Center tells SC that demonetisation was a well-considered decision to combat black money and terror financing
In its filing to the Supreme Court, the Union government said the 2016 demonetisation was part of a larger strategy to combat the menace of fake money, terror financing, black money, and tax evasion.
The Centre defended its decision to demonetise currency notes of Rs 500 and Rs 1000 denominations, stating that it had been taken after extensive consultation with the Reserve Bank of India and that advance preparation had been made before enforcing the ban.
A batch of appeals challenging the Centre’s demonetisation decision in 2016 prompted these submissions in an affidavit.
It should be noted that the withdrawal of the legal tender character of the specified bank notes was by itself an effective measure and also a part of a larger strategy intended to combat the menace of fake money, terror financing, black money, and tax evasion, but not limited to them alone.
As a result of the power conferred by Parliament (RBI Act, 1934), and in conformity with the provisions of the said Act, the Centre submitted that it was an economic policy decision that was subsequently affirmatively taken note of by Parliament in the Specified Bank Notes (Cessation of Liabilities) Act, 2017.
One of the crucial steps in the series of transformational economic policy measures was the withdrawal of the legal tender status of the specified banknotes.
The Constitution Bench of five judges comprising Justices S A Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna is hearing this case on November 24.
Upon the specific recommendation of the Central Board of the Reserve Bank of India, the Union government implemented the demonetisation decision, and the RBI also proposed a draft scheme for its implementation.
The Reserve Bank of India made a specific recommendation to the government regarding the withdrawal of the legal tender status of the existing series of banknotes in the denominations of 500 and 1000 rupees.
Furthermore, the RBI proposed a draft scheme for implementing the recommendation. Accordingly, the Central Government considered the recommendation as well as the draft scheme and published the Notification in the Gazette of India declaring that the specified bank notes are no longer legal tender. According to the Centre, a wide range of measures were taken to reduce and mitigate the hardships experienced by the people, which included exempting certain bank notes from becoming legal tender in certain transactions, including booking a bus, train, and air tickets, receiving treatment in government hospitals, and purchasing LPG cylinders.
The Centre asserted that the government’s economic policy agenda included rooting out fake currency, black money, and subversive activity financing, expanding the formal sector, digitizing transactions, expanding communication connectivity to reach the last mile, broadening the tax base, improving tax compliance, and expanding the formal sector.
Moreover, the report mentions lowering business costs, facilitating financial inclusion, and eliminating long-standing distortions in the informal sector.
The Attorney General apologized to the bench on November 9 for not being able to prepare the comprehensive affidavit and requested a week to do so.
In his observation, Justice Nagarathna noted that the Constitution Bench does not normally rise in such a manner, and the incident was very embarrassing.
According to the top court, the Centre has one week to file an affidavit.
In 58 petitions, the bench challenged the Centre’s decision to demonetise currency notes of Rs 1000 and Rs 500 denominations on November 8, 2016.
TS Thakur, the then Chief Justice, directed a bench of five judges to decide the validity of the decision and other related issues on December 16, 2016