With no Constitution bench set up yet, challenges to demonetisation now an ‘academic exercise’

Numerous petitions challenging demonetisation were filed in Supreme Court and various other courts. All of them were referred to 5-judge Constitution bench in Dec 2016, that is yet to be set up.

Representational photo: pxhere

New Delhi: “Brothers and sisters… To break the grip of corruption and black money, we have decided that the five hundred rupee and thousand rupee currency notes currently in use will no longer be legal tender from midnight tonight.”

These were the words Prime Minister Narendra Modi used to announce demonetisation in a televised address to the nation at 8 pm on Tuesday, 8 November 2016.

To say that citizens were surprised is probably an understatement, considering the hush-hush manner in which the government had taken the decision, and the fact that 86 per cent of the total currency in circulation would be rendered illegal within four hours of Modi’s announcement. The PM then said people holding demonetised currency could deposit it in their bank and post office accounts from 10 November to 30 December 2016.

The move was introduced through a notification issued under the Reserve Bank of India Act, 1934, but in December 2016, the government passed the Specified Bank Notes Cessation of Liabilities Ordinance, which made holding demonetised Rs 500 and Rs 1,000 notes after 31 March 2017 a criminal offence.

Soon after the PM’s announcement, multiple petitions were filed challenging the constitutional validity of the move. These petitions were referred to a Constitution bench of the Supreme Court in December 2016. Individual petitioners who were unable to deposit the money within the stipulated time frame were also asked to file applications before this Constitution bench.

Since then, more than four years have passed, but the Constitution bench hasn’t even been set up yet.

‘Economic terrorism’

One of the petitioners, Vivek Narayan Sharma, asserted in his plea that demonetisation “created panic and emergency like situation all around India, be it metropolitans (sic), cities, towns & villages etc.”

The petition said the “constitutional ‘right to life’ & ‘right to trade’ of all the citizens of India is being infringed by respondent (the government) due to unreasonable, unmethodical and dictatorial manner of implementing the said scheme”.

Sharma’s plea asserted that “this economic crisis created at the cost of lives of 125 billion citizens of India, cannot be termed less than ‘economic terrorism’ in the lives of aam aadmi”.

Sharma now says “time was of the essence in this matter”.

“If the court would have granted a stay in the beginning, only then the benefit would’ve been there,” he told ThePrint. “Now it is an academic question on how the government should issue such a policy, how it should be implemented, so that people are not disturbed in their day-to-day lives.”

Sharma continued: “Now, it’s about the validity of the process which was undertaken for demonetisation — whether the process was legal or illegal. The judgment will now be on that aspect, so that if the government wants to bring in any policy again, it can follow the directions passed by the court.”

‘Secrecy and confidentiality was critical’

The petitions had also asserted that demonetisation of this scale can only be done by a statute of Parliament and not through a notification.

In response, the government told the Supreme Court that on 7 November 2016, just a day before demonetisation was announced, it had advised the Reserve Bank to consider withdrawal of currency notes “to mitigate the triple problems of counterfeiting, terrorist financing and black money”.

“It was advised in that letter that cash has been a facilitator of black money since transactions made in cash do not leave any audit trail. Elimination of black money will eliminate the long shadow of the ghost economy and will be positive for India’s growth outlook,” it said in an affidavit filed in the court in late 2018.

It also claimed that in the five years preceding the announcement, there had been an increase in the circulation of Rs 500 and Rs 1000 notes, adding: “The fake Indian currency notes have their origin in a neighbouring country and pose a grievous threat to the security and integrity of the country.”

Fake currency notes, it said, were being used for “subversive activities such as drug trafficking and terrorism, causing serious damage to the economy and security of the country.”

It also accepted that it had not been fully prepared with new currency notes when the move was announced, but said this was because “secrecy and confidentiality” were critical in the entire process.

“Since secrecy and confidentiality were the critical requirements of this decision making process, preparations for arranging bank notes of new series in full measure was impossible. Therefore, when the scheme started, the demonetised banknotes could be exchanged with new available bank notes along with the continuous supply being made from the bank note printing presses,” the government said.

9 questions referred to Constitution bench

On 16 December 2016, a three-judge bench of the Supreme Court comprising then-Chief Justice of India T.S. Thakur and Justices A.M. Khanwilkar and D.Y. Chandrachud had framed nine important questions that it said the court would have to look into.

These questions included whether the notification passed on 8 November was against the provisions of the Reserve Bank of India Act, whether it violated Articles 300A (right to property), 14 (equality before law) and 19 (freedom to practice any trade/profession) of the Constitution, and whether it was unreasonable. Another issue was “whether a political party can raise such issues under Article 32 of the Constitution, and whether district co-operative banks have been discriminated against by excluding them from accepting deposits and exchanging demonetised notes”.

It then referred the matter to a five-judge Constitution bench, “keeping in view the general public importance and the far-reaching implications which the answers to the questions may have”.

The petitioners had also demanded that the time limit for exemption for use of demonetised currency notes should be extended in the meantime. However, the court refused to issue any such direction, saying that this “must be best left to the judgment of the government of the day with a hope that the government will be responsive and sensitive to the problems encountered by the common man.”

74-year-old NRI, 71-year-old widow among petitioners

Along with the petitions challenging validity of the notification, there were also several petitions and applications filed by individuals highlighting their grievances with the demonetisation exercise, as they had not been able to deposit the old bank notes within the stipulated time.

For instance, 74-year-old NRI Malvinder Singh had moved the Supreme Court demanding that he should be allowed to deposit Rs 1.6 lakh as he was in the United States from April 2016 to February 2017, and hence, was not able to deposit the old currency notes that were lying in his locked home.

The RBI had allowed Indian citizens who were abroad during November-December 2016 to exchange the demonetised notes up to 31 March 2017. NRIs were allowed to do so until 30 June 2017. This facility was available at RBI offices in Mumbai, Delhi, Kolkata, Chennai and Nagpur only.

After returning to the country, Singh tried to deposit this money, but the RBI refused to take it. Singh’s plea stated that the central bank orally informed him that only those who declared their currency to the custom authorities at the airport were allowed to deposit it with the RBI. He, therefore, approached the Supreme Court.

Another such plea was filed by a 71-year-old woman, Sarla Shrivastav. She moved the Supreme Court for permission to deposit Rs 1.7 lakh worth of old currency notes, which she said belonged to her late husband. She said she was not aware of this money and found it in a “steel kothi (tank)” (sic) in her house in January 2017.

Having heard several individual cases, the Supreme Court on 3 November 2017 said such petitioners should file intervention applications in the main case, which it had referred to the Constitution bench. The court said that the same Constitution bench would decide on their individual grievances as well.

The government had assured the Supreme Court the same day that it would not take any criminal action against those who have approached the Supreme Court for possessing demonetised notes.

But with the Constitution bench not even formed yet, these individual cases have also remained pending.

Transfer petitions last heard 1.5 years ago

In its 16 December 2016 order, the court stayed the petitions and proceedings pending in all the high courts of the country, on transfer petitions filed by the government.

The court issued notice on these transfer petitions, but in the meantime, stayed similar proceedings in all high courts.

“We further direct that no other court shall entertain, hear or decide any writ petition/proceedings on the issue or in relation to or arising from the decision of the government of India to demonetise the old notes of Rs 500 and Rs 1,000, as the entire issue in relation thereto is pending consideration before this court in the present proceedings,” it added.

By January 2017, over 20 such petitions had been filed in different high courts, including Telangana, Kerala, Madras, Bombay and Delhi. The transfer petitions have also been pending for the past four years — the last time they were listed was on 31 July 2017 according to the Supreme Court website.

Advocate Pranav Sachdeva, who is representing several individuals who weren’t able to deposit old currency notes in time, told ThePrint: “Now, since the Supreme Court said that people cannot go to the high courts on demonetisation, so one could not go to the high courts. Now, if somebody could not deposit, he has no remedy but to come to the Supreme Court.”

He added: “There were many others who were not able to deposit money on time but obviously not everybody can come to the Supreme Court.”