In its ruling on the Centre’s 2016 decision to implement demonetisation, the Supreme Court stated that the notification could not be overturned. Here are the implications for 2023.
A five-judge Supreme Court Constitution panel handed down its ruling on Monday regarding a number of petitions that contested the legality of the Modi administration’s decision to demonetize the Rs. 500 and Rs. 1,000 notes in November 2016. The applications were denied by the supreme court, which supported the government’s judgement.
The majority of petitions questioned the legality of the unexpected decision that resulted in currency notes worth 86% of the money in circulation becoming “worthless pieces of paper.” While some petitions asked for a new opportunity to swap notes that were discarded because they couldn’t be exchanged by the deadline.
The bench of Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna rendered two distinct rulings.
Controversy and Defense
Following Prime Minister Narendra Modi’s announcement of the plan to implement demonetisation, there was intense confusion and turmoil for several weeks as people scurried to obtain new currency notes and formed days-long snaking lines outside of banks and ATMs. Additionally, it was stated that some persons passed away while awaiting a money exchange.
The measure, which was initially intended to strengthen India’s digital economy and address the problem of black money and terror financing, has been defended by the administration. Demonetization has drawn criticism from certain experts and members of the political opposition, who claim it has left many people in great suffering, disrupted small enterprises, and negatively impacted the nation’s economic growth.
This majority verdict of the five-judge Constitution bench was delivered by Justice BR Gavai. pic.twitter.com/dw0o9HqIcy
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This criticism has been fueled, in part, by the fact that a significant amount of the demonetised currency has returned to circulation, dashed hopes of eliminating sizable amounts of black money.
Despite concerns that the original purpose of demonetisation was not fulfilled, the Supreme Court upheld the government’s decision to remove the currency notes from circulation and ruled that the announcement cannot be overturned.
2023 Implications of the Court’s Decision
After six years, the economy and society have finally recovered from the shock of the demonetisation decision. According to many analysts, the current court decision will merely be a “academic exercise” at best.
The Supreme Court had hinted that it might not overturn demonetization during the hearing in November-December because “the clock cannot be turned back.” The top court, however, said that the arguments might prompt it to establish rules for similar exercises in the future.
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The Modi administration and the Reserve Bank of India were tasked by the Supreme Court on December 7 to record all pertinent documents pertaining to the demonetisation decision.
Congress leader and the petitioners’ attorney P Chidambaram has stated that the government cannot propose any legislation pertaining to legal tender because this can only happen on the central board of the RBI’s advice.
The Supreme Court responded by stating that documentation demonstrates that the RBI was consulted and that the government collaborated with it for six months before to the announcement in November 2016.
Attorney General R. Venkataramani had rejected judicial review on behalf of the government, arguing that the Supreme Court could not determine a case at this time because “turning back the clock” and “unscrambling an egg” would not result in any concrete relief.
Advantages of Demonetisation
Demonetization’s key advantage is that it will stop criminal activities because their source of funds is no longer recognised as legal cash. Counterfeiters are also impacted by this because they are unable to swap their “merchandise” for fear of being caught. It can stop tax evasion since those who were doing so must come forward and swap their current currency, at which point the government can tax them in the past. Finally, by reducing the need of real currency, it can bring in the era of digital currency.
Disadvantages of Demonetization
The main drawback is the high expense of printing and minting the new money. Demonetization may also fail to have the intended impact of curbing criminal activities since these organisations may be resourceful enough to keep assets in forms other than actual money. Finally, if not executed with the utmost competence, this process is dangerous since it might send the country into complete disarray.