The Supreme Court will pronounce its verdict on January 2 on a batch of petitions filed against the decision taken by the Union government to demonetise the currency notes of Rs 500 and Rs 1,000 denominations. A Constitution bench of Justices S. Abdul Nazeer, B.R. Gavai, A.S. Bopanna, V. Ramasubramanian and B.V. Nagarathna had reserved its verdict on December 7. A total of 58 petitions have been filed challenging the Narendra Modi government's order on November 8, 2016, which had triggered a political storm in the country.
What the petitioners claim
The central government cannot on its own initiate any proposal relating to legal tender which and can only be done on the recommendation of the RBI's central board.
Government has no power to invoke Section 26 of the Reserve Bank of India Act to demonetise currency notes. Section 26(2) gives power to Centre to cancel only certain series of currency notes and not the entire notes of a denomination.
Over 2,300 crore currency notes were demonetised while the government's printing presses could only print 300 crore notes per month. This gross mismatch meant it would take several months to print notes.
The government did not even consider that over 2,15,000 ATMs would have to be recalibrated. In fact, in initial days ATMs did not take the Rs 2,000 note.
The government did not take into account that two-third of bank branches were located in metros and only a third were in rural areas.
The three objectives it aimed to achieve through demonetisation were to control fake currency, black money and terrorism. But none of these objectives could be achieved.
Government's stance
The demonetisation decision was taken after extensive consultation with the Reserve Bank of India and advance preparations were made before the note ban was enforced.
The decision was part of a larger strategy to combat the menace of fake money, terror financing, black money and tax evasion.
The court cannot decide a matter when no tangible relief can be granted by way of "putting the clock back" and "unscrambling a scrambled egg" .
RBI's submission
There were "temporary hardships" and those too are an integral part of the nation-building process, but there was a mechanism by which the problems that arose were solved.