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Wed. Dec 7th, 2022
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NEW DELHI: A five-judge Supreme Court Constitution bench on Thursday hinted at laying guidelines for future demonetisation as it commenced hearing on a bunch of petitions challenging the validity of the Union government’s six-year-old decision to withdraw Rs 500 and Rs 1,000 currency notes.
The bench of Justices S Abdul Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian and B V Nagarathna told the petitioners that the demonetisation probably could not be reversed as it is six years old, but the SC could scrutinise the process adopted for withdrawal of the banknotes and lay down guidelines to streamline the process.
Appearing for the petitioners, senior advocate P Chidambaram, also a staunch political critic of demonetisation, argued that the entire process was flawed resulting in an arbitrary decision of unnecessarily withdrawal of Rs 500 and Rs 1,000 banknotes, which constituted more than 86% of the total currency notes in circulation, to inflict untold miseries and hardships on people.
He said the Union government reversed the decision-making process and asked the RBI to recommend demonetisation. “The RBI board, without its independent directors, met hurriedly on November 8 evening and recommended demonetisation within one and half hours. A waiting cabinet then passed it without any discussion and the Prime Minister went on TV to announce the dreaded decision,” he alleged.
He said the RBI alone had the database about currency notes in circulation and it should have been allowed sufficient time to consider the pros and cons of demonetisation, which turned out to be an ineffective decision as more than 99% of the banknotes of Rs 500 and Rs 1,000 denomination in circulation were returned in exchange of new notes.
Chidambaram pointed out that the government had resorted to Section 26(2) of the RBI Act to take the decision. He argued that the provision says that the government, on the recommendation of the RBI, could withdraw “any series” of currency notes, but this was perceived as “all series” of currency notes by the Centre.
Requesting the court to read down Section 26(2) on the lines of what he argued — “any series” means only “certain particular series” of currency notes, Chidamabaram said if that is not done all governments in future would resort to whimsical demonetisation resulting in chaos.
He said demonetisation did not help in achieving its object of weeding out fake currency and black money as well as stopping the finances for terrorist activities. If all the notes in circulation of the demonetised currency came back to the banks, where was the fake currency, he asked.

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