SC to examine legality of demonetisation

The Supreme Court on Tuesday declined to stay the demonetisation of Rs 500 and Rs 1,000 currency notes announced by Prime Minister Narendra Modi on November 8 but wanted the government to justify the drastic step through an affidavit. The court will examine its legality with reference to the provisions of the Reserve Bank Act. 

The bench presided over by Chief Justice T S Thakur clarified that it did not intend to interfere in the economic policy of the government, but asked the Attorney General to file an affidavit explaining what steps the government had taken to ensure liquidity. 

Everyone carrying Rs 500 or Rs 1,000 cannot be painted as a blackmoney hoarder, the court observed. The court will take up the case again after government reply on November 25. The court was hearing a batch of four public interest petitions challenging the black money crackdown, alleging that it was arbitrary as wells as discriminatory and restricted freedom of trade and profession. 

They perceive the step — which is causing immense inconvenience to the common people — as illegal and wanted its roll back. 

Senior counsel Kapil Sibal, arguing for one of the petitioners, submitted that he was not asking for stay of the notification, but only seeking answers from the government, the steps it had taken to ease the inconvenience caused by this measure. He described the step as a surgical strike against the public. 

The Centre had filed a 'caveat' in the court soon after the November 8 notification that if any petition was posted, the government should also be heard before passing any order. 

Attorney General Mukul Rohtagi appeared for the government justifying the step. According to him, Rs 3.25 lakh crore has been deposited in banks two days after the notification, and Rs 11 lakh crore will be added in a few days. 

Thus the present crisis will be defused, he said. He agreed with the judges who observed that there will be "collateral damage" but the step had to be taken in view of the threat to the nation and financial terrorism. 

The court is likely to examine Section 26 of the Reserve Bank of India Act which is claimed to provide drastic power to the government to take black money clean-up. It says, "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." According to Sibal there should be legislative sanction for cancelling currency series in a wholesale manner.