DECONSTRUCTING LEGALESE OF DEMONETISATION 2016

The Supreme Court in its judgment dated 2.1.2023 upheld the validity of the decision of the incumbent government to demonetise Rs.500 and Rs.1000 currency notes of all denominations on 8.11.2016, by a majority of 4 in a Constitution Bench judgment of 5 judges.

- SRIDHAR POTARAJU

The said judgment has cleared the air on several doubts in the minds of the people as to the validity of such a decision having serious consequences on the citizen at large. Several issues raised were adjudicated in the course of the judgment in the majority opinion of four Hon’ble Judges who upheld the said decision as being in conformity with requirements of Law. The Dissenting opinion addressed the issues arising from interpretation of Section 26(2) of the RBI Act, 1934 while holding the decision to be illegal.

Demonetisation of the currency is a known device used by governments for various reasons primarily to regulate black money. The earliest instance of demonetisation was noticed to be in 1873 in the U.S.A.  Another instance was in 1969 by President Richard Nixon to combat black money by declaring all currencies over $100 to be null. Britain in the year 1971 stopped circulation of old currency. Russia, formerly Union of Soviet Socialist Republics, in an attempt to combat the parallel economy removed 50 and 100 Rouble Notes from circulation under the leadership of Mikhail Gorbachev.