble notes
were removed from circulation under the leadership of
Mikhail Gorbachev.
h) Venezuela: In the year 2016, the Government of Venezuela
th
demonetised 100 Bolívares notes on 11 December, 2016,
to achieve economic, monetary and price stability.
i) Zimbabwe: In 2015, the Zimbabwean government chose to
replace the Zimbabwe Dollar with the US Dollar in order to
stabilize hyperinflation.
History of Demonetisation in India:
th
j) The first demonetisation was carried out on 12 January,
1946. To bring to realisation the first demonetisation that
the country witnessed, an Ordinance was promulgated by
th
the Government on 12 January, 1946. The Ordinance
demonetised currency notes of Rs.500/, Rs.1,000/ and
Rs.10,000/ which were in circulation, primarily to check
the unaccounted hoarding of money, with a directive that
they could be exchanged for reissued bank notes, within
36
ten days. The period of exchange was extended a number of
times by both, the Bank and the Central Government. By
the end of 1947, out of a total of Rs.143.97 crores of high
denomination notes, notes of the value of Rs.134.9 crores
had been exchanged. Thus, notes worth Rs.9.07 crores
went out of circulation or not exchanged.
It is said that this exercise turned out to be more like a
currency conversion drive as the government couldn’t
achieve much profit in the cashstrapped economy at that
time.
k) The second demonetisation was carried out in the year
1978, in pursuance of the recommendation of the Wanchoo
Committee, appointed by the Central Government, to recall
the reintroduced Rs.1,000/, Rs.5,000/ and Rs.10,000/
notes, entirely from the cash system. The stated objective of
such measure was to nullify black money supposedly held
in high denomination currency notes. The government
resorted to demonetisation of bank notes of denominations
th
Rs.1,000/, Rs.5,000/, and Rs.10,000/ notes on 16
January, 1978, under the High Denomination Bank Notes
(Demonetisation) Ordinance, 1978 (No. 1 of 1978) and
people were allowed three days’ time to exchange their
notes. During this demonetisation exercise, out of a value
37
of Rs.146 Crores demonetised notes, currency notes of
value of Rs.124.45 Crores were exchanged and a sum of
Rs.21.55 Crores, or 14.76% of the demonetised currency
notes, were extinguished.
11. It would be useful at this stage to discuss briefly the Acts of 1946
and 1978 and the impugned demonetisation having regard to sub
section (2) of Section 26 of the Act.
th
11.1 The Ordinance of 12 January, 1946 stated that on the expiry
th
of the 12 Day of January, 1946, all high denomination bank
notes shall, notwithstanding anything contained in Section
26 of the Act , cease to be legal tender in payment or on
account at any place in British India. A provision was made for
the exchange of the high denomination bank notes which had
ceased to be legal tender, with bank notes of the
denominational value of Rs.100/ which continued to be legal
tender.
11.2 The High Denomination Bank Notes (Demonetisation) Act, 1978
was enacted in public interest and provided demonetisation of
certain high denomination bank notes and for matters
connected therewith or incidental thereto. The said Act, inter
alia, defined a high denomination bank note to be a bank note
of the denominational value of Rs.1,000/, Rs.5,000/ or
38
Rs.10,000/, issued by the Reserve Bank of India immediately
before the commencement of the said Act. The said Act also
th
stated in Section 3 that on the expiry of the 16 Day of
January, 1978, all high denomination bank notes shall,
notwithstanding anything contained in Section 26 of the
Act , cease to be legal tender.
11.3 As noted earlier, the previous demonetisations were not carried
out on the strength of subsection (2) of Section 26 of the Act
inasmuch as both the legislations categorically stated that the
demonetisation was “ notwithstanding anything contained
”. In fact, under the 1978 Act, one of
in Section 26 of the Act
the objects of the demonetisation of high denomination bank
notes was that such notes facilitated illicit transfer of money for
financial transactions which were harmful to the national
economy or were used for illegal purposes and therefore, it was
necessary in public interest to demonetise the high
denomination bank notes. The use of the nonobstante clause
clearly indicates that the Central Government was not
demonetising the currency on the recommendation of the
Central Board of the Bank under subsection (2) of Section 26
of the Act. In fact, this position is demonstrated by the fact that
in the year 1978, the then Central Government sought an
39
opinion of the Central Board of the Bank regarding the
demonetisation of high denomination bank notes. The proposal
for demonetisation arose from or was initiated by the Central
Government which sought the opinion of the Central Board of
the Bank. Therefore, the proposal for demonetisation initiated
by the Central Government was subsection (2) of
de hors
Section 26 of the Act.
11.4 The fact that the nonobstante clause found a place in Section 3
of the Ordinance of 1946 as well as in Section 3 of the 1978
Act, would clearly indicate that the Central Government, in
those cases, did not demonetise the high denomination bank
notes on the recommendation made by the Central Board of the
Bank under subsection (2) of Section 26 of the Act but on the
other hand, the same was carried out the said provision
de hors
by plenary legislations. Hence, the Central Government which
initiated the process chose the route through legislation for
carrying out the demonetisation rather than by issuing an
executive notification in the Gazette of India.
11.5 The above is in contrast with the issuance of the gazette
th
notification dated 8 November, 2016, which was followed by
the Ordinance of 2016 and then the Act of 2017 was enacted.
The said Act, inter alia , provides that the specified bank notes
40
would cease to be the liability of the Reserve Bank of India or
the Central Government.
11.6 The demonetisation carried out in the year 2016, of all series of
bank notes of denomination Rs.500/ and Rs.1,000/ which
forms the subject matter of the controversy at hand was, on the
other hand, carried out by the Central Government by issuance
th
of a notification in the Gazette of India on 8 November, 2016.
th
For ease of reference, the impugned notification dated 8
November, 2016 is extracted as under:
“
MINISTRY OF FINANCE
(Department of Economic Affairs)
NOTIFICATION
th
New Delhi, the 8 November, 2016
S.O. 3407(E). — Whereas, the Central Board of
Directors of the Reserve Bank of India (hereinafter
referred to as the Board) has recommended that
bank notes of denominations of the existing series of
the value of five hundred rupees and one thousand
rupees (hereinafter referred to as specified bank
notes) shall be ceased to be legal tender;
And whereas, it has been found that fake
currency notes of the specified bank notes have been
largely in circulation and it has been found to be
difficult to easily identify genuine bank notes from
the fake ones and that the use of fake currency notes
is causing adverse effect to the economy of the
country;
41
And whereas, it has been found that high
denomination bank notes are used for storage of
unaccounted wealth as has been evident from the
large cash recoveries made by law enforcement
agencies;
And whereas, it has also been found that fake
currency is being used for financing subversive
activities such as drug trafficking and terrorism,
causing damage to the economy and security of the
country and the Central Government after due
consideration has decided to implement the
recommendations of the Board;
Now, therefore, in exercise of the powers
conferred by subsection (2) of section 26 of the
Reserve Bank of India Act, 1934 (2 of 1934)
(hereinafter referred to as the said Act), the Central
Government hereby declares that the specified bank
notes shall cease to be legal tender with effect from
th
the 9 November, 2016 to the extent specified below,
namely:
1. (1) Every banking company defined under the
Banking Regulation Act, 1949 (10 of 1949) and every
Government Treasury shall complete and forward a
return showing the details of specified bank notes
held by it at the close of business as on the 8th
November, 2016, not later than 13:00 hours on the
10th November, 2016 to the designated Regional
Office of the Reserve Bank of India (hereinafter
referred to as the Reserve Bank) in the format
specified by it.
(2) Immediately after forwarding the return referred to
in subparagraph (1), the specified bank notes shall
be remitted to the linked or nearest currency chest,
or the branch or office of the Reserve Bank, for credit
to their accounts.
2. The specified bank notes held by a person other than
a banking company referred to in subparagraph (1)
of paragraph 1 or Government Treasury may be
exchanged at any Issue Office of the Reserve Bank or
any branch of public sector banks, private sector
banks, foreign banks, Regional Rural Banks, Urban
Cooperative Banks and State Cooperative Banks for
42
a period up to and including the 30th December,
2016, subject to the following conditions, namely: —
(i) the specified bank notes of aggregate value of
Rs.4,000/ or below may be exchanged for
any denomination of bank notes having legal
tender character, with a requisition slip in
the format specified by the Reserve Bank and
proof of identity;
(ii) the limit of Rs.4,000/ for exchanging
specified bank notes shall be reviewed after
fifteen days from the date of commencement
of this notification and appropriate orders
may be issued, where necessary;
(iii) there shall not be any limit on the quantity
or value of the specified bank notes to be
credited to the account maintained with the
bank by a person, where the specified bank
notes are tendered; however, where
compliance with extant Know Your Customer
(KYC) norms is not complete in an account,
the maximum value of specified bank notes
as may be deposited shall be Rs.50,000/;
(iv) the equivalent value of specified bank notes
tendered may be credited to an account
maintained by the tenderer at any bank in
accordance with standard banking procedure
and on production of valid proof of Identity;
(v) the equivalent value of specified bank notes
tendered may be credited to a thirdparty
account, provided specific authorisation
therefor accorded by the third party is
presented to the bank, following standard
banking procedure and on production of
valid proof of identity of the person actually
tendering;
(vi) cash withdrawal from a bank account over
the counter shall be restricted to
Rs.10,000/ per day subject to an overall
limit of Rs.20,000/ a week from the date of
commencement of this notification until the
43
end of business hours on 24th November,
2016, after which these limits shall be
reviewed;
(vii) there shall be no restriction on the use of
any noncash method of operating the
account of a person including cheques,
demand drafts, credit or debit cards, mobile
wallets and electronic fund transfer
mechanisms or the like;
(viii) withdrawal from Automatic Teller Machines
(hereinafter referred to as ATMs) shall be
restricted to Rs.2,000/ per day per card up
to 18th November, 2016 and the limit shall
be raised to Rs.4,000/ per day per card
from 19th November, 2016;
(ix) any person who is unable to exchange or
deposit the specified bank notes in their
bank accounts on or before the 30th
December, 2016, shall be given an
opportunity to do so at specified offices of the
Reserve Bank or such other facility until a
later date as may be specified by it.
3. (1) Every banking company and every
Government Treasury referred to in subparagraph
(1) of paragraph 1 shall be closed for the transaction
of all business on 9th November, 2016, except the
preparation for implementing this scheme and
remittance of the specified bank notes to nearby
currency chests or the branches or offices of the
Reserve Bank and receipt of bank notes having legal
tender character.
(2) All ATMs, Cash Deposit Machines, Cash
Recyclers and any other machine used for receipt
and payment of cash shall be shut on 9th and 10th
November, 2016.
(3) Every bank referred to in subparagraph (1)
of paragraph 1 shall recall the specified bank notes
from ATMs and replace them with bank notes having
legal tender character prior to reactivation of the
machines on 11th November, 2016.
44
(4) The sponsor banks of White Label ATMs
shall be responsible to recall the specified bank notes
from the White Label ATMs and replacing the same
with bank notes having legal tender character prior
to reactivation of the machines on 11th November,
2016.
(5) All banks referred to in subparagraph (1) of
paragraph 1 shall ensure that their ATMs and White
Label ATMs shall dispense bank notes of
denomination of Rs.100/ or Rs.50/, until further
instructions from the Reserve Bank.
(6) The banking company referred to in sub
paragraph (1) of paragraph 1 and Government
Treasuries shall resume their normal transactions
from 10th November, 2016.
4. Every banking company referred to subparagraph
(1) of paragraph 1, shall at the close of business of
each day starting from 10th November, 2016, submit
to the Reserve Bank, a statement showing the details
of specified bank notes exchanged by it in such
format as may be specified by the Reserve Bank.
[F.No.10/03/2016Cy.I]
Dr. SAURABH GARG, Jt. Secy.”
(underlining by me)
The said Notification was thereafter followed by an Ordinance
th
issued by the President on 30 December, 2016 and subsequently an
Act of Parliament namely, the 2017 Act.
The Actual Controversy:
12. The contention of the leaned senior counsel for the petitioners is
twofold: firstly, that subsection (2) of Section 26 of the Act cannot be
interpreted as having a very wide import as it would then be lacking in
45
guidance and being unchanneled, would be arbitrary and in violation
of Article 14, and hence, unconstitutional. It was further contended
that if the provision has to be saved from being declared
unconstitutional, then the same has to be “read down” which means
that a restrictive interpretation must be given to the words of the
provision. The second contention is with regard to the exercise of
power by the Central Government by issuance of the Notification dated
th
8 November, 2016 and the manner in which such power was
exercised and the procedure followed. The aforesaid two contentions
shall be dealt with together as they are intertwined.
The Reserve Bank of India: Bulwark of the Indian Economy:
13. Before considering the aforesaid two contentions, it would be
useful to discuss the unique position that the Reserve Bank of India
holds in the Indian economy.
13.1 Shri Chidambaram cited a recent judgment of this Court in the
case of
Internet & Mobile Assn. of India vs. RBI (2020) 10
SCC 274 (“Internet and Mobile Assn. of India”) wherein one
of us, V. Ramasubramanian, J. while dealing with the
regulation of cryptocurrency and virtual currency (VC)
highlighted the importance of the Reserve Bank of India in the
Indian economy. The salient observations made in the said
judgment may be culled out as under:
46
a) That the Bank, established for the objects spelt out under
Section 3(1) of the Act, is vested with the duty to operate
the monetary policy framework in India; take over the
management of currency from the Central Government and
carry on the business of banking, in accordance with the
provisions of the Act.
b) That with a view to enable the Bank to perform the role
spelt out above, the Act authorises it to carry on and
transact businesses, as enlisted under Section 17 of the
Act; confers under Section 22, sole and exclusive right on
the Bank to issue bank notes in India, except in relation to
notes of denomination, Rs.1; recognises under Section 26
(1) that every note issued by the Bank shall be a legal
tender; vests with the Central Board of the Bank the power
to recommend to the Central Government to declare any
series of Bank notes of any denomination, to cease to be
legal tender, under Section 26 (2) of the Act; prohibits
under Section 38 any money from being put into
circulation by the Central Government, except through the
Bank. In short, it was held that the operation/regulation of
the credit/financial system of the country rests, almost
entirely, on the Bank.
47
c) That the Bank is the sole repository of power for the
management of currency in India. As regards the nature,
amplitude and inalienability of the power that the Bank
wields in the field of currency management, it was observed
that what the Bank can do in this regard, the executive
acting the aid of the Bank, is not adequately
dehors
equipped to do. Recognising the importance of the role
played by the Bank in matters pertaining to currency
management, this Court declared that any
observations/recommendations made by the Bank to the
Central Government in this regard, have to be accorded
due deference. The pertinent observations of the Court on
this aspect have been usefully extracted hereinunder:
“ 192. But as we have pointed out above, RBI is not
just any other statutory authority. It is not like a
stream which cannot be greater than the source.
The RBI Act, 1934 is a preconstitutional
legislation, which survived the Constitution by
virtue of Article 372(1) of the Constitution. The
difference between other statutory creatures and
RBI is that what the statutory creatures can do,
could as well be done by the executive. The power
conferred upon the delegate in other statutes can be
tinkered with, amended or even withdrawn. But the
power conferred upon RBI under Section 3(1) of the
RBI Act, 1934 to take over the management of the
currency from the Central Government, cannot be
taken away . The sole right to issue Bank notes in
India, conferred by Section 22(1) cannot also be
taken away and conferred upon any other Bank or
authority. RBI by virtue of its authority, is a
48
member of the Bank of International Settlements,
which position cannot be taken over by the Central
Government and conferred upon any other
authority. Therefore, to say that it is just like any
other statutory authority whose decisions cannot
invite due deference, is to do violence to the
scheme of the Act. In fact, all countries have
Central Banks/authorities, which, technically have
independence from the Government of the country.
To ensure such independence, a fixed tenure is
granted to the Board of Governors, so that they are
not bogged down by political expediencies. In the
United States of America, the Chairman of the
Federal Reserve is the second most powerful
person next only to the President. Though the
President appoints the sevenmember Board of
Governors of the Federal Reserve, in consultation
with the Senate, each of them is appointed for a
fixed tenure of fourteen years. Only one among
those seven is appointed as Chairman for a period
of four years. As a result of the fixed tenure of 14
years, all the members of Board of Governors
survive in office more than three Governments.
Even the European Central Bank headquartered in
Frankfurt has a President, VicePresident and four
members, appointed for a period of eight years in
consultation with the European Parliament.
Worldwide, central authorities/Banks are ensured
an independence, but unfortunately Section 8(4) of
the RBI Act, 1934 gives a tenure not exceeding five
years, as the Central Government may fix at the
time of appointment. Though the shorter tenure
and the choice given to the Central Government to
fix the tenure, to some extent, undermines the
ability of the incumbents of office to be absolutely
independent, the statutory scheme nevertheless
provides for independence to the institution as
such. Therefore, we do not accept the argument
that a policy decision taken by RBI does not
warrant any deference.”
49
d) This Court acknowledged the pivotal position of the Bank in
the economy of the country. That the powers of the Bank,
may be exercised by way of preventive as well as curative
measures. That such powers may be exercised to take pre
emptive action. However, such measures must be
proportional and must be prompted by some semblance of
any damage suffered by its regulated entities. The relevant
observations have been reproduced as under:
“ It is no doubt true that RBI has very wide
224.
powers not only in view of the statutory scheme of
the three enactments indicated earlier, but also in
view of the special place and role that it has in the
economy of the country. These powers can be
exercised both in the form of preventive as well as
curative measures. But the availability of power is
different from the manner and extent to which it
can be exercised. While we have recognised
elsewhere in this order, the power of RBI to take a
preemptive action, we are testing in this part of
the order the proportionality of such measure, for
the determination of which RBI needs to show at
least some semblance of any damage suffered by
its regulated entities. But there is none. When the
consistent stand of RBI is that they have not
banned VCs and when the Government of India is
unable to take a call despite several committees
coming up with several proposals including two
draft Bills, both of which advocated exactly
opposite positions, it is not possible for us to hold
that the impugned measure is proportionate.”
50
13.2 Shri Jaideep Gupta appearing for the Bank has brought to our
notice the following decisions to emphasize on the importance of
the Reserve Bank of India:
a) In
Joseph Kuruvilla Vellukunnel vs. The Reserve Bank
this Court observed that the
of India AIR 1962 SC 1371,
most important function of the Bank is to regulate the
banking system. The Bank has been described as a
Banker's Bank. Under the Act, the scheduled banks
maintain certain balances and the Bank can lend
assistance to those banks as a “lender of the last resort”.
The Bank has also been given certain advisory and
regulatory functions, but in its position as a central bank, it
acts as an agency for collecting financial information and
statistics. The Bank is also entrusted with the role of
advising the Government and other banks on financial and
banking matters, and for this purpose, the Bank keeps
itself informed of the activities and monetary position of
scheduled and other banks and inspects the books and
accounts of Scheduled banks and advises the Government
after inspection of the said books and accounts as to
whether a particular bank should be included in the
Second Schedule or not. That the Bank has been created as
a central bank with powers of supervision, advice and
51
inspection, over banks, particularly those desiring to be
included in the Second Schedule or those already included
in the Schedule. The Reserve Bank thus, safeguards the
economy and the financial stability of the country. This
Court in the said case also sounded a caveat in stating that
it cannot be said that the Reserve Bank can never act
mistakenly or even negligently.
b) Subsequently, in Peerless General Finance and
Investment Co. Ltd. vs. Reserve Bank of India (1992) 2
this Court once again recognized the status of the
SCC 343
Reserve Bank in the Indian economy. In the said case it
was observed that the Reserve Bank of India is a Banker’s
Bank and a creature of statute. That the Reserve Bank of
India has a large contingent of expert advice relating to the
matters affecting the economy of the entire country. It was
further observed that the Reserve Bank has an important
role in the economy and financial affairs of India and one of
its many important functions is to regulate the banking
system in the country.
The aforesaid discussion is relevant for the purpose of
interpreting subsection (2) of Section 26 of the Act. The said
provision clearly states that it is only on the recommendation of
52
the Central Board of the Bank, that any series of bank notes of
any denomination shall be declared to have ceased to be legal
tender.
Economic/Fiscal Policies: Interference by Courts
13.3 Before proceeding to interpret the said provision, it would be
necessary to consider another aspect of the matter which has
been emphasized by the learned Attorney General, i.e., with
regard to the Court’s deference to the economic and monetary
policies of the government and restraint that the Court must
exercise in interfering with the said policies, unless the same
are so irrational or unreasonable, so as to be declared to be
unconstitutional.
The above submission was made in the context of the
contention of the petitioners, that the decisionmaking process
in the present case was deeply flawed as it was contrary to the
scheme and procedure contained in subsection (2) of Section
26 of the Act and hence, this Court may review the same and
declare it to be in contravention, interalia , of statutory
provisions of the Act. The aforesaid contention was vehemently
opposed by learned Attorney General who submitted that courts
cannot sit in judgment over economic policy matters of the
53
Government. In this regard the following discussions could be
made.
Judicial Review of Economic Policy:
The Indian judiciary has consistently exercised
restraint with regard to judicial review of policy decisions. A few
instances on which such restraint has been demonstrated, have
been discussed as under:
(a) In this regard reliance was placed by the learned Attorney
General on a judgment of this Court in
State of Tamil
Nadu vs. National South Indian River Interlinking
Agriculturist Association 2021 SCC OnLine SC 1114 .
(b) In Rustom Cavasjee Cooper vs. Union of India AIR 1970
it was observed
SC 565 (“Bank Nationalization Case”)
that this Court was not the forum where conflicting policy
claims may be debated; it is only required to adjudicate the
legality of a measure which has little to do with relative
merits of different political and economic theories.
(c) This Court in the case of
State of M.P. vs. Nandlal
Jaiswal (1986) 4 SCC 566 observed that the Government,
as laid down in Permian Basin Area Rate Cases, 20 L Ed
54
, is entitled to make pragmatic adjustments which
(2d) 312
may be called for by particular circumstances. The court
cannot strike down a policy decision taken by the
Government merely because it feels that another policy
decision would have been fairer or wiser or more scientific
or logical. That courts could interfere only if the policy
decision is patently arbitrary, discriminatory or mala fide.
(d) In Peerless General Finance and Investment Co. Ltd. vs.
RBI (1992) 2 SCC 343, this Court dithered to indulge itself
with matters involving domains of the executive and the
legislature concerning economic policy or directions given
by Reserve Bank of India. This Court observed that it is
unbecoming of judicial institutions to interfere with
economic policy which is the prerogative of the
Government, in consultation with experts in the field and
that it is not the function of the courts to sit in judgment
over matters of economic policy and it must necessarily be
left to the expert bodies.
(e) The validity of the decision of the Government to grant
licence under the Telegraph Act, 1885 to nongovernment
companies for establishing, maintaining and working of
telecommunication system of the country pursuant to
55
government policy of privatisation of telecommunications
was challenged in Delhi Science Forum vs. Union of
India AIR 1996 SC 1356 . It was contended that
telecommunications were a sensitive service which should
always be within the exclusive domain and control of the
Central Government and under no situation should be
parted with by way of grant of license to nongovernment
companies and private bodies. While rejecting this
contention, this Court observed that:
“... The national policies in
respect of economy, finance,
communications, trade, telecommunications
and others have to be decided by Parliament
and the representatives of the people on the
floor of Parliament can challenge and
question any such policy adopted by the
ruling Government....”
(f) The reluctance of the court to judicially examine the merits
of economic policy was again emphasised in
Bhavesh D.
Parish vs. Union and India (2000) 5 SCC 471 . This Court
opined that in the context of the changed economic
scenario the expertise of people dealing with the subject
should not be lightly interfered with. The consequences of
such an interdiction can have largescale ramifications and
can put the clock back for a number of years. That in
dealing with economic legislations, this Court, while not
56
jettisoning its jurisdiction to curb arbitrary action or
unconstitutional legislation, should interfere only in those
few cases where the view reflected in the legislation is not
possible to be taken at all.
(g) Buttressing the same aspect, in Balco Employees’ Union
(Regd) vs. Union of India AIR 2002 SC 350 , it was held
that in a democracy, it is the prerogative of each elected
Government to follow its own policy. This Court observed
that often a change in Government may result in the shift
in focus or change in economic policies and any such
change may result in adversely affecting some vested
interests. Unless any illegality is committed in the
execution of the policy or the same is contrary to law or
malafide , a decision bringing about change cannot per se
be interfered with by the court.
(h) In Directorate of Film Festivals vs. Gaurav Ashwin Jain
, it was observed that the scope of
AIR 2007 SC 1640
judicial review of governmental policy is now well defined
and the courts do not and cannot act as Appellate
Authorities examining the correctness, suitability and
appropriateness of a policy. This Court was also of the view
that Courts are not Advisors to the executive on matters of
57
policy which the executive is entitled to formulate, thus, the
scope of judicial review when examining a policy of the
government is to check whether it violates the fundamental
rights of the citizens or is opposed to the provisions of the
Constitution, or opposed to any statutory provision or
manifestly arbitrary. It was thus held that the Courts
cannot interfere with policy either on the ground that it is
erroneous or on the ground that a better, fairer or wiser
alternative is available. Legality of the policy, and not the
wisdom or soundness of the policy, is the subject of judicial
review.
(i) In the case of
DDA vs. Joint Action Committee, Allottee
of SFS Flats AIR 2008 SC 1343 , the Supreme Court held
as under:
“An executive order termed as a policy
decision is not beyond the pale of judicial review.
Whereas the superior courts may not interfere with
the nittygritty of the policy, or substitute one by the
other but it will not be correct to contend that the
court shall lay its judicial hands off, when a plea is
raised that the impugned decision is a policy
decision. Interference therewith on the part of the
superior court would not be without jurisdiction as
it is subject to judicial review.”
“Broadly, a policy decision is subject to judicial
review on the following grounds:
(a) if it is unconstitutional;
58
(b) if it is dehors the provisions of the Act and
the regulations;
(c) if the delegate has acted beyond its power
of delegation;
(d) if the executive policy is contrary to the
statutory or a larger policy.”
(j) In Small Scale Industrial Manufacturers Association
(Regd.) vs. Union of India (2021) 8 SCC 511, a writ
petition was preferred under Article 32 of the Constitution
of India by the SmallScale Industrial Manufactures
Association, Haryana for an appropriate writ, direction or
order directing the Union of India and others to take
effective and remedial measures to redress the financial
strain faced by the industrial sector, particularly, MSMEs
due to the COVID19 pandemic. This Court while
considering the submissions of the parties on the issue of
whether economic and/or policy decisions taken by the
Government in their executive capacity are amenable to the
jurisdiction of courts, held that it was the legality of the
policy, and not the wisdom or soundness of the policy, that
can be the subject of judicial review. This Court observed
that courts do not play an advisory role to Government and
economic policy decisions should be left to experts. This
Court observed that it is not normally within the domain of
59
any Court to weigh the pros and cons of the policy or to
scrutinize it and test the degree of its beneficial or equitable
disposition for the purpose of varying, modifying or
annulling it, based on howsoever sound and good
reasoning. It is only when a policy is arbitrary and violative
of any Constitutional, statutory or any other provisions of
law, that the Courts can interfere.
13.4 What emerges from an understanding of the decisions referred
to above on the subject of judicial review of economic policy
may be culled out as under:
i) That the court is not to sit in judgment over the merits of
economic or financial policy;
ii) That the scope of interference by a court is limited to
instances where the impugned scheme or legislation in the
economic arena has been enacted in violation of any
Constitutional or statutory provisions;
iii) That the court may not undertake a foray into the merits,
demerits, sufficiency or lack thereof, success in realising
the objectives etc., of an economic policy, as such an
analysis is the prerogative of the Government in
consultation with experts in the field.
60
13.5 Being mindful of the limited scope of judicial review permissible
in matters concerning economic policy decisions, I shall limit
my examination of the matter to such extent as is necessary for
the purpose of determining whether the process concluding in
the issuance of the impugned notification was correct or as
being contrary to subsection (2) of Section 26 of the Act and
allied aspects of the case. It may be stated at this juncture that
the said aspect of the matter is not one of form but of
substance . Therefore, examining this aspect of the matter
would not amount to interfering with, or sitting in judgment
over the merits of the policy of demonetisation, and is therefore
well within the limits of the Lakshmanrekha that this Court has
carefully drawn for itself.
14. Bearing in mind the important role played by the Bank in
shaping the economy of the country, and also the principle that the
Constitutional Courts should refrain from interfering in financial and
economic policy decisions of the government unless such policies are
so irrational as to warrant interference and also having regard to the
provisions of the Constitution, the relevant statutes, and
considerations of public interest, the two contentions raised by the
petitioners shall now be considered in analysing and interpreting
Section 26 (2) of the Act.
61
Section 26 of the Act: Interpretation:
bird’s eye view of my analysis and conclusions has been expressed in a
tabular form as under:
| Sl.<br>No. | Parameters<br>for<br>distinction | When the proposal for<br>demonetisation<br>originates by way of a<br>recommendation by the<br>Central Board of the<br>Bank: | When the proposal for<br>demonetisation<br>originates from the<br>Central Government: |
|---|
| 1 | . Role of the<br>Central<br>Government | The Central Government<br>may on consideration of<br>the Bank’s<br>recommendation, accept<br>the same and act on<br>such acceptance by<br>issuing a notification in<br>the Gazette of India<br>declaring that “any” series<br>of “any” denomination has<br>ceased to be legal tender;<br>or<br>the Central Government is<br>also free to decide in its<br>wisdom that it is not<br>expedient to accept the<br>recommendation of the<br>Bank to declare that “any”<br>series of “any”<br>denomination has ceased<br>to be legal tender. In the<br>event that the<br>recommendation is not<br>accepted, no further<br>action is required to be<br>taken by the Central<br>Government. | The Central Government<br>initiates the proposal<br>for demonetisation. It<br>consults the Bank on the<br>same and seeks the<br>Bank’s advice. On<br>receiving the Bank’s<br>advice/opinion on the<br>proposed measure, the<br>Central Government shall<br>consider the same.<br>Consultation with the<br>Central Board of the<br>Bank does not mean<br>concurrence. The<br>Central Government is<br>free to give effect to its<br>proposal for<br>demonetisation,<br>notwithstanding the<br>opinion of the Bank. |
62
| Sl.<br>No. | Parameters<br>for<br>distinction | When the proposal for<br>demonetisation<br>originates by way of a<br>recommendation by the<br>Central Board of the<br>Bank: | When the proposal for<br>demonetisation<br>originates from the<br>Central Government: |
|---|
| 2 | . Role of the<br>Bank | The Central Board of the<br>Bank makes a<br>recommendation to the<br>Central Government to<br>declare that “any” series of<br>“any” denomination has<br>ceased to be legal tender. | The Central Government<br>consults the Bank<br>seeking advice on its<br>proposal to carry out<br>demonetisation. The<br>Bank is bound to render<br>its independent advice<br>and opinion on the<br>same. |
| 3 | . Extent of<br>demonetisation<br>that may be<br>proposed and<br>carried out | Demonetisation of “any”<br>series of “any”<br>denomination, has been<br>interpreted to mean<br>“specified” series of<br>“specified”<br>denomination. Otherwise,<br>it would be a case of<br>excessive vesting of powers<br>with the Bank which would<br>be arbitrary and<br>unconstitutional. | “All” series of “all”<br>denominations may be<br>declared at once, to have<br>ceased to be legal tender<br>having regard to the<br>situation faced by the<br>Central Government. |
| 4 | . Considerations<br>for proposed<br>measure of<br>demonetisation<br>(Illustrative) | i) To promote general<br>health of the Country’s<br>economy;<br>ii) Fiscal policy<br>considerations;<br>iii) Monetary policy<br>considerations.<br>Considerations which<br>could guide the Bank’s<br>recommendation are<br>limited or narrow in<br>compass. | i) Sovereignty and<br>Integrity of India;<br>ii) Security of the State;<br>iii) To promote general<br>health of the<br>Country’s economy;<br>iv) Other aspects of<br>governance.<br>Considerations which<br>could guide the Central<br>Government’s proposal to<br>carry out demonetisation<br>are broad or wide. |
| 5 | . Process/Route<br>to be followed | Issuance of a Notification<br>in the Gazette of India, | Enactment of a<br>Parliamentary |
63
| Sl.<br>No. | Parameters<br>for<br>distinction | When the proposal for<br>demonetisation<br>originates by way of a<br>recommendation by the<br>Central Board of the<br>Bank: | When the proposal for<br>demonetisation<br>originates from the<br>Central Government: |
|---|
| to carry out<br>demonetisation | indicating therein that<br>“any” specified series of<br>“any” specified<br>denomination has ceased<br>to be legal tender, from<br>such date as specified in<br>the Notification. | Legislation, which may or<br>may not be preceded by<br>an Ordinance issued by<br>the President of India. |
| 6 | . Applicability of<br>subsection (2)<br>of section 26 of<br>the Reserve<br>Bank of India<br>Act, 1934 | Notification issued by the<br>Central Government, giving<br>effect to the Bank’s<br>recommendation, shall be<br>on the strength of sub<br>section (2) of section 26 of<br>the Act. | Subsection (2) of section<br>26 of the Act is not<br>applicable.<br>Hence, a notification in<br>the Gazette of India is not<br>the manner in which<br>demonetisation is to be<br>carried out, when the<br>proposal for the same<br>originates from the<br>Central Government. |
| 15.1 | | Section 26 of the Act deals with legal tender of notes. Sub |
|---|
| section (1) of Section 26 declares that every bank note shall be a<br>legal tender at any place in India in payment or on account for<br>the amount expressed therein, and shall be guaranteed by the<br>Central Government. There are two aspects to this provision:<br>the first is, every bank note shall be a legal tender in any place<br>in India and, secondly, that the Central Government shall<br>guarantee the amount expressed on the bank note. The<br>expression “bank note” is defined in Section 2 (aiv) of the Act to | | |
| | expression “bank note” is defined in Section 2 (aiv) of the Act to |
64
| mean, a bank note issued by the Bank whether in physical or<br>digital form, under Section 22 of the Act. Section 22 of the Act<br>categorically states that the Bank has the sole right to issue<br>bank notes in India, on the recommendations of the Central<br>Board of the Bank. The provision further provides that the Bank<br>has the sole right to issue currency notes of the Government of<br>India. The provisions of the Act would be applicable in a like<br>manner, to all currency notes of the Government of India,<br>issued either by the Central Government or by the Bank, as if<br>such currency notes were bank notes. | | mean, a bank note issued by the Bank whether in physical or |
|---|
| | |
| 15.2 | | Further, it is only on the recommendation of the Central Board |
| of the Bank that the Central Government may direct the non<br>issue or discontinuation of the issue of bank notes of such<br>denominational value as it may specify in this behalf. Even the<br>design, form and material of bank notes has to be approved by<br>the Central Government, after considering the recommendations<br>made by the Central Board of the Bank. Thus, the scheme of the<br>Act envisages that the issuance of the bank notes, the various<br>denominations of the bank notes, the design and form of the<br>bank notes, are all to be specified by the Central Government<br>only on the recommendation of the Central Board of the Bank.<br>Therefore, on perusal of Sections 24, 25 and 26 of the Act, it is<br>observed that it is only on the recommendation of the Central | | |
| | observed that it is only on the recommendation of the Central |
65
| Board of the Bank that the Central Government would act qua<br>the aforestated matters, on the strength of the respective<br>provisions. It need not be emphasised that the Bank, being the<br>only institution, which carries out the function of currency<br>management and formulates credit rules in the country, is<br>recognised as having a say in the issuance of currency notes,<br>and also in specifying the denominations of the notes, as well as<br>the design and form of the bank notes. | Board of the Bank that the Central Government would act | qua |
|---|
| 15.3 Further, although, subsection (1) of Section 26 states that<br>every Bank note shall be legal tender at any place in India, it<br>acquires legal sanctity because the Central Government has<br>guaranteed the bank note which has legal tender. Thus, a bank<br>note statutorily has dual characteristics when it is issued by the<br>Bank, namely, being a legal tender coupled with the guarantee<br>of the Central Government and the said qualities go hand in<br>hand. This would mean that it is only when the Bank which has<br>the sole right to issue a currency note in India, issues the note<br>and the same has been guaranteed by the Central Government,<br>that such a note is legal tender. Therefore, the Issue<br>Department of the Bank is not subject to any liabilities other<br>than the liabilities under Section 34 of the Act. Section 34 of the<br>Act states that an amount equal to the total of the amount of<br>the currency notes of the Government of India and bank notes | | |
| the currency notes of the Government of India and bank notes | |
66
for the time being in circulation, would be the liability of the
Issue Department. This would imply that as long as the bank
notes issued by the Bank are in circulation, the liability of the
Government of India would continue. The said liability is owing
to the guarantee given by the Central Government in sub
section (1) of Section 26 which is in the nature of a statutory
guarantee.
first question that would arise is, whether, a bank note which
has ceased to be a legal tender on the issuance of a notification
by the Central Government would also cease to have the
guarantee of the Central Government. In other words, whether
the guarantee by the Central Government, would continue
despite the bank note ceasing to be a legal tender. The answer is
in the affirmative, for, a bank note may cease to be a legal
tender between citizens but cannot cease to have the guarantee
of the Central Government, so long as the liability of the Issue
Department continues. The liability of the Issue Department of
the Bank is coextensive with the time period within which a
bank note which has ceased to be a legal tender is exchanged at
a notified bank. It is because of this reason that a bank note of
any denomination which is demonetised or is declared to have
ceased to be a legal tender, can be exchanged as indicated in
67
the notification issued by the Central Government so that the
bearer of the bank note receives an equivalent amount as that
expressed in the note which has ceased to be a legal tender or
demonetised. Therefore, even though such demonetised
currency would cease to be legal tender, the same could be
exchanged in a bank specified by the Reserve Bank owing to the
guarantee of the Central Government. If the guarantee of the
Central Government ceases on demonetisation, then the same
cannot be exchanged by the bearer of such bank notes. This
has also been the argument of learned senior counsel Shri
Shyam Divan.
recommendation of the Central Board of the Bank, the Central
Government may, by notification in the Gazette of India, declare
that with effect from such date as specified in the notification,
any series of bank notes of any denomination shall cease to be a
legal tender, save at such office or agency of the Bank and to
such extent as may be specified in the said notification. The
Central Government derives the power to issue a notification in
the Gazette only on the recommendation of the Central Board of
the Bank. The issuance of such a notification is an executive act
which is backed by the recommendation of the Central Board of
the Bank which has been accepted by the Central Government.
68
| The notification has to indicate the date from which any series<br>of bank notes of any denomination shall cease to be a legal<br>tender, save at such office and to such extent as may be<br>specified in the notification. | The notification has to indicate the date from which any series | |
|---|
| 15.6 The essential ingredients of subsection (2) of Section 26 of the<br>Act can be epitomised as under: | | |
| i) on the recommendation of the Central Board of the<br>Bank; | |
| ii) the Central Government by notification in the Gazette<br>of India; | |
| iii) may declare any series of bank notes of any<br>denomination to cease to be legal tender; | |
| iv) with effect from such date as may be specified in the<br>notification; | |
| v) to such extent as may be specified in the notification; | |
| Therefore, under subsection (2) of Section 26 of the<br>Act, the Central Government would act only on the<br>recommendation made by the Central Board of the Bank,<br>which is the initiator of demonetisation of bank notes. | |
| 15.7 Learned Attorney General made a pertinent submission that it<br>is not necessary that only on a recommendation of the Central | | |
69
Board of the Bank, the Central Government can demonetise any
currency. That the Central Government has the power or
jurisdiction to demonetise any bank note by the issuance of a
gazette notification. He further contended that the powers of the
Central Government cannot be denuded to such an extent that
unless and until a recommendation of the Central Board of the
Bank is made to the Central Government, the latter cannot
demonetise any currency. According to learned Attorney
General, if such a strict interpretation is given to subsection (2)
of Section 26, it would nullify the power of the Central
Government to demonetise any bank note, having regard to the
economic conditions of the country, the financial health of the
economy and the monetary policy of the Government. It was
submitted that the provision must be so interpreted so as to
give a free play in the joints and empower the Central
Government to issue a notification in the Gazette of India, in
order to demonetise any bank note. He further contended that
the requirement of recommendation of the Central Board of the
Bank in order to enable the Central Government to issue a
notification to demonetise any currency would imply that the
initiation of demonetisation must only be from the Central
Board of the Bank and that the Central Government has no
power to initiate such an action of demonetisation.
70
15.8 I find considerable force in the contention of the learned
Attorney General inasmuch as the Central Government cannot
be said to be without powers in initiating demonetisation of
bank notes. This is on the strength of Entry 36 of List I of the
Seventh Schedule of the Constitution. The Central Government
is not just concerned with the financial health of the country as
well as its economy, but it is also concerned with the
sovereignty and integrity of India; the security of the State; the
defence of the country; its friendly relations with foreign
countries; internal and external security and various other
aspects of governance. On the other hand, the Bank is only
concerned with the regulation of currency notes, monetary
policy framework, maintaining price stability and allied matters.
Therefore, if the Central Government is of the considered
opinion that in order to meet certain objectives such as the ones
stated in the impugned notification, namely, to eradicate black
money, fake currency, terror funding etc., it is necessary to
demonetise the currency notes in circulation, then the Central
Government may initiate a proposal for demonetisation.
15.9 The second prong of the Learned Attorney General’s contention
qua the interpretation of subsection (2) of Section 26 of the Act
was that the Central Government has the power to demonetise
not just any one series of currency of any one denomination but
71
it has the power to demonetise all series of currencies of all
denominations at a time. It was argued that the expression
“any” in subsection (2) of Section 26 of the Act must mean “all”.
15.10 Per contra, it was the submission of the learned senior counsel
for the petitioners that, as the said provision stands, in the
absence of there being any guidance the power of the
visàvis
Central Government to issue a notification to demonetise the
currency notes in circulation and in order to save such measure
from the vice of unconstitutionality, the expression “any series”
and “any denomination” in subsection (2) of Section 26 of the
Act must be restricted to mean “one series” and “one
denomination”, respectively. Otherwise, it could result in
arbitrary exercise of power. He further contended that if sub
section (2) of Section 26 of the Act is not read down in this
context, it would confer unguided and arbitrary power on the
executive Government and it would amount to impermissible
delegation of legislative powers.
15.11 It was further contended by Shri Chidambaram that
demonetisation is resorted to in rare and exceptional
circumstances and there are two justifiable reasons for which
demonetisation could be resorted to, namely,
72
1) to weed out denominations of currency that are in disuse or
are practically unusable;
2) to get rid of currency which has become worthless in value
because of hyperinflation.
According to learned senior counsel for the petitioners, if
any demonetisation of currency has to take place, and if the
power of the Central Government is not channelised or
restricted by reading down subsection (2) of Section 26 of the
Act, it would result in arbitrariness and unconstitutionality.
Therefore, to save it from the vice of arbitrariness and
unconstitutionality, it is necessary to read down the provision in
the following two respects:
a) the Central Government has no power to demonetise any
currency note except on the recommendation of the Central
Board of the Bank under subsection (2) of Section 26 of
the Act, and;
b) the expression “any” in subsection (2) of Section 26 of the
Act must be restricted to be “any one”, that is, “one series”
or “one denomination” of bank notes. That the addition of
the words “any series” before the words “of bank notes of
any denomination” limits the power of the Government to
declare only a specified series of notes as no longer being a
73
| legal tender. Thus, “any series” means any specified series<br>and not “all series” of notes of a given denomination. |
|---|
| 15.12 Since I have accepted the contention of the learned Attorney<br>General appearing for Union of India visàvis the power of the<br>Central Government for initiating the process of demonetisation,<br>the next question would be, whether, the Central Government<br>can, on initiating the process of demonetisation, proceed to<br>issue a gazette notification to demonetise any or all series of any<br>or all denomination of bank notes, on the strength of sub<br>section (2) of Section 26 of the Act. Consideration of this issue<br>would also answer the contention of learned senior counsel for<br>the petitioners regarding subsection (2) of Section 26 of the Act<br>being unguided and arbitrary in nature and hence,<br>unconstitutional. To this end, the following aspects have to be<br>examined: | |
| (a) Whether demonetisation can be initiated and carried but by<br>the Central Government by issuing a notification in the<br>Gazette of India as per subsection (2) of Section 26 of the<br>Act? |
| (b) Extent of the Central Government’s power to carry out<br>demonetisation, i.e., whether “all series” of “all<br>denominations” may be demonetised. |
74
| 15.13 As held hereinabove, the proposal for demonetisation can<br>emanate either from the Central Government or from the<br>Central Board of the Bank. It is however necessary to contrast<br>the proposal for demonetisation initiated by the Central<br>Government, with that initiated by the Central Board of the<br>Bank. When the Central Board of the Bank recommends<br>demonetisation, it is in my view, only for a particular series of<br>bank notes of a particular denomination as specified in the<br>recommendation made under subsection (2) of Section 26 of<br>the Act. The word “any” in subsection (2) of Section 26 cannot<br>be read to mean “all”. If read as “specified” or “particular” as<br>against all, in my view, it would not suffer from arbitrariness or<br>suffer from unguided discretion being given to the Central Board<br>of the Bank. | |
|---|
| On the other hand, in my view, the Central Government<br>has the power to demonetise all series of bank notes of all<br>denominations, if the need for such a measure arises. It cannot<br>be restricted in such powers in such manner as the Central<br>Board of the Bank is, under the above provision. This is because<br>such power is not exercised under subsection (2) of Section 26<br>of the Act but is exercised notwithstanding the said provision by<br>the Central Government. Therefore, demonetisation of bank<br>notes at the behest of the Central Government is a far more |
75
| serious issue having wider ramifications on the economy and on<br>the citizens, as compared to demonetisation of bank notes of a<br>given series of a given denomination on the recommendation of<br>the Central Board of the Bank by issuance of a gazette<br>notification by the Central Government. |
|---|
| Therefore, in my considered view, the powers of the Central<br>Government being vast, the same have to be exercised only<br>through a plenary legislation or a legislative process rather than<br>by an executive act by the issuance of a notification in the<br>Gazette of India. It is necessary that the Parliament which<br>consists of the representatives of the People of this country,<br>discusses the matter and thereafter approves and supports the<br>implementation of the scheme of demonetisation. |
| 15.14 The Central Government, as already noted above, could have<br>several compulsions for initiating demonetisation of the bank<br>notes already in circulation in the economy, and it could do so<br>even in the absence of a recommendation, as per subsection (2)<br>of Section 26 of the Act, of the Central Board of the Bank. On its<br>proposal to demonetise the bank notes, the advice/opinion of<br>the Central Board of the Bank which has to be consulted may<br>not always be in support of the proposal of the Central<br>Government as in the year 1978. The Central Board of the Bank<br>may give a negative opinion or a concurring opinion. In either of | |
76
| the situations, the Central Government may proceed to<br>demonetise the bank notes but only through a legislative<br>process, either through an Ordinance followed by a legislation, if<br>the Parliament is not in session; or by a plenary legislation<br>before the Parliament and depending upon the passage of the<br>Bill as an Act, carry out its proposal of demonetisation. Of<br>course, depending upon the urgency of the situation and<br>possibly to maintain secrecy, the option of issuance of an<br>Ordinance by the President of India and the subsequent<br>enactment of a law is always available to the Central<br>Government by convening the Parliament. Such demonetisation<br>of currency notes at the instance of the Central Government<br>cannot be by the issuance of an executive notification. The<br>reasons for stating so are not far to see – | |
|---|
| (i) Firstly, because the Central Government is not acting under<br>subsection (2) of Section 26 of the Act. When the Central<br>Government initiates the process of demonetisation it is de hors<br>subsection (2) of Section 26 of the Act. |
| (ii) Secondly, the Central Government has the power to demonetise<br>all series of bank notes of all denominations unlike the narrower<br>powers vested with the Central Board of the Bank under the<br>aforesaid provision, if the situation so arises. |
77
(iii) Thirdly, the Parliament which is the fulcrum in our democratic
system of governance, must be taken into confidence. This is
because it is the representative of the people of the Country. It
interests of the citizens of the Country. The Parliament enables
its citizens to participate in the decisionmaking process of the
| government. | A Parliament is often referred to as a | |
|---|
; it is the basis for democracy. A Parliament
miniature”
provides representation to the people of a country and makes
| their voices heard. | | | Without a Parliament, a democracy cannot |
|---|
thrive; every democratic country needs a Parliament for the
smooth conduct of its governance and to give meaning to
democracy in the true sense. The Parliament which is at the
centre of our democracy cannot be left aloof in a matter of such
importance. Its views on the subject of demonetisation are
critical and of utmost importance.
Dr. Subhash C. Kashyap in his book, “Parliamentary
rd
Procedure: Law, Privileges, Practice and Precedents”, 3 Ed.,
(2014), while discussing the functions of the Parliament has
stated as follows:
“Over the years, the functions of Parliament
have no longer remained restricted merely to
legislating. Parliament has, in fact emerged as
a multifunctional institution encompassing in
78
its ambit various roles viz. developmental,
financial and administrative surveillance,
grievance ventilation and redressal, national
integrational, conflict resolution, leadership
recruitment and training, educational and so
on. The multifarious functions of Parliament
make it the cornerstone on which the edifice
of Indian polity stands and evokes admiration
from many a quarter.”
It is in the above context that it is observed that on a
matter as critical as demonetisation, having a bearing on
nearly 86% of the total currency in circulation, the same could
not have been carried out by way of issuance of an executive
notification. A meaningful discussion and debate in the
Parliament on the proposed measure, would have lent
legitimacy to the exercise.
When an Ordinance is issued or a Bill is introduced in the
Parliament and enacted as a law, it would mean that it has been
done by taking into confidence the Members of Parliament who
are the representatives of the people of India, who would
meaningfully discuss on the proposal for demonetisation made
by the Central Government. In such an event, demonetisation
would be by an Act of Parliament and not a measure carried out
by the issuance of a gazette notification by the Central
Government in exercise of its executive power.
Such demonetisation through an Ordinance or a legislation
through the Parliament would be “notwithstanding what is
79
contained in subsection (2) of Section 26 of the Act”. This is
because in such a situation, the Central Government is not
acting on the basis of a recommendation received from the
Central Board of the Bank but it would be proposing the
demonetisation. Precedent for the same may be found in the
earlier demonetisations which were also through a legislative
process and not through the issuance of a gazette notification
by the Executive/Central Government. When the process of
demonetisation is carried out through a Parliamentary
enactment and after being the subject of scrutiny by the
Members of Parliament, any opinion sought by the Central
Government from the Central Board of the Bank before
initiating the promulgation of the Ordinance or placing the Bill
before the Parliament may also be additional material which
could be considered by the Parliament. When the Central
Government initiates the proposal for demonetisation and
thereafter consults the Bank on such proposal, then it could be
said that the necessary safeguards were taken, as the Central
Government would be fortified in its proposal for demonetisation
having taken the advice of not only an expert body but the
highest financial authority in the country, which handles not
only the monetary policy but is also the sole authority vested
with the power of issuance of bank notes or currency notes in
80
| India. When the Central Government proposes to demonetise<br>the currency notes, not only the view of the Central Board of the<br>Bank is relevant and important but also that of the<br>representatives of the people in the Parliament. The Members of<br>the Parliament hold the sovereign powers of “We, the People of<br>India” in trust. |
|---|
| 15.15 Of course, by contrast, there would be no difficulty if the<br>proposal for demonetisation is initiated by the Central Board of<br>the Bank by making a recommendation under subsection (2) of<br>Section 26 of the Act, which the Central Government in its<br>wisdom may consider and either act upon the recommendation<br>or for good reason, decline to act on the same. That is a matter<br>left to the wisdom of the Central Government. However, as noted<br>above such recommendation by the Bank cannot relate to “all”<br>series of a denomination or “all” series of “all” denominations of<br>bank notes. That is a prerogative of only the Central<br>Government. | |
| 15.16 It is nobody’s case that the impugned gazette notification dated<br>8th November, 2016, of the Central Government was published<br>on the initiation of the proposal of demonetisation by the<br>Central Board of the Bank. The proposal for demonetisation was<br>initiated by the Central Government by a letter dated 7th<br>November, 2016 addressed by the Finance Secretary to the | |
81
| Governor of the Bank. The Central Government, having<br>“obtained” the advice of the Bank on its proposal, proceeded to<br>issue the impugned gazette notification on the very next day,<br>dated 8th November, 2016. The same was followed by an<br>Ordinance and thereafter, an enactment was passed. | | |
|---|
| | |
| 15.17 | | The contention of the petitioners could now be considered and |
| answered. The words in subsection (2) of Section 26 of the Act<br>would have to be interpreted/construed in their normal<br>parlance. It is already observed that issuance of such a<br>notification under subsection (2) of Section 26 of the Act must<br>be preceded by a recommendation of the Central Board of the<br>Bank and such recommendation is a condition precedent. The<br>Central Government in its wisdom may accept the<br>recommendation of the Central Board of the Bank and issue a<br>notification in the Gazette of India or it may decline to do so.<br>This position is evident from the use of the word “may” in sub<br>section (2) to Section 26 of the Act. However, what is significant<br>is that if demonetisation of any bank note is to take place under<br>subsection (2) of Section 26 of the Act, it is only by issuance of<br>a notification in the Gazette of India and not by any other<br>method or manner. In other words, the Central Board of the<br>Bank must first initiate the process by recommending to the<br>Central Government to declare that any series of bank notes of | | |
| | Central Government to declare that any series of bank notes of |
82
any denomination shall cease to be a legal tender by the
issuance of a notification. If the Central Government accepts the
recommendation of the Central Board of the Bank, it issues a
notification in the Gazette of India carrying out the same, which
is in the nature of an executive function and the publication of
the notification in the Gazette of India is only a ministerial act.
initiation of the process of demonetisation and the exercise of
| power | originates | | from the Central Board of the Bank which has |
|---|
to recommend to the Central Government and the latter may
accept the recommendation and in such event it would issue a
gazette notification. In case the Central Government does not
accept the recommendation, there will be no further action on
the recommendation of the Central Board of the Bank. Thus,
subsection (2) of the Section 26 of the Act has inherently a very
restricted operation, and is limited only to the initiation of
demonetisation by the Central Board of the Bank and making a
recommendation in that regard. Issuance of the notification, in
the Gazette of India, would imply that the Central Government
has accepted the recommendation of the Central Board of the
Bank and therefore, has declared that the specified series of
Bank notes of the specified denomination shall cease to be legal
tender from the date to be specified in the notification. The
83
| operation of subsection (2) of Section 26 of the Act is thus in a<br>very narrow compass and it is reiterated that the said power is<br>exercised by the Central Government on acceptance of the<br>recommendation of the Central Board of the Bank. | | | (2) of Section 26 of the Act is thus in a |
|---|
| | | |
| 15.19 | | The reason as to why a wide interpretation as contended by the | |
| Union of India cannot be given to subsection (2) of Section 26<br>of the Act is because a plain reading of the provision as well as a<br>contextual understanding, would suggest that it is only when<br>the initiation of a proposal for demonetisation is by the Central<br>Board of the Bank by making a recommendation to the Central<br>Government that the provision would apply. | | | |
| | | |
| 15.20 This position, however, does not imply that the Central | | | |
| Government is bereft of any power or jurisdiction to declare any<br>bank note of any denomination to have ceased to be a legal<br>tender. As already observed while accepting the contention of<br>learned Attorney General, the Central Government in its wisdom<br>may also initiate the process of demonetisation as has been<br>done in the instant case. But what is important and to be noted<br>is that the said power cannot be exercised by the mere issuance<br>of an executive notification in the Gazette of India. In other<br>words, when the proposal to demonetise any currency note is<br>initiated by the Central Government with or without the | | | |
| | initiated by the Central Government with or without the | |
| the | initiation | of a proposal for demonetisation is by the Central |
|---|
84
| concurrence of the Central Board of the Bank, it is not an<br>exercise of the executive power of the Central Government<br>under subsection (2) of Section 26 of the Act. In such a<br>situation, as already held, the Central Government would have<br>to resort to the legislative process by initiating a plenary<br>legislation in the Parliament. | concurrence of the Central Board of the Bank, it is | not | an |
|---|
| 15.21 What is being emphasised is that the Central Government<br>cannot act in isolation in such matters. The Central<br>Government has to firstly, take the opinion of the Central Board<br>of the Bank for the proposed demonetisation. The Central Board<br>of the Bank may not accept the proposal of the Central<br>Government or may partially concur with the proposal on<br>specific aspects. In fact, in 1978, when the then Governor of the<br>Bank did not accept the proposal of the Central Government to<br>demonetise Rs.5,000/ and Rs.10,000/ bank notes, the Central<br>Government initiated the said process through the Parliament<br>and this culminated in the passing of the Act of 1978. In<br>drafting the said legislation, the expert assistance of two officers<br>of the Bank was taken so as to fortify the legislation. The said<br>legislation was also challenged before this Court in the case of<br>Jayantilal Ratanchand Shah, Devkumar Gopaldas<br>Aggarwal vs. Reserve Bank of India (1996) 9 SCC 650 | | | |
| Aggarwal vs. Reserve Bank of India (1996) 9 SCC 650 | | |
85
| whereby the | vires | of the 1978 Act |
|---|
th
Court vide judgement dated 9 August, 1996, after eighteen
years of its enactment.
15.22 The reasons as to why the Central Government cannot
unilaterally issue a gazette notification but has to resort to a
legislation when it initiates the proposal for demonetisation
have already been discussed. The Central Government may
have very valid objectives to do so, as in the instant case, i.e., in
order to eradicate black money, fake currency and prevent
currency from being utilized for terror funding. But, those
objects would not be the objects with which the Central Board
of the Bank may make a recommendation under subsection (2)
of Section 26 of the Act. The reason being, the Central
Government would view the entire scheme of demonetisation in
a larger perspective, having several objects in mind and in the
interest of the sovereignty and integrity of the India, the
security of the State, the financial health of the economy, etc.
The Central Board of the Bank may not be in a position to
visualize such objectives. Under such circumstances the
Central Government must consult the Bank but need not
mandatorily obtain the imprimatur of the Central Board of the
Bank to its proposal. What if the Central Board of the Bank,
when consulted by the Central Government, gives a negative
86
opinion? Would it mean that the Central Government would
then not resort to demonetisation in deference to the opinion of
the Central Board of the Bank? It may do so if it finds that the
opinion tendered by the Bank is just and proper, but the
Central Government may have its own reasons for not accepting
the opinion of the Central Board of the Bank and therefore, in
such a situation the Central Government will have to resort to
initiate the proposal for demonetisation through a plenary
legislation, by way of introduction of a Bill in the Parliament
resulting in an Act of Parliament.
15.23 Therefore, the sum and substance of the discussion is that
when the Central Board of the Bank initiates or originates the
proposal for demonetisation of any series of bank notes of any
denomination, it has to make a recommendation to the Central
Government as per subsection (2) of Section 26 of the Act. The
Central Government may act on such recommendation by
issuing a gazette notification. On the other hand, when the
Central Government is the originator of the proposal for
demonetisation of any currency note as in the instant case, it
has to seek the advice of the Central Board of the Bank, for, it
cannot afford to proceed in isolation and without bringing the
said proposal to the notice of the Central Board of the Bank
having regard to the important position the Bank holds in the
87
Indian economy. Irrespective of the opinion of the Central
Board of the Bank to the Central Government’s proposal, the
legislative route would have to be taken by the Central
Government for furthering its objective/s of demonetisation of
bank notes. Thus, the same cannot be carried out by the
issuance of a simple notification in the Gazette of India
declaring that all bank notes or currency notes are
demonetised. This is because when the Central Government is
the originator of a proposal for demonetisation, it is acting
de
hors subsection (2) of Section 26 of the Act.
15.24 Such an interpretation is necessary as it is the contention of the
Union of India that the Central Government has the power to
demonetise “all” series of bank notes of “all” denominations
which would mean that every Rs.1/, Rs.5/, Rs.10/, Rs.20/,
Rs.50/, Rs.100/, Rs.500/, Rs.1,000/, Rs.5,000/,
Rs.10,000/, could be demonetised. Since the same is possible
theoretically, in my view, such an extensive power cannot be
exercised by issuance of a simple gazette notification in exercise
of an executive power of the Central Government as if it is one
under subsection (2) of Section 26 of the Act. The same can
only be through a plenary legislation, by way of an enactment
following a meaningful debate in Parliament, on the proposal of
the Central Government. This would also answer the other
88
contention of the learned senior counsel for the petitioners that
subsection (2) of Section 26 of the Act cannot be interpreted to
mean “all series” of bank notes of “all denominations” when the
words used in the provision are “any series” of “any
denomination”.
Deciphering the plain meaning of subsection (2) of Section 26:
15.25 The reason why power is vested only with the Central Board of
the Bank under subsection (2) of Section 26 of the Act to
recommend to the Central Government to declare specified
series of specific denomination of bank notes as having ceased
to be legal tender, becomes clear when the plain meaning of the
words of the said provision is recognised. When interpreted as
such, no power to demonetise currency notes at the behest of
the Central Government is envisaged under the said provision.
This is because the power of the Central Government to do so is
vast and has a wider spectrum. Such a power is not traceable to
subsection (2) of Section 26 of the Act which operates in a
narrower compass. Hence, to save subsection (2) of Section 26
from the vice of unconstitutionality, it must be given an
interpretation appropriate to the object for which the provision
is intended. In this context, the following principles become
relevant.
89
15.26 When the words of a statute are clear, plain or unambiguous,
i.e., they are reasonably susceptible to only one meaning, the
court is bound to give effect to that meaning and admit only one
meaning and no question of construction of a statute arises,
for, the provision/Act would speak for itself. The judicial dicta
relevant to the above principle of interpretation are as follows:
(i) In
Kanailal Sur vs. Paramnidhi Sadhu Khan AIR 1957
this Court observed that if the words
SC 907 at Page 910
used are capable of only one “construction” then it would
not be open to the courts to adopt any other hypothetical
construction on the ground that such hypothetical
construction is more consistent with the purported object
and policy of the Act. Reference was made to Section 162 of
the Code of Criminal Procedure, 1898 and interpretation of
the expression “any person” by Lord Atkin, speaking for the
Privy Council who observed that the expression “any
person” includes any person who may thereafter be an
accused, and he observed that “when the meaning of the
words is plain, it is not the duty of Courts to busy
themselves with supposed intentions” vide Pakala
Narayanaswami vs. Emperor AIR 1939 PC 47 .
90
(ii) Similarly, while construing Sections 223 and 226 of the
Indian Succession Act, 1925 which contain a prohibition in
relation to grant of Probate or Letters of Administration “to
any association of individuals unless it is a company”, this
Court in Illachi Devi vs. Jain Society Protection of
Orphans India (2003) 8 SCC 413 , applied the plain
meaning rule and held that said expression would not
include a society registered under the Societies Registration
Act as a society even after registration does not become
distinct from its members and does not become a separate
legal person like a company.
(iii) For a proper application of the plain meaning rule to a
given statute, it is necessary, to first determine, whether
the language used is plain or ambiguous. “Any ambiguity”
means that a phrase is fairly and equally open to diverse
meanings. A provision is not ambiguous merely because it
contains a word which in different contexts is capable of
different meanings. It is only when a provision contains a
word or phrase which in a particular context is capable of
having more than one meaning that it would be ambiguous.
(iv) Hence, in order to ascertain whether certain words are clear
and unambiguous, they must be studied in their context.
91
Context in this connection is used in a wide sense as
including not only other enacting provisions of the same
statute, but its preamble, the existing state of the law, other
statutes in pari materia and the mischief which by those
and other legitimate means can be discerned that the
statute was intended to remedy.
[Source: Interpretation of Statutes by Justice G.P. Singh,
th
15 Edition]
15.27 Applying the above rule, if subsection (2) of Section 26 of the
Act is read as per the plain meaning of the words of the
provision, then it does not lead to any ambiguity. The plain
meaning rule is the golden rule of construction of statutes and
it does not lead to any absurdity in the instant case. On a plain
reading of the provision, it is observed that the Central
Government can issue a notification in the Gazette of India to
demonetise any series of bank notes of any denomination but
only on the recommendation of the Central Board of the Bank.
In my view subsection (2) of Section 26 is not vitiated by
unconstitutionality. This is for two reasons: firstly, the plain
meaning of the words “any” series of bank notes of “any
denomination” would imply “all series” of bank notes of “all
not
denominations”. The word “any” means specified or particular
92
and not “all” as contended by the respondents. If the contention
of the Union of India is accepted and the word “any” is to be
read as “all”, it would lead to disastrous consequences as the
Central Board of the Bank cannot be vested with the power to
recommend demonetisation of “all series of currency of all
denominations”. The interpretation suggested by learned
Attorney General would lead to vesting of unguided power in
the Central Board of the Bank whereas giving a wider power to
the Central Government to initiate such a demonetisation
wherein all series of a denomination could be demonetised is
appropriate as it is expected to consider all pros and cons from
various angles and then to initiate demonetisation on a large
scale through a legislative process. Such a power is vested only
in the Central Government by virtue of Entry 36 of List I of the
Seventh Schedule of the Constitution which of course has to be
exercised by means of a plenary legislation and not by issuance
of a gazette notification under subsection (2) of Section 26 of
the Act. Hence, the word “any” cannot be interpreted to mean
“all” having regard to the context in which it is used in the said
provision.
15.28 Secondly, any recommendation of the Central Board of the
Bank under subsection (2) of Section 26 is not binding on the
Central Government. If the Central Government does not accept
93
the recommendation of the Bank then no notification would be
published in the Gazette of India by it. In fact, the Central
Government is not bound by the recommendation made by the
Central Board of the Bank to demonetise any bank note,
although, the Central Board of the Bank may comprise of
experts in matters relating to finance, having knowledge and
experience of economic affairs of the country and such
knowledge may be reflected in the recommendation made to the
Central Government. As already noted, the Central Government
has the option to accept the said recommendation and
accordingly issue a gazette notification or elect not to act on the
same. However, the Central Government should consider the
recommendation with all seriousness and in its wisdom take an
appropriate decision in the matter.
16. In the instant case, on perusal of the records submitted by
Union of India and the Bank, it is noted that the proposal for
demonetisation had been initiated by the Central Government by
th
writing a letter to the Bank on 7 November, 2016 and not by the
th
Central Board of the Bank. On the very next evening i.e., on 8
November, 2016 at 05:30 p.m., there was a meeting of the Central
Board of the Bank at New Delhi and a Resolution was passed and a
little while thereafter on the same evening, the notification was issued
invoking subsection (2) of Section 26 of the Act by the Central
94
Government. Such a procedure is not contemplated under subsection
(2) of Section 26 of the Act when the proposal for demonetisation is
initiated by the Central Government.
16.1 Hence, it is held that in the instant case the Central
Government could not have exercised power under subsection
(2) of Section 26 of the Act in the issuance of the impugned
th
g azette Notification dated 8 November, 2016. It is further held
that in the present case, the object and the purpose of issuance
of an Ordinance and thereafter, the enactment of the 2017 Act
by the Parliament was, in my view, to give a semblance of
legality to the exercise of power by issuance of the Notification
th
on 8 November, 2016. In fact, Section 3 of the Ordinance as
well as Section 3 of the Act makes this explicit. The same is
extracted as under for immediate reference:
“3. On and from the appointed day,
notwithstanding anything contained in the
Reserve Bank of India Act, 1934 or any other law
for the time being in force, the specified bank
notes which have ceased to be legal tender, in view of
the notification of the Government of India in the
Ministry of Finance, number S.O. 3407(E), dated the
8th November, 2016, issued under subsection (2)
of section 26 of the Reserve Bank of India Act,
1934, shall cease to be liabilities of the Reserve
Bank under section 34 and shall cease to have
the guarantee of the Central Government under
subsection (1) of section 26 of the said Act.”
(Emphasis by me)
95
The said Section has an inherent contradiction inasmuch
as the Section has a nonobstante clause visàvis the Act or any
other law for the time being in force but at the same time, the
said provision refers to Sections 26 as well as Section 34 of the
Act.
| A | nonobstante | clause such as “notwithstanding anything |
|---|
contained in the Act or in any law for the time being in force”, is
sometimes appended to a section, with a view to give the
enacting part of that section in case of conflict, an overriding
| effect over the provision or Act mentioned in the | non obstante |
|---|
clause. The following are the judicial dicta on the point which
| bring out the use of a | nonobstante | clause: |
|---|
| a) In | T.R. Thandur vs. Union of India (1996) 3 SCC 690 | , |
|---|
| this Court observed that a | nonobstante | clause may be |
|---|
used as a legislative device to modify the ambit of the
| provision or law mentioned in the | nonobstante | clause or to |
|---|
override it in specified circumstances. That while
| interpreting a | nonobstante | clause, the Court is required to |
|---|
find out the extent to which the legislature intended to give
it an overriding effect.
| b) In | Central Bank of India vs. State of Kerala (2009) 4 |
|---|
| SCC 94 | , this Court held that while interpreting a | non |
|---|
96
| obstante | clause the court is required to find out the extent |
|---|
to which the legislature intended to give it an overriding
effect.
| c) Further, this Court in | A.G. Varadarajulu and Anr. vs. |
|---|
| State of Tamil Nadu (1998) 4 SCC 231 | , observed that it |
|---|
| is wellsettled that while dealing with a | nonobstante | clause |
|---|
under which the legislature wants to give overriding effect
to a section, the court must try to find out the extent to
which the legislature had intended to give one provision
overriding effect over another provision.
| The effect of insertion of a | nonobstante | clause into a |
|---|
provision in a legislation, is that the very consideration arising
from the provisions sought to be excluded, shall be excluded,
| vide | Madhav Rao Scindia vs. Union of India (1971) 1 SCC |
|---|
85.
Applying the aforesaid principles to interpret Section 3 of
| the 2017 Act, it is observed that the | nonobstante | clause |
|---|
contained in the said provision has the effect of overriding the
provisions of the Act as they are not applicable to the provisions
and processes under the 2016 Ordinance and the 2017 Act. It
is significant to note that the said Section contains a non
obstante clause which reads, “ notwithstanding anything
97
contained in the Act or any other law for the time being in
”. This is rightly so as the demonetisation is not in
force
exercise of the powers under subsection (2) of Section 26 of the
Act. However, Section 3 of the 2017 Act goes on to state that
the specified bank notes which have ceased to be legal
th
, in view of the notification dated 8 November, 2016
tender
issued under subsection (2) of Section 26 of the Act, shall
cease to impose liabilities on the Bank under Section 34 of the
Act and shall cease to have the guarantee of the Central
Government under subsection (1) of Section 26 of the Act.
th
Therefore, while the impugned gazette notification dated 8
November, 2016 has been admittedly issued exercising powers
under subsection (2) of Section 26 of the Act, Section 3 of the
2017 Act also states that it is notwithstanding anything
contained in the Act. If it is so, then the impugned notification
could not have been issued invoking subsection (2) of Section
26 of the Act. The liability could have so ceased, if the power
that had been exercised by the Central Government for the
th
issuance of the notification dated 8 November, 2016 impugned
herein, under subsection (2) of Section 26 of the Act on the
recommendation made by the Central Board of the Bank. That
is, when the initiation of demonetisation or the proposal came
from the Central Board of the Bank, leading to the issuance of
98
the notification by the Central Government. Had the measure
of demonetisation been carried out by way of enactment of a
plenary legislation, then the nonobstante clause could have
been employed to exclude the applicability of the Act. However,
having sought to rely on subsection (2) of Section 26 of the Act
to issue the Notification, not only is the nonobstante clause
misplaced but it also gives rise to a contradiction as to on what
th
basis the Notification dated 8 November, 2016 has been
issued.
Affidavits and Record of the Case:
17. It has been observed in the preceding paragraphs that when the
proposal to carry out demonetisation originates from the Central
Government, irrespective of whether or not the Bank concurs with or
endorses such proposal, the Central Government would have to take
the legislative route through a plenary legislation and cannot proceed
with demonetisation by simply issuing a notification.
17.1 Having observed so, it is necessary to examine the proposal to
carry out demonetisation, in the present case, which originated
from the Central Government. For this purpose, reference may
be had to the recitals of the affidavits filed by the Union of India
and the Bank, and to the extent permissible, to the records
submitted by the Union of India and the Bank in a sealed cover.
99
17.2 I have perused the following photocopies of the original records
submitted on behalf of the Union of India and the Reserve Bank
of India:
i) Letter by the Secretary, Department of Economic Affairs,
th
Ministry of Finance, dated 7 November, 2016, bearing F.
No. 10.03/2016 Cy.I, addressed to the Governor of the
Bank;
ii) Draft Memorandum of the Deputy Governor of the Bank,
st
placed before the Central Board of the Bank at its 561
Meeting;
st
iii) Minutes of the 561 Meeting of the Central Board of the
th
Bank, convened at New Delhi, on 8 November, 2016, at
th
05:30 p.m., and signed on 15 November, 2016;
iv) Letter addressed by the Deputy Governor of the Bank to
th
the Central Government on 8 November, 2016.
17.3 On a reading of the records listed hereinabove, the following
facts emerge:
th
1) A letter bearing F. No. 10.03/2016 Cy.I dated 7
November, 2016 was addressed by the Secretary, Ministry
of Finance, Department of Economic Affairs, Government of
India, to the Governor of the Bank, referring to certain facts
and figures to indicate the following two major threats to
the security and financial integrity of the country:
100
i) Fake Infusion of Currency Notes (FICN);
ii) Generation of black money in the Indian economy.
The desire of the Central Government to proceed with
the measure of demonetisation was expressed in the said
letter and a request was made to the Bank to consider
recommending the such measure, in terms of the relevant
clauses of the Act.
2) Further, the Draft Memorandum of the Deputy Governor of
the Bank, placed before the Central Board of the Bank,
categorically states that the need for a meeting to deliberate
on the proposed measure of demonetisation, had arisen
pursuant to the letter addressed to the Bank from the
th
Central Government dated 7 November, 2016. The Draft
Memorandum further records that the
Government had
“recommended” that the withdrawal of the tender
character of existing Rs.500/ and Rs.1,000/ notes, is
apposite.
Further, the said document records that
“as desired”
by the Central Government, a draft scheme for
implementation of the scheme of demonetisation had also
been enclosed.
101
3) In view of the contents of the Draft Memorandum, the
st
Central Board of the Bank in its 561 Meeting commended
the Central Government’s proposal for demonetisation and
directed that the same be forwarded to the Central
Government.
4) Accordingly, a letter was addressed by the Deputy
th
Governor of the Bank to the Central Government on 8
November, 2016, stating therein that the proposal of the
Central Government pertaining to withdrawal of legal
tender of bank notes of denominational values of Rs. 500/
and Rs. 1,000/ was placed before the Central Board of the
st
Bank in its 561 meeting. It was also stated that necessary
recommendation to proceed with the said proposal, had
been from the Central Board of the Bank.
“obtained”
17.4 On a comparative reading of the records submitted by the
Union of India as well as the Reserve Bank of India, it becomes
crystal clear that the process of demonetisation of all series of
bank notes of denominational values of Rs. 500/ and Rs.
1,000/, commenced/originated from the Central Government.
The said fact is crystalised in the communication addressed by
the Secretary, Department of Economic Affairs, Ministry of
th
Finance, dated 7 November, 2016 to the Governor of the Bank.
102
The phrases and words emphasized hereinabove clearly
indicate that the proposal for demonetisation was from the
Central Government. In substance, the Central Government
sought the opinion/advice of the Bank on such proposal.
The use of the words/phrases such as, “as desired” by
the Central Government; Government had “recommended”
the withdrawal of the legal tender of existing Rs.500/ and
Rs.1,000/ notes; recommendation has been “obtained” ; etc.,
are selfexplanatory. This demonstrates that there was no
independent application of mind by the Bank. Neither was there
any time for the Bank to apply its mind to such a serious issue.
This observation is being made having regard to the fact that
the entire exercise of demonetisation of all series of bank notes
of Rs.500/ and Rs.1,000/ was carried out in twenty four
hours.
A situation where an independent authority such as the
Bank, based on its own appreciation of the economic climate of
the country, recommends a measure to the Central
Government, must be contrasted with another situation where
a measure which originates from the Central Government is
simply placed before such independent authority for seeking its
advice or opinion on such proposed measure. A proposal of the
103
Central Government on a certain scheme having serious
economic ramifications has to be placed before the Bank to seek
its expert opinion as to the viability of such a scheme. The Bank
as an expert body may render advice on such a proposal and on
some occasions may even concur with the same. However, even
such concurrence to a proposal originating from the Central
Government is not akin to an original recommendation of the
Central Board of the Bank, within the meaning of Section 26 (2)
of the Act.
17.5 The following points emerge on perusal of the affidavits
submitted on behalf of the Union of India:
1) That the Central Board of the Bank made a specific
th
recommendation to the Central Government on 8
November, 2016, for the withdrawal of legal tender
character of the of Rs.500/ and
existing series
Rs.1,000/ bank notes which could
tackle black money,
counterfeiting and illegal financing . That the Bank also
proposed a draft scheme for the implementation of the
recommendation.
2) That the consultations between the Central Government
and the Bank began in February, 2016; however, the
104
process of consolidation and decision making were kept
confidential.
3) That the Bank and the Central Government were together
engaged in the finalization of new designs, development of
security inks and printing plates for the new designs,
change in specifications of printing machines and other
critical aspects.
17.6 The following points emerge upon perusal of the affidavits
submitted on behalf of the Bank:
th
1) That a letter dated 7 November, 2016 was received by the
Bank, from the Ministry of Finance, Government of India,
which contained a proposal to withdraw the character of
legal tender of existing Rs.500/ and Rs.1,000/ bank
notes.
2) The said proposal was considered, together with a draft
scheme for implementing the withdrawal of
existing
st
Rs.500/ and Rs.1,000/ bank notes, at the 561 meeting
th
of the Central Board of Directors of the Bank, held on 8
November, 2016, at 05:30 p.m. at New Delhi.
3) That the Central Board of Directors was assured that the
matter had been the subject of discussion between the
Central Government and the Bank for six months. The said
105
Board was also that the Central Government
assured
would take adequate mitigating measures to contain the
use of cash.
4) That the Board, having observed that the proposed step
presents a big opportunity to advance the
objects of
financial inclusion and incentivising use of electronic
modes payment , recommended the withdrawal of legal
tender of in the denomination of Rs.500/
old bank notes
and Rs.1,000/.
17.7 On a conjoint reading of the affidavits submitted by the Union of
India and the Bank, the following deductions may be drawn:
1) That the Central Government in its letter addressed to the
th
Bank, dated 7 November, 2016 proposed to withdraw the
character of legal tender of existing Rs.500/ and
Rs.1,000/ bank notes.
st
2) The Central Board of the Bank, at its 561 meeting held on
th
8 November, 2016 resolved that the
withdrawal of legal
in the denomination of Rs.500/
tender of old bank notes
and Rs.1,000/ be made.
3) The objects guiding the Board’s opinion were twofold: first,
pertaining to financial inclusion , and second, being to
.
incentivise the use of electronic modes of payment
106
4) The object guiding the Government’s proposal to withdraw
currency of the specified denominations, was to tackle
black money, counterfeiting and illegal financing.
17.8 In my view, there is contradiction as to the subject of
demonetisation, as well the object thereof, as stated by the
Bank visàvis the Central Government as discernible from the
affidavits. The same may be expressed as follows:
| As stated in the<br>affidavit of the Bank | As stated in the<br>affidavit of the<br>Central<br>Government |
|---|
| Object of<br>Demonetisatio<br>n | i) Financial<br>inclusion<br>ii) incentivising use<br>of electronic modes of<br>payment | To tackle:<br>i) black money,<br>ii) counterfeiting,<br>iii) illegal<br>financing. |
| Subject of<br>Demonetisatio<br>n | Old bank notes in the<br>denomination of<br>Rs.500/ and<br>Rs.1,000/ | Existing Rs.500/<br>and Rs.1,000/ bank<br>notes |
The object of the measure and the subject are of relevance,
th
in assessing the resolution of the Bank dated 8 November,
2016 because, the said considerations would have a bearing on
107
the question, whether, the Bank’s opinion was in consonance
with the object sought to be achieved through demonetisation
by the Central Government’s proposal.
th
17.9 On a close reading of the Notification dated 8 November, 2016,
in juxtaposition with the records, the following aspects emerge:
i) One aspect of the matter which emerges with no ambiguity is
that the proposal for demonetisation originated from the
Central Government, by way of its letter addressed to the
th
Bank, dated 7 November, 2016. This aspect forms the
central plank of the controversy at hand. That the
recommendation did not originate from the Bank under sub
section (2) of Section 26 of the Act , but was “obtained” from
the Bank in the form of an opinion on the proposal for
demonetisation submitted by the Central Government. Such
an opinion, could not be considered to be a recommendation
as required by the Central Government in order to proceed
under subsection (2) of Section 26 of the Act .
ii) Even if it is to be assumed for the sake of argument that the
said opinion, was in fact a “recommendation” under sub
section (2) of Section 26 of the Act , in light of the
interpretation given by me hereinabove to the phrase “any”
series or “any” denomination, to mean a specified
series/specified denomination, the recommendation itself is
108
void inasmuch as it pertained to demonetisation of “all” series
of Bank notes of denominational values of Rs.500/ and
Rs.1,000/. As has already been observed, the term “any” as
appearing in subsection (2) of Section 26 of the Act could not
be interpreted to mean “all” as such an interpretation would
vest unguided and expansive discretion with the Central
Board of the Bank.
iii) The Notification expressly states that it is issued under sub
section (2) of Section 26 of the Act . Therefore Section 3 of the
Ordinance and Act could not, in the nonobstante clause,
state that subsection (2) of Section 26 is not applicable to the
Act.
iv) Having observed that demonetisation could not have been
carried out by issuing a Notification as contemplated under
subsection (2) of Section 26 of the Act and that the
Parliament does indeed have the competence to carry out
demonetisation, on the strength of Entry 36 of List I of the
Seventh Schedule of the Constitution, the Central
Government could not have exercised the power by issuance
of an executive notification.
Legal Principles applicable to the case:
109
18. There are certain legal principles which are applicable in this
case: one is expressed in the maxim “to do a thing a particular way or
not at all”; this principle has also been expressed in terms of the latin
maxim “ expressio unius est exclusio alterius ”, which means that when
a manner is specified for doing a certain thing, then all other modes for
carrying out such act are expressly excluded; and the other principle
is, exercise of discretion which is a well known principle in
Administrative Law. The same would be discussed at this stage.
18.1 The first principle which is of relevance to the controversy at
hand is that, where a power is given to do a certain thing in a
certain way, the thing must be done in that way or not at all
and other methods of performance are necessarily forbidden
vide, . Hence, when a
Taylor vs. Taylor (1875) 1 Ch D 426
statute requires a particular thing to be done in a particular
manner, it must be done in that manner or not at all and other
methods of performance are necessarily forbidden, vide Nazir
.
Ahmed vs. King Emperor (1936) L.R. 63 I.A. 372
18.2 This Court too, has applied this maxim in the following cases:
(i) Parbhani Transport Cooperative Society Ltd. vs. The
Regional Transport Authority, Aurangabad (1960) (3)
wherein it was observed
S.C.R. 177: AIR 1960 SC 801,
that the rule provides that an expressly laid down mode of
110
doing something necessarily implies a prohibition of doing
it in any other way.
(ii) In
Dipak Babaria vs. State of Gujarat AIR 2014 SC
1972, this Court set aside the sale of agricultural land, on
the ground that the sale was not in compliance with the
statutory procedure prescribed in that regard under the
Bombay Tenancy and Agricultural Lands (Vidarbha Region)
Act, 1958. The matter was examined on the anvil of the
aforestated maxim and it was held that alienation of
agricultural land by adopting any alternate procedure to
the one prescribed under the Act, was necessarily
forbidden.
(iii) In ,
Kameng Dolo vs. Atum Welly AIR 2017 SC 2859
election of an unopposed candidate was declared as invalid
on the ground that the nomination of his opponent was not
withdrawn as per the procedure statutorily mandated. That
the nomination of the opposite candidate ought to have
been withdrawn in the manner provided for under the
relevant statute and withdrawing the same in any other
manner was necessarily forbidden. That withdrawal of the
nomination, not carried out in accordance with the
procedure established under the relevant statute, enabled
111
the successful candidate to win unopposed. Hence, his
election was declared as void.
(iv) Similarly, in
The Tahsildar, Taluk Office, Thanjore vs.
G. Thambidurai AIR 2017 SC 2791 , assignment of land
was cancelled on the ground that statutory requirements
were not followed in assigning the land. It was held that
when a statute prescribes that a certain Act is to be carried
out in a given manner, the said Act could not be carried
out through any mode other than the one statutorily
prescribed.
(v) It may also be apposite to refer to the decision of this Court
in Union of India vs. Charanjit S. Gill (2000) 5 SCC
742 , wherein this Court held that any provisions
introduced by way of “Notes” appended to the Sections of
the Army Act, 1950, could not be read as a part of the Act
and therefore such notes could not take away any right
vested under the said Act. It was observed that issuance of
an administrative order or a “Note” pertaining to a special
type of weapon to bring it within the ambit of the Army Act,
which was hitherto not included therein, could not be said
to have been included in the manner in which it was
supposed to be included. That the Army Act empowers the
112
Central Government to make rules and regulations for
carrying into effect the provisions of the Act; however, no
power is conferred upon the Central Government of issuing
“Notes” or “issuing orders” which could have the effect of
the Rules made under the Act. That rules and Regulations
or administrative instructions can neither be supplemented
nor substituted by “Notes”. That administrative
instructions issued or the “Notes” attached to the Rules
which are not referable to any statutory authority cannot
be permitted to bring about a result, which is supposed to
be achieved through enactment of Rules.
What emerges from the above discussion is that when a
statute contemplates a specific procedure to be adhered to in
order to arrive at a desired end, such procedure cannot be
substituted by an alternative procedure which is not
contemplated under the statute. Further, if an action is to be
carried out by way of issuance of a particular statutory
instrument on the basis of certain requirements, such action
cannot be validly carried out by way of issuance of an
instrument when the same is not contemplated under the Act.
This is particularly so when the instrument enacted stands on a
different footing than the one meant to be enacted.
113
| Applying the said principle to the facts of the present case,<br>it is observed that what ought to have been done through a<br>Parliamentary enactment or plenary legislation, could not have<br>been carried out by simply issuing a notification under sub<br>section (2) of Section 26 of the Act by the Central Government.<br>As noted hereinabove, the said provision does not apply to cases<br>where the proposal for demonetisation originates from the<br>Central Government and the same is not envisaged under the<br>Act. Hence, issuance a notification to give effect to the Central<br>Government’s proposal for demonetisation, was clearly based on<br>an incorrect understanding of subsection (2) of Section 26 of<br>the Act. The Central Government did not follow the procedure<br>contemplated under law to give effect to its proposal for<br>demonetisation. This is not a matter of form but one of<br>substance as in law, the powers of the Central Board of the<br>Bank and the Central Government are totally distinct in the<br>matter of demonetisation of bank notes. |
|---|
| 19. The other legal principle is concerning exercise of discretion in<br>Administrative Law. Lords Halsbury in Sharp vs. Wakefield 1891 AC<br>173 described the concept of discretion in the following words: | |
“When it is said that something is to be done within
the discretion of the authorities that something is to
be done according to the rules of reason and justice,
114
not according to private opinion ...according to law
and not humour. It is to be, not arbitrary, vague and
fanciful, but legal and regular. And it must be
exercised within the limit, to which an honest man
competent to the discharge of his office ought to
confine himself.”
19.1 It is a wellestablished rule of administrative law that
discretionary power is to be exercised and a decision has to be
made, by the very authority to whom the discretion is entrusted
by the statute in question. The situation of an authority not
exercising its discretion arises when any authority does not
itself consider a particular matter before it on merits but still
takes a decision, as if it is directed to do so, by another
authority, most often, by a higher authority. When an authority
exercises the discretion vested in it by law at the behest of
another authority in a specific matter, this would in law amount
to nonexercise of its discretionary power by the authority itself,
and consequently, such action or decision is invalid.
19.2 The petitioners have contended that it is implicit in subsection
(2) of Section 26 of the Act that adequate time and attention
must be devoted by both the Central Board of the Bank and the
Central Government before proceeding with a measure of such
magnitude and consequences, as demonetisation. It was
further submitted that the facts and records of the present case
would show that the procedure with such implicit obligations
115
was abandoned and the process contemplated was not as per
the said provision. That the proposal emanated from the
Central Government and was not initiated by the Bank. The
Central Board of the Bank passed a resolution in a hurried
manner. No adequate care and consideration were bestowed on
such a crucial matter by the Central Board of the Bank having
regard to the severe ramifications that the proposed
demonetisation would have on almost every citizen of the
country. Possibly, the Central Board of the Bank acted on the
“assurances” of the Central Government which is evident on a
perusal of the records and not on an independent application of
mind owing to lack of time.
As noted from the records submitted by the Central
Government as well as the Reserve Bank of India in the instant
case, the Central Government wrote to the Central Board of the
th
Reserve Bank of India on 7 of November, 2016 about its
proposal to demonetise all series of bank notes of
denominations of Rs.500/ and Rs.1,000/, which were in
th
circulation, and on the very next day i.e., 8 November, 2016, a
meeting of the Central Board of the Bank was held at New Delhi
at 05:30 p.m. and shortly thereafter, the gazette notification was
issued. Such a swift action would indicate that the Central
Board of the Bank had hardly twentyfour hours to consider the
116
proposal of the Central Government and hence, hardly any time
to apply its mind independently to the proposal. It is clear from
the records submitted that the Central Government
“assured”
the Central Board of the Bank that sufficient safeguards would
be taken while embarking on the process of demonetisation and
that it would also result in reducing bank notes in the economy
and a switch over to the digitalisation of the economy. The
Central Board of the Bank, in resolving to opine on the measure
of demonetisation to the Central Government, acted only on
such “assurances”.
19.3 Further, the Central Government cannot in the guise of seeking
an opinion on its proposal to demonetise bank notes, “ obtain ” a
“recommendation from the Central Board of the Bank” as if it is
acting under subsection (2) of Section 26 of the Act, and
consequently, issue a gazette notification by which
demonetisation of bank notes would be given effect to. Such a
procedure, in my view, would be contrary to the import of sub
section (2) of Section 26 of the Act, inasmuch as the Central
Government cannot act under the said provision by the
issuance of a notification, as if a “recommendation” has been
made by the Central Board of the Bank when in fact, what
actually transpired in the instant case, was that the Central
117
Government initiated the process of demonetisation by
formulating a proposal in this regard and subsequently secured
the imprimatur of the Bank on such proposal. In fact, the
Central Board of the Bank has no jurisdiction to “ recommend ”
demonetisation of bank notes of “all series” of “all
denomination” to the Central Government, as already held
above.
19.4 The powers of the Central Board of the Bank are restrictive in
nature inasmuch as it can only recommend that a particular
series of a particular denomination would cease to be legal
tender. Hence, the Central Government cannot rely on the
semblance of a “recommendation made to it by the Central
Board of the Bank under subsection (2) of Section 26 of the
Act” when it initiates the process of demonetisation. The Central
Government also cannot “obtain” any recommendation to that
effect, and if it has done so, it would imply that the Central
Board of the Bank is acting at the behest of the Central
Government, only to concur with what the Central Government
intends to do. Such an opinion would not be on the basis of any
independent application of mind of the experts who form the
Central Board of the Bank. Moreover, when the Central
Government seeks the opinion of the Central Board of the Bank
to its proposal for demonetisation, the latter would have to be
118
given some time to consider the pros and cons and the impact
that it would have on the citizens of India, as bank notes are a
species of negotiable instruments and a medium through which
goods and services are traded and therefore, they are the lifeline
of the economy. The Central Government also failed to indicate
that the demonetised currency had lost the guarantee provided
vide subsection (1) of Section 26 of the Act in the impugned
th
notification. Hence, an Ordinance had to be issued on 30
December, 2016. Moreover, it is not known whether the Bank
had made arrangements for printing sufficient new notes for
exchange of demonetised currency. It is also not known whether
the Department of Legal Affairs was consulted in the matter as
the procedure of demonetisation involves legal implications.
19.5 Hence, in my considered view, the action of demonetisation
initiated by the Central Government by issuance of the
th
impugned notification dated 8 November, 2016 was an exercise
of power contrary to law and therefore unlawful. Consequently,
the 2016 Ordinance and 2017 Act are also unlawful. But,
having regard to the fact that the demonetisation process was
th
given effect to from 8 November, 2016 onwards, the status quo
ante cannot be restored at this point of time.
What relief may be awarded in the present case?
119
20. In view of the above conclusion, the question of moulding the
relief shall now be considered. According to the petitioners, around 86
per cent of the volume of currency notes of the total currency in
circulation in the Indian economy was demonetised. They also stated
that the people of India were exposed to undue hardships owing to the
lack of financial resources and had to undergo not only a severe
financial crunch but were also exposed to other socioeconomic and
psychological hardships. The problems associated with the measure of
demonetisation would make one wonder whether the Central Board of
the Bank had visualised the consequences that would follow. Whether
the Central Board of the Bank had attempted to take note of the
adverse effects of demonetisation of such a large volume of bank notes
in circulation? The objective of the Central Government may have been
sound, just and proper, but the manner in which the said objectives
were achieved and the procedure followed for the same, in my view was
not in accordance with law having regard to the interpretation given
above.
It has also been brought on record that around 98% of the value
of the demonetised currency have been exchanged for bank notes
which continues to be legal tender. Also, a new series of bank notes of
Rs.2,000/ was released by the Bank. This would suggest that the
measure itself may not have proved to be as effective as it was hoped
to be. However, this Court does not base its decision on the legality of
120
a legislation, qua the effectiveness of such action in achieving the
stated objectives. Therefore, it is clarified that any relief moulded in the
present cases is de hors considerations of success of the measure.
20.1 I have borne in mind the submissions of learned Attorney
General appearing on behalf of the Union of India to the effect
that the objectives of the Central Government have been sound,
just and proper, but in my view, the manner in which the said
objectives were achieved and the procedure followed for the
same was not in accordance with law having regard to the
interpretation given above.
Learned Attorney General appearing on behalf of the Union
of India also contended that the issues raised in these petitions
have become infructuous and wholly academic as the action of
demonetisation has been acted upon and therefore, the present
cases are only of academic significance. It is necessary to
examine the nature of relief that could be moulded by the Court
in this matter.
20.2 There are several judgments which could be relied upon in this
context:
(i) This Court acknowledged in S.R. Bommai vs. Union of
, that although substantive relief
India AIR 1994 SC 1918
may be granted only if the issue remains live in cases which
121
are justiciable, this Court may prospectively declare a law,
for posterity. Notwithstanding the fact that no substantive
relief could be granted in the said case for the reason that
following the Presidential proclamation, fresh elections had
been held and new Houses had been constituted, this Court
went on to declare the law, for posterity, as to the federal
character of the Constitution, the nature of the power
conferred on the President under Article 356 of the
Constitution and the manner in which such power is to be
exercised for imposing President’s Rule in a State by
dissolution of the Legislative Assembly.
(ii) In ,
Golak Nath vs. State of Punjab (1967) 2 SCR 762
this Court declared that it is open to the Court, to find and
declare the law, but restrict the operation of such law to the
future.
(iii) Further, the observations made by this Court in Orissa
Cement Ltd. vs. State of Orissa 1991 Supp (1) SCC 430 ,
while determining what relief that could be granted
following a declaration of a provision of an enactment as
invalid, are also relevant. This Court held that declaration
of invalidity of a provision, and determination of the relief to
be granted as a consequence of such invalidity, are two
122
distinct things. That in respect of the relief to be granted as
a consequence of declaration of invalidity, the Court has
discretion which could be exercised to grant, mould or
restrict the relief.
20.3 In the instant case, the elementary question that requires
determination is, whether the challenge to the validity of the
th
Central Government’s decision dated 8 November, 2016 to
demonetise all Rs.500/ and Rs.1,000/ bank notes, having
been adjudicated upon, at this juncture, i.e., after a lapse of
over six years since the impugned action was carried out, the
nature of relief that could be granted by this Court at this
juncture is to be considered.
20.4 Stated very patently, the controversy in the present cases
relates to the true meaning and interpretation of subsection (2)
of Section 26 of the Act. Therefore, the question that arises for
consideration is, whether, this Court can declare the law as to
the validity of an action, even after such action has been given
effect to in toto. That is to say, once the action has been
completely carried out, and there is no element of such action
which is left to be carried out, can there still be a subsequent
declaration by this Court as to the validity of such act, having
regard to the interpretation accorded to the provisions of the
relevant statute.
123
20.5 As discussed hereinabove, this Court has acknowledged on
several occasions that it has the competence to declare the law
on a subject for posterity, even though no substantive relief may
be given under the circumstances of a given case, vide S.R.
. The effect of such declaration would apply
Bommai
prospectively. That is, in the present case if a declaration is
made to the effect that the impugned action was unlawful, such
declaration would only have the effect of deterring future
measures from being carried out in a like manner, in order to
save such measures, from the vice of unlawfulness. Such
declarations as to validity or invalidity of a measure, may be
made by this Court in exercise of its power under Article 141 of
the Constitution, and the effect of such declaration may be
moulded or restricted by exercising the power vested with this
Court under Article 142.
20.6 Reference may also be had to the decision of this Court in
Jayantilal Ratanchand Shah, Devkumar Gopaldas
Aggarwal vs. Reserve Bank of India AIR 1997 SC 370 . The
said case pertains to the challenge to the Constitutional validity
of the High Denomination Bank Notes (Demonetisation) Act,
1978. Although the enactment related to the year 1978 and its
effects were immediate, as in the present case, the validity of the
124
same was conclusively declared by this Court only in the year
1997. This Court, while upholding the validity of the legislation
impugned therein, authoritatively clarified and declared the law
on the Parliamentary power to enact such a legislation. A
declaration of a similar nature, i.e., as to the validity or
invalidity of the impugned actions and Notification, is what is
sought for in the present petitions.
Conclusions:
21. In view of the aforesaid discussion, the following conclusions are
arrived at:
(i) According to subsection (1) of Section 26 of the Act, every bank
note shall be legal tender at any place in India in payment or on
account for the amount expressed therein and shall be guaranteed
by the Central Government. This provision is subject to sub
section (2) of Section 26 of the Act.
(ii) Subsection (2) of Section 26 of the Act applies only when a
proposal for demonetisation is initiated by the Central Board of
the Bank by way of a recommendation being made to the Central
Government. The said recommendation can be in respect of any
series of bank notes of any denomination which is interpreted to
mean any specified series of bank notes of any specified
denomination.
125
(iii) The expression any series of bank notes of any denomination has
been given its plain, grammatical meaning, having regard to the
context of the provision and not a broad meaning. Thus, the word
“any” will mean a specified series or a particular series of bank
notes. Similarly, “any” denomination will mean any particular or
specified denomination of bank notes.
(iv) If the word “any” is not given a plain grammatical meaning and
interpreted to mean “all series of bank notes” of “all
denominations”, it would vest with the Central Board of the Bank
unguided and unlimited powers which would be exfacie arbitrary
and suffer from the vice of unconstitutionality as this would
amount to excessive vesting of powers with the Bank. In order to
save the provision from being declared unconstitutional, the
meaning of the provision is read down to the context of the Central
Board of the Bank initiating a proposal for demonetisation by
making a recommendation to the Central Government under sub
section (2) of Section 26 of the Act of a particular series of bank
note of any denomination.
On receipt of the said recommendation made by the Central Board
(v)
of the bank under subsection (2) of Section 26 of the Act, the
Central Government may accept the said recommendation or may
not do so. If the Central Government accepts the
recommendation, it may issue a notification in the Gazette of India
specifying the date w.e.f. which any specified series of bank notes
126
of any specified denomination shall cease to be legal tender and
shall cease to have the guarantee of the Central Government.
(vi) The provisions of the Act do not bar the Central Government from
proposing or initiating demonetisation. It could do so having
regard to its plenary powers under Entry 36 of List I of the
Seventh Schedule of the Constitution of India. However, it has to
be done only by an Ordinance being issued by the President of
India followed by an Act of Parliament or by plenary legislation
through the Parliament. The Central Government cannot
demonetise bank notes by issuance of a gazette notification as if it
is exercising power under subsection (2) of Section 26 of the Act.
In such circumstances when the Central Government is initiating
the process of demonetisation, it would not be acting under sub
section (2) of Section 26 of the Act but notwithstanding the said
provision through a legislative process.
(vii) When such power is exercised by the Central Government by
means of a legislation, it is by virtue of Entry 36, List I of the
Seventh Schedule of the Constitution of India which deals with
currency, coinage and legal tender; foreign exchange which is a
field of legislation. Hence, the power of the Central Government to
demonetise any currency is
notwithstanding anything
contained in Section 26 of the Act.
127
(viii) When the Central Government proposes demonetisation of any
bank note, it must seek the opinion of the Central Board of the
Bank having regard to the fact that the Bank is the sole authority
to regulate circulation of bank notes and secure monetary stability
and generally to operate the currency and credit system of the
country and to maintain price stability.
(ix) 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
128
undertake a legislative process and not carry out the measure by
simply issuing a gazette notification.
(x) In view of the aforesaid conclusions, I am of the considered view
th
that the impugned notification dated 8 November, 2016 issued
under subsection (2) of Section 26 of the Act is unlawful . In the
circumstances, the action of demonetisation of all currency notes
of Rs.500/ and Rs.1,000/ is
vitiated.
Further, the subsequent Ordinance of 2016 and Act of 2017
(xi)
incorporating the terms of the impugned notification are also
unlawful.
(xii) However, having regard to the fact that the impugned notification
th
dated 8 November, 2016 and the Act have been acted upon, the
declaration of law made herein would apply prospectively and
would not affect any action taken by the Central Government or
th
the Bank pursuant to the issuance of the Notification dated 8
November, 2016. This direction is being issued having regard to
of the Constitution of India. Hence, no relief is being
Article 142
granted in the individual matters.
In view of the above conclusions, I do not think it is necessary to
(xiii)
answer the other questions raised in the reference order.
22. Before parting, I wish to observe that demonetisation was an
initiative of the Central Government, targeted to address disparate
129
evils, plaguing the Nation’s economy, including, practices of hoarding
“black” money, counterfeiting, which in turn enable even greater evils,
including terror funding, drug trafficking, emergence of a parallel
economy, money laundering including Havala transactions. It is
beyond the pale of doubt that the said measure, which was aimed at
eliminating these depraved practices, was wellintentioned. The
measure is reflective of concern for the economic health and security
of the country and demonstrates foresight. At no point has any
suggestion been made that the measure was motivated by anything
but the best intentions and noble objects for the betterment of the
Nation. The measure has been regarded as unlawful only on a purely
legalistic analysis of the relevant provisions of the Act and not on the
objects of demonetisation.
23. In view of the answer given by me to question no.1 of the
reference order, I do not deem it necessary to answer all other
questions of the reference order or even the questions reframed by His
Lordship B.R. Gavai, J. during the course of the judgment except to
the extent discussed above.
24. In the result, the writ petitions, special leave petitions and
transfer petitions are directed to be posted before the appropriate
Bench after seeking orders from Hon’ble the Chief Justice of India.
130
I would like to acknowledge and place on record my appreciation
for the learned Attorney General for India, all learned senior counsel,
learned instructing counsel as well as the learned counsel, for their
assistance in the matter.
Parties to bear their respective costs.
………………...…….J.
[B. V. NAGARATHNA]
NEW DELHI,
2 JANUARY, 2023.
