# VIVEK NARAYAN SHARMA v. UNION OF INDIA

- **Citation:** [2023] 1 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2023-01-02
- **Bench:** S. Abdul Nazeer, B.R. Gavai, A.S. Bopanna, V. Ramasubramanian, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vivek-narayan-sharma-v-union-of-india-36982
- **Pages:** 230

## Headnote

Demonetisation - Notification No. 3407(E) dated 8th
November 2016 by which Central Government declared that the
bank notes of denominations of the existing series of the value of
five hundred rupees and one thousand rupees shall cease to be
legal tender with effect from 9th November 2016 - Act or policy of
'demonetisation' - Interpretation of sub-section (2) of s.26 of the
Reserve Bank of India Act, 1934 - Meaning of "any" series of
"any" denomination - Power of the Central Government to initiate
and carry out demonetisation in absence of recommendation to this
effect by the Central Board of the Reserve Bank of India - Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.) (majority judgment)]: The power available
to the Central Government under sub-section (2) of s.26 of the RBI
Act cannot be restricted to mean that it can be exercised only for
'one' or 'some' series of bank notes and not for 'all' series of bank
notes - The power can be exercised for all series of bank notes -
Merely because on two earlier occasions, the demonetization
exercise was by plenary legislation, it cannot be held that such a
power would not be available to the Central Government under
sub-section (2) of s.26 of the RBI Act - Sub-section (2) of s.26 of
the RBI Act does not provide for excessive delegation inasmuch as
there is an inbuilt safeguard that such a power has to be exercised
on the recommendation of the Central Board - As such, sub-section
(2) of Section 26 of the RBI Act is not liable to be struck down on
the said ground - The impugned Notification dated 8th November
2016 does not suffer from any flaws in the decision-making process;
and satisfies the test of proportionality and, as such, cannot be
struck down - The period provided for exchange of notes vide the
impugned Notification dated 8th November 2016 cannot be said to
be unreasonable - The RBI does not possess independent power
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under sub-section (2) of s.4 of the 2017 Act in isolation of the
provisions of ss.3 and 4(1) thereof to accept the demonetized notes
beyond the period specified in notifications issued under sub-section
(1) of s.4 of the 2017 Act - Held [per B.V. Nagarathna, J. (minority
judgment)]: Sub-section (2) of s.26 of RBI Act applies only when a
proposal for demonetisation is initiated by the Central Board of
RBI by way of a recommendation being made to the Central
Government - The Central Government cannot demonetise bank
notes by issuance of a gazette notification as if it is exercising power
under sub-section (2) of s.26 of the RBI Act - In such circumstances
when the Central Government is initiating the process of
demonetisation, it would not be acting under sub-section (2) of s.26
of the RBI Act but notwithstanding the said provision through a
legislative process - When such power is exercised by the Central
Government by means of a legislation, it is by virtue of Entry 36,
List I of the Seventh Schedule of the Constitution of India which
deals with currency, coinage and legal tender; foreign exchange
which is a field of legislation - When the Central Government
proposes demonetisation of any bank note, it must seek the opinion
of the Central Board of the RBI - The opinion of the Central Board
of RBI ought to be an independent and frank opinion - On receipt
of a negative opinion from the Central Board of the Bank, the Central
Government which has initiated the demonetisation process may
still intend to go ahead with the said process after weighing the
pros and cons only by means of an Ordinance and/or Parliamentary
legislation but not by issuance of a gazette notification - The Central
Government in such circumstances cannot resort to exercise of power
under sub-section (2) of s.26 of the RBI Act by issuing a notification
in the Gazette of India as if it were exercising executive powers -
Even if the Central Board of RBI concurs with

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VIVEK NARAYAN SHARMA
v.
UNION OF INDIA
(Writ Petition (Civil) No.906 of 2016)
JANUARY 02, 2023
[S. ABDUL NAZEER, B.R. GAVAI, A.S. BOPANNA,
V. RAMASUBRAMANIAN AND B. V. NAGARATHNA, JJ.]
Demonetisation - Notification No. 3407(E) dated 8th
November 2016 by which Central Government declared that the
bank notes of denominations of the existing series of the value of
five hundred rupees and one thousand rupees shall cease to be
legal tender with effect from 9th November 2016 - Act or policy of
'demonetisation' - Interpretation of sub-section (2) of s.26 of the
Reserve Bank of India Act, 1934 - Meaning of "any" series of
"any" denomination - Power of the Central Government to initiate
and carry out demonetisation in absence of recommendation to this
effect by the Central Board of the Reserve Bank of India - Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.) (majority judgment)]: The power available
to the Central Government under sub-section (2) of s.26 of the RBI
Act cannot be restricted to mean that it can be exercised only for
'one' or 'some' series of bank notes and not for 'all' series of bank
notes - The power can be exercised for all series of bank notes -
Merely because on two earlier occasions, the demonetization
exercise was by plenary legislation, it cannot be held that such a
power would not be available to the Central Government under
sub-section (2) of s.26 of the RBI Act - Sub-section (2) of s.26 of
the RBI Act does not provide for excessive delegation inasmuch as
there is an inbuilt safeguard that such a power has to be exercised
on the recommendation of the Central Board - As such, sub-section
(2) of Section 26 of the RBI Act is not liable to be struck down on
the said ground - The impugned Notification dated 8th November
2016 does not suffer from any flaws in the decision-making process;
and satisfies the test of proportionality and, as such, cannot be
struck down - The period provided for exchange of notes vide the
impugned Notification dated 8th November 2016 cannot be said to
be unreasonable - The RBI does not possess independent power
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under sub-section (2) of s.4 of the 2017 Act in isolation of the
provisions of ss.3 and 4(1) thereof to accept the demonetized notes
beyond the period specified in notifications issued under sub-section
(1) of s.4 of the 2017 Act - Held [per B.V. Nagarathna, J. (minority
judgment)]: Sub-section (2) of s.26 of RBI Act applies only when a
proposal for demonetisation is initiated by the Central Board of
RBI by way of a recommendation being made to the Central
Government - The Central Government cannot demonetise bank
notes by issuance of a gazette notification as if it is exercising power
under sub-section (2) of s.26 of the RBI Act - In such circumstances
when the Central Government is initiating the process of
demonetisation, it would not be acting under sub-section (2) of s.26
of the RBI Act but notwithstanding the said provision through a
legislative process - When such power is exercised by the Central
Government by means of a legislation, it is by virtue of Entry 36,
List I of the Seventh Schedule of the Constitution of India which
deals with currency, coinage and legal tender; foreign exchange
which is a field of legislation - When the Central Government
proposes demonetisation of any bank note, it must seek the opinion
of the Central Board of the RBI - The opinion of the Central Board
of RBI ought to be an independent and frank opinion - On receipt
of a negative opinion from the Central Board of the Bank, the Central
Government which has initiated the demonetisation process may
still intend to go ahead with the said process after weighing the
pros and cons only by means of an Ordinance and/or Parliamentary
legislation but not by issuance of a gazette notification - The Central
Government in such circumstances cannot resort to exercise of power
under sub-section (2) of s.26 of the RBI Act by issuing a notification
in the Gazette of India as if it were exercising executive powers -
Even if the Central Board of RBI concurs with the proposal of the
Central Government, the Central Government would have to
undertake a legislative process and not carry out the measure by
simply issuing a gazette notification - The action of demonetisation
initiated by the Central Government by issuance of the impugned
notification dated 8th November, 2016 was an exercise of power
contrary to law and therefore unlawful - Consequently, the 2016
Ordinance and 2017 Act are also unlawful - But, having regard to
the fact that the demonetisation process was given effect to from
8th November, 2016 onwards, the status quo ante cannot be restored
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at this point of time - Reserve Bank of India Act, 1934 - s.26 -
Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 -
Specified Bank Notes (Cessation of Liabilities) Act, 2017 - -
Constitution of India - Entry 36 of List I of the Seventh Schedule.
Interpretation of Statutes - Words of a statute - Word "any"
- Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: Word "any" will have to be
construed in its context, taking into consideration the scheme and
the purpose of the enactment - What is the meaning which the
legislature intended to give to a particular statutory provision has
to be decided by the Court on a consideration of the context in
which the word(s) appear(s) and in particular, the scheme and object
of the legislation.
Interpretation of Statutes - Textual interpretation v/ contextual
interpretation - Held [per B.R. Gavai, J. (for himself and for S. Abdul
Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: An
interpretation which makes the textual interpretation match the
contextual has to be preferred - No part of a statute and no word of
a statute can be construed in isolation.
Interpretation of Statutes - Construction having regard to
legislative intent - Held [per B.R. Gavai, J. (for himself and for S.
Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: A statute
must be construed having regard to the legislative intent - It has to
be meaningful - A construction which leads to manifest absurdity
must not be preferred to a construction which would fulfil the object
and purport of the legislative intent.
Interpretation of Statutes - Modern approach of interpretation
- Is pragmatic, and not pedantic - Held [per B.R. Gavai, J. (for himself
and for S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]:
An interpretation which advances the purpose of the Act and which
ensures its smooth and harmonious working must be chosen and
the other which leads to absurdity, or confusion, or friction, or
contradiction and conflict between its various provisions, or
undermines, or tends to defeat or destroy the basic scheme and
purpose of the enactment must be eschewed.
Interpretation of Statutes - Purposive Interpretation - Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.)]: An interpretation which, in effect,
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nullifies the purpose for which a power is to be exercised, would be
opposed to the principle of purposive interpretation - Such an
interpretation rather than advancing the object of the enactment,
would defeat the same.
Interpretation of Statutes - Purposive Interpretation in respect
of intention of Legislature in governing the relation between Central
Government and RBI - Held [per B.R. Gavai, J. (for himself and for S.
Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: When
the legislature itself has provided that the Central Government would
take a decision after considering the recommendation of the Central
Board of the RBI, which has been assigned a primary role in matters
with regard to monetary policy and management and regulation of
currency, the legislature could not have intended to give a restricted
power under sub-section (2) of s.26 of the RBI Act - Reserve Bank
of India Act, 1934 - s.26.
Demonetisation - Reserve Bank of India Act, 1934 - s.26 -
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: The Policy of s.26 of RBI
Act is to enable the Central Government on the recommendation of
the Central Board, to effect demonetization - The legislative policy
is with regard to management and regulation of currency -
Demonetization of notes would certainly be a part of management
and regulation of currency - Such demonetization can be done in
respect of any series of bank notes of any denomination.
Reserve Bank of India - Pivotal Role/Primary Status of RBI -
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: RBI, which is a bankers'
bank, is a creature of statute - RBI plays an important role in the
economy and financial affairs of India and one of its important
functions is to regulate the banking system in the country - It is the
duty of the RBI to safeguard the economy and financial stability of
the country - RBI is the sole repository of power for the management
of currency - It has the sole right to issue bank notes and to issue
currency notes supplied to it by the Government of India - RBI has
an important role to play in evolving the monetary policy of the
country.
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Reserve Bank of India Act, 1934 - s.26 - Held [per B.R. Gavai,
J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The word "any" would mean "all" under
sub-section (2) of s.26 of the RBI Act taking into consideration the
overall scheme, purpose and the object of the RBI Act and also the
context in which the power is to be exercised.
Reserve Bank of India Act, 1934 - s.26 - Held [per B.R. Gavai,
J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: Decision u/s.26(2) has to be taken on the
recommendation of the Central Board - There is an inbuilt safeguard
in sub-section (2) of s.26 of the RBI Act inasmuch as the Central
Government is required to take a decision on the recommendation
of the RBI.
Reserve Bank of India Act, 1934 - s.26 - Power to be
exercised by the Central Government under sub-section (2) of s.26
of the RBI Act is for effecting demonetization - The power has to be
exercised on the recommendation of the Central Board - Word
"recommendation" - Meaning of - Held [per B.R. Gavai, J. (for
himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The word "recommendation" will have to
be construed in the context in which it is used - The word
"recommendation" would mean a consultative process between the
Central Board of RBI and the Central Government - RBI has a
pivotal role in matters of monetary policy and issuance of currency
- The scheme mandates that before the Central Government takes a
decision with regard to demonetization, it would be required to
consider the recommendation of the Central Board - Consultation
with the RBI is an inbuilt safeguard - Insofar as s.26(2) is concerned,
the Parliament has provided an inbuilt safeguard i.e. recommendation
of the RBI - The RBI as well as the Central Government are bodies
having contingent of experts in the field of economic, monetary
and fiscal policies, thus, there is sufficient guidance to the delegatee
when it exercises its powers under sub-section (2) of s.26 of the RBI
Act, from the subject matter of the statute, and the other provisions
of the Act.
Words and Phrases - Word "any" in sub-section (2) of s.26
of the RBI Act - Factors which cannot be considered to give
restricted meaning - Held [per B.R. Gavai, J. (for himself and for S.
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Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: Merely
because on earlier two occasions the Government decided to take
recourse to plenary power of legislation, this, by itself, cannot be a
ground to give a restricted meaning to the word "any" in sub-section
(2) of s.26 of the RBI Act - The legislative intent could not have
been to give a restricted meaning to the word "any" in sub-section
(2) of s.26 of the RBI Act - Reserve Bank of India Act, 1934 - s.26.
Delegated Legislation - Excessive Delegation - "policy and
guideline" test - Held [per B.R. Gavai, J. (for himself and for S. Abdul
Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: A mere
possibility or eventuality of abuse of delegated powers in the absence
of any evidence supporting such claim, cannot be a ground for
striking down such a provision - If a challenge is made to the
delegated legislation framed by the executive, the same can be
examined by the constitutional court - Applying the "policy and
guideline" test, if it is found that the delegated legislation does not
satisfy the said test, the legislation can be struck down without
affecting the constitutionality of the rule-making power.
Reserve Bank of India Act, 1934 - Guiding Factors - Whether
the RBI Act provides guidance to the delegatee or not - Held [per
B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and
V. Ramasubramanian, JJ.)]: The entire scheme, object and the purpose
of the Act has to be taken into consideration - Guidance could be
sought from the express provision empowering delegation or other
provisions of the statute, the preamble, the scheme or even the very
subject-matter of the Statute - If guidance could be found in
whatever part of the Act, the delegation has to be held to be valid -
A great amount of latitude has to be given in such matters - There
cannot be a straitjacket formula, and the question whether excessive
delegation has been conferred or not has to be decided on the basis
of the scheme, the object and the purpose of the statute under
consideration.
Demonetisation - Democratic check upon excessive delegation
- Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: Insofar as Demonetization
is concerned, the delegation is made to the Central Government i.e.
the highest executive body of the country - India has a Parliamentary
system in which the Government is responsible to the Parliament -
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In case the Executive does not act reasonably while exercising its
power of delegated legislation, it is responsible to Parliament who
are elected representatives of the citizens for whom there exists a
democratic method of bringing to book the elected representatives
who act unreasonably in such matters.
Judicial Review - Scope of - Held [per B.R. Gavai, J. (for
himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The duty of the court is to confine itself to
the question of legality - The Court would be entitled to interfere
only when it is found that the action of the executive is arbitrary
and violative of any constitutional, statutory or other provisions of
law.
Judicial Review - Scope of - Inquiry in economic matters -
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: Is limited only to find out
as to whether there is an illegality in the decision-making process.
Demonetisation - Procedural Propriety of - Held [per B.R.
Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The final say with regard to economic and
monetary policies of the country will be with the Central Government
- It cannot be expected that the RBI and the Central Government
will act in two isolated boxes - An element of interaction/consultation
in such important matters pertaining to economic and monetary
policies cannot be denied to the RBI and the Central Government -
The matter was under active consideration for a period of six months
between the RBI and the Central Government - RBI and the Central
Government were in consultation with each other for a period of
six months before the impugned notification was issued - The record
would also reveal that all the relevant information was shared by
both the Central Board as well as the Central Government with
each other - As such, merely because the Central Government has
advised the Central Board to consider recommending demonetization
and that the Central Board, on the advice of the Central Government,
has considered the proposal for demonetization and recommended
it and, thereafter, the Central Government has taken a decision,
cannot be a ground to hold that the procedure prescribed under
s.26 of the RBI Act was breached - The two requirements of subsection (2) of s.26 of the RBI Act are (i) recommendation by the
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Central Board; and (ii) the decision by the Central Government -
Both the Central Board while making recommendation and the
Central Government while taking the decision, have taken into
consideration all the relevant factors.
Demonetisation - Interference by Court - Scope - Held [per
B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and
V. Ramasubramanian, JJ.)]: The court does not have the expertise to
determine whether the object with which demonetization was effected
is served or not or as to whether it has resulted in huge direct and
indirect benefits or not - It would be wise for the Court not to hazard
an opinion where even economists may differ.
Administrative Law - Government action - Scope of judicial
review - Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer,
A.S. Bopanna, and V. Ramasubramanian, JJ.)]: If the action of the
government has a basis with the objectives to be achieved, it cannot
be declared as palpably arbitrary - The result of the act may seem
unjust and oppressive, yet be free from judicial interference - The
problems of government are practical ones and may justify, if they
do not require, rough accommodations, illogical, it may be, and
unscientific - But even such criticism should not be hastily expressed
- What is best is not always discernible, and the wisdom of any
choice may be disputed or condemned - Mere errors of government
are not subject to judicial review - It is only the palpably arbitrary
exercises which can be declared void.
Government Notification - Legality of - Adjudication of -
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: While adjudging the
illegality of the impugned Notification, one has to examine on the
basis as to whether the objectives for which it was enacted has
nexus with the decision taken or not - If the impugned Notification
had a nexus with the objectives to be achieved, then, merely because
some citizens have suffered through hardships would not be a ground
to hold the impugned Notification to be bad in law.
Demonetisation - Argument of "haste" in taking the decision
to demonetise - Tenability - Held [per B.R. Gavai, J. (for himself and
for S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]:
The Central Government had advised the Central Board to draft a
scheme to implement demonetization in a non-disruptive manner
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with as little inconvenience to the public and business entities as
possible - Accordingly, a draft scheme was also submitted by the
Central Board along with its recommendations for demonetization
- RBI subsequently issued relaxations from time to time taking into
consideration the difficulties of the people and availability of the
new notes - No doubt that on account of demonetization, the citizens
were faced with various hardships - But the 'hasty' argument would
be destructive of the very purpose of demonetization - Such
measures undisputedly are required to be taken with utmost
confidentiality and speed - If the news of such a measure is leaked
out, it is difficult to imagine how disastrous the consequences would
be.
Specified Bank Notes (Cessation of Liabilities) Act, 2017 -
s.4 - Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer,
A.S. Bopanna, and V. Ramasubramanian, JJ.)]: sub-section (2) of s.4
of the 2017 Act cannot be read independently to provide power to
the RBI in isolation of sub-sections (3) and (4) thereof - It is to be
read as a part of the scheme of s.4 of the 2017 Act - Because s.4 of
2017 Act provides an integrated scheme - It is a complete code in
itself.
Judicial Review - Limits of - Held [per B.R. Gavai, J. (for himself
and for S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]:
It is not permissible for a Court to advise in matters relating to
financial and economic policies for which bodies like Reserve Bank
are fully competent - It would be risky and hazardous for the courts
to tread an unknown path and should leave such task to the expert
bodies.
Government policy - Interference with - Held [per B.R. Gavai,
J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The Court would not interfere with any
opinion formed by the government if it is based on the relevant
facts and circumstances or based on expert's advice - When the
government forms its policy, it is based on a number of circumstances
and it is also based on expert's opinion, which must not be interfered
with.
Policy matters - Economic policy - Judicial review by the
Court - Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer,
A.S. Bopanna, and V. Ramasubramanian, JJ.)]: It is not the function
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of this Court or of any other Court to sit in judgment over matters
of economic policy - These must be left to the government of the
day to decide - Even experts can seriously err and doubtlessly differ
- Courts can certainly not be expected to decide - The Court must
defer to legislative judgment in matters relating to social and
economic policies and must not interfere unless the exercise of
executive power appears to be palpably arbitrary - The Court does
not have necessary competence and expertise to adjudicate upon
such economic issues - It is also not possible for the Court to assess
or evaluate what would be the impact of a particular action and it
is best left to the wisdom of the experts - Mere errors of judgment
by the government seen in retrospect is not subject to judicial review
- Legislative and quasi-legislative authorities are entitled to a free
play, and unless the action suffers from patent illegality, manifest
or palpable arbitrariness, the Court should be slow in interfering
with the same.
Demonetisation - Proportionality- the four-pronged test - Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.)]: While examining as to whether the
impugned provisions of the statute and rules amount to reasonable
restrictions and are brought out in the interest of the general public,
the exercise that is required to be undertaken is balancing of the
fundamental right to carry on occupation on the one hand and the
restrictions imposed on the other hand - Four tests of proportionality
which need to be satisfied - The first one is that it should be
designated for a proper purpose - The second one is that the
measures undertaken to effectuate such a limitation are rationally
connected to the fulfilment of that purpose - The third one is that
the measures undertaken are necessary in that there are no
alternative measures that may similarly achieve that same purpose
with a lesser degree of limitation - Finally, the fourth one is that
there needs to be a proper relation between the importance of
achieving the proper purpose and the social importance of
preventing the limitation on the constitutional right - There has to
be a balance between a constitutional right and public interest - A
constitutional licence to limit those rights is granted where such a
limitation will be justified to protect public interest or the rights of
others - By demonetization, the right vested in the notes was not
taken away - The only restrictions were with regard to exchange of
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old notes with the new notes, which were also gradually relaxed
from time to time - Insofar as deposit of the demonetized notes in
banks is concerned, there was no limitation - If a citizen had a
'Know Your Customer (KYC) compliant bank account', he could
deposit any amount and get to his credit the full value of legitimate
currency - As such, the right to property in bank notes was not
taken away - A full value of legitimate currency was entitled to be
deposited in the bank account, however, up to a particular date -
In any case, there was no restriction on non-cash transactions like
debit card, credit card, net banking, online transactions etc. - The
argument that the right to property was sought to be taken away is
without substance - In any case, even if there were reasonable
restrictions on the said right, the said restrictions were in the public
interest of curbing evils of fake currency, black money, drug
trafficking & terror financing - As such, applying the four-pronged
test, the doctrine of proportionality was fully satisfied.
Demonetisation - Reserve Bank of India Act, 1934 - s.26 -
Held [per B.V. Nagarathna, J.]: The Act does not envisage initiation
of demonetisation of bank notes by the Central Government - Subsection (2) of s.26 of the Act, contemplates demonetisation of bank
notes at the instance of the Central Board of the Reserve Bank of
India - Hence, if demonetisation is to be initiated by the Central
Government, such power is derived from Entry 36 of List I of the
Seventh Schedule to the Constitution which speaks of currency,
coinage and legal tender; foreign exchange - Constitution of India
- Entry 36 of List I of the Seventh Schedule.
Economic/Fiscal Policies - Interference by Courts - Limited
scope of judicial review permissible in matters concerning economic
policy decisions - Held [per B.V. Nagarathna, J.]: The court is not to
sit in judgment over the merits of economic or financial policy -
The scope of interference by a court is limited to instances where
the impugned scheme or legislation in the economic arena has been
enacted in violation of any Constitutional or statutory provisions -
The court may not undertake a foray into the merits, demerits,
sufficiency or lack thereof, success in realising the objectives etc.,
of an economic policy, as such an analysis is the prerogative of the
Government in consultation with experts in the field.
Reserve Bank of India Act, 1934 - s.26 - Interpretation of
sub-section (2) of s.26 of the Act - Initiation of recommendation to
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carry out demonetisation - Held [per B.V. Nagarathna, J.]: Under
sub-section (2) of s.26 of the Act, the Central Government would
act only on the recommendation made by the Central Board of the
RBI, which is the initiator of demonetisation of bank notes.
Reserve Bank of India Act, 1934 - s.26 - Interpretation of
sub-section (2) of Section 26 of the Act - Meaning of "any" series
of "any" denomination - Held [per B.V. Nagarathna, J.]: The proposal
for demonetisation can emanate either from the Central Government
or from the Central Board of the RBI - It is however necessary to
contrast the proposal for demonetisation initiated by the Central
Government, with that initiated by the Central Board of the RBI -
When the Central Board of the RBI recommends demonetisation, it
is only for a particular series of bank notes of a particular
denomination as specified in the recommendation made under
sub-section (2) of s.26 of the Act - The word "any" in sub-section
(2) of s.26 cannot be read to mean "all" - If read as "specified" or
"particular" as against all, it would not suffer from arbitrariness
or suffer from unguided discretion being given to the Central Board
of the RBI.
Demonetisation - Reserve Bank of India Act, 1934 - s.26 -
Demonetisation initiated by Central Government ought to have been
carried out by way of a plenary legislation - Non-applicability of
sub-section (2) of s.26 of the Act - Held [per B.V. Nagarathna, J.]:
The powers of the Central Government being vast, the same have to
be exercised only through a plenary legislation or a legislative
process rather than by an executive act by the issuance of a
notification in the Gazette of India - It is necessary that the
Parliament which consists of the representatives of the People of
this country, discusses the matter and thereafter approves and
supports the implementation of the scheme of demonetisation.
Demonetisation - Principle, "to do a thing a particular way
or not at all" - "expression unius est exclusion alterius" - Held
[per B.V. Nagarathna, J.]: Where a power is given to do a certain
thing in a certain way, the thing must be done in that way or not at
all and other methods of performance are necessarily forbidden -
What ought to have been done through a Parliamentary enactment
or plenary legislation, could not have been carried out by simply
issuing a notification under sub- section (2) of s.26 of the RBI Act
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by the Central Government - The said provision does not apply to
cases where the proposal for demonetisation originates from the
Central Government and the same is not envisaged under the Act -
Hence, issuance a notification to give effect to the Central
Government's proposal for demonetisation, was clearly based on
an incorrect understanding of sub-section (2) of s.26 of the RBI Act
- The Central Government did not follow the procedure contemplated
under law to give effect to its proposal for demonetisation - This is
not a matter of form but one of substance as in law, the powers of
the Central Board of the RBI and the Central Government are totally
distinct in the matter of demonetisation of bank notes.
Administrative Law - Exercise of discretion, when invalid -
Held [per B.V. Nagarathna, J.]: When an authority exercises the
discretion vested in it by law at the behest of another authority in a
specific matter, this would in law amount to non-exercise of its
discretionary power by the authority itself, and consequently, such
action or decision is invalid.
Answering the referred questions, the Court
HELD:
PER B.R. GAVAI, J. (FOR HIMSELF AND FOR S. ABDUL
NAZEER, A.S. BOPANNA, AND V. RAMASUBRAMANIAN,
JJ.) (MAJORITY JUDGMENT):
1. The power available to the Central Government under
sub-section (2) of Section 26 of the RBI Act cannot be restricted
to mean that it can be exercised only for 'one' or 'some' series of
bank notes and not for 'all' series of bank notes. The power can
be exercised for all series of bank notes. Merely because on two
earlier occasions, the demonetization exercise was by plenary
legislation, it cannot be held that such a power would not be
available to the Central Government under sub-section (2) of
Section 26 of the RBI Act. [Para 304 (i)][143-G-H; 144-G]
2. Sub-section (2) of Section 26 of the RBI Act does not
provide for excessive delegation inasmuch as there is an inbuilt
safeguard that such a power has to be exercised on the
recommendation of the Central Board. As such, sub-section (2)
of Section 26 of the RBI Act is not liable to be struck down on
the said ground. [Para 304 (ii)][144-B-C]
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3. The impugned Notification dated 8th November 2016
does not suffer from any flaws in the decision-making process.
[Para 304 (iii)][144-C]
4. The impugned Notification dated 8th November 2016
satisfies the test of proportionality and, as such, cannot be struck
down on the said ground. [Para 304 (iv)][144-C-D]
5. The period provided for exchange of notes vide the
impugned Notification dated 8th November 2016 cannot be said
to unreasonable. [Para 304 (v)][144-D]
6. The RBI does not possess independent power under
sub-section (2) of Section 4 of the 2017 Act in isolation of the
provisions of Sections 3 and 4(1) thereof to accept the
demonetized notes beyond the period specified in notifications
issued under sub-section (1) of Section 4 of the 2017 Act. [Para
304 (vi)][144-E-F]
Harakchand Ratanchand Banthia and others v. Union
of India and others (1969) 2 SCC 166 : [1970] 1 SCR
479; Internet and Mobile Association of India v. Reserve
Bank of India (2020) 10 SCC 274 : [2020] 2 SCR 297;
Tata Cellular v. Union of India (1994) 6 SCC 651:
[1994] 2 Suppl. SCR 122; Jayantilal Ratanchand Shah
v. Reserve Bank of India and others (1996) 9 SCC 650
: [1996] 4 Suppl. SCR 443; The Chief Inspector of
Mines and another v. Lala Karam Chand Thapar etc.
[1962] 1 SCR 9; Banwarilal Agarawalla v. The State
of Bihar and others [1962] 1 SCR 33; Tej Kiran Jain
and others v. N. Sanjiva Reddy and others (1970) 2
SCC 272 : [1971] 1 SCR 612; Lucknow Development
Authority v. M.K. Gupta (1994) 1 SCC 243: [1993] 3
Suppl. SCR 615; K.P. Mohammed Salim v.
Commissioner of Income Tax, Cochin (2008) 11 SCC
573 : [2008] 6 SCR 949; Raj Kumar Shivhare v.
Assistant Director, Directorate of Enforcement and
another (2010) 4 SCC 772 : [2010] 4 SCR 608;
Municipal Corporation of Delhi v. Birla Cotton,
Spinning and Weaving Mills, Delhi and another AIR
1968 SC 1232 : [1968] 3 SCR 251; Gwalior Rayon
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E
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Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt. Commissioner of
Sales Tax and others (1974) 4 SCC 98 : [1974]
2 SCR 879; The Registrar of Co-operative Societies,
Trivandrum and another v. K. Kunjabmu and others
(1980) 1 SCC 340 : [1980] 2 SCR 260; Peerless
General Finance and Investment Co. Limited and
another v. Reserve Bank of India (1992) 2 SCC 343 :
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632; Modern Dental College and Research Centre and
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another v. Justice R.A. Mehta (Retired) and others (2013)
13 SCC 1 : [2013] 1 SCR 1; Rashmi Metaliks Limited
and Another v. Kolkata Metropolitan Development
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17 SCR 345; M/s. Prag Ice & Oil Mills and Another v.
Union of India (1978) 3 SCC 459: [1978] 3 SCR 293;
R.K. Garg v. Union of India and Others (1981) 4 SCC
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Limited and Another v. Union of India and Others
(1990) 3 SCC 223 : [1990] 1 SCR 909; V.M. Kurian v.
State of Kerala and others (2001) 4 SCC 215 : [2001]2
SCR 818; Manohar s/o Manikrao Anchule v. State of
Maharashtra and another (2012) 13 SCC 14 : [2012]
12 SCR 850; Km. Sonia Bhatia v. State of U.P. and
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227: [1998] 2 Suppl. SCR 632 and Popatlal Shah v.
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Hamdard Dawakhana (Wakf) Lal Kuan, Delhi and
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8 SCR 1; Uttamrao Shivdas Jankar v. Ranjitsinh
Vijaysinh Mohite Patil (2009) 13 SCC 131 : [2009] 9
SCR 538; Centre for Public Interest litigation and others
v. Union of India and others (2012) 3 SCC 1:[2012] 3
SCR 147; Lt. General Manomoy Ganguly VSM v. Union
VIVEK NARAYAN SHARMA v. UNION OF INDIA
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of India and others (2018) 18 SCC 83 : [2018] 13
SCR 703; Somaiya Organics (India) Ltd. and another
v. State of U.P. and another (2001) 5 SCC 519 : [2001]
3 SCR 33; Orissa Cement Ltd. v. State of Orissa and
others 1991 Supp (1) SCC 430 : [1991] 2 SCR 105;
I.C. Golak Nath & Others v. State of Punjab & Another
[1967] 2 SCR 762; Maneka Gandhi v. Union of India
[1978] 2 SCR 621; C.I.T. v. S. Teja Singh, AIR 1959
SC 352 : [1959] 1 Suppl. SCR 394; Maharaj Singh
v. State of Uttar Pradesh and others (1977) 1 SCC 155
: [1977] 1 SCR 1072; Delhi Laws Act, In Re AIR 1951
SC 332: [1951] SCR 747:1951 SCC 568; M.P. High
Court Bar Association v. Union of India and others
(2004) 11 SCC 766 : [2004 ] 4 Suppl. SCR 520; Kerala
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Banerjee and others v. Union of India and others (1984)
3 SCC 127 : [1984] 3 SCR 252; Ramesh Birch and
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430 : [1989] 2 SCR 629; M/s Gammon India Limited
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Secretary and Curator, Victoria Memorial Hall v.
Howrah Ganatantrik Nagrik Samity and others (2010)
3 SCC 732 : [2010] 3 SCR 190; Bajaj Hindustan
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& Processing Cooperative Ltd. v. State of Karnataka
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C
D
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and others (1997) 8 SCC 31; R.S. Nayak v. A.R. Antulay
(1984) 2 SCC 183: [1984] 2 SCR 495; Ram Kishore
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Union of India (1993) 4 SCC 119 : [1993] 3 SCR 802;
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(1994) 3 SCC 1 : [1994] 2 SCR 644; M. Pentiah and
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Mathur and others (1986) 2 SCC 237 : [1986] 1 SCR
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and others (1989) 3 SCC 709 : [1989] 2 SCR 544;
Small Scale Industrial Manufactures Association
(Registered) v. Union of India and Others (2021) 8 SCC
511 and P.T.R. Exports (Madras) Pvt. Ltd. v. Union of
India and others (1996) 5 SCC 268 : [1996] 2 Suppl.
 SCR 662 - referred to.
Yakus v. U.S. 321 U.S. 414 (1944) Federal Energy
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(1976); Metropolis Theater Company et al v. City of
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North Carolina v. Wayne Claude RICE 404 U.S. 244
(1971) Mills v. Green 159 U.S. 651 (1895) People ex
rel. Kingsland v. Clark 25 Sickels 518 (1877) (Court
of Appeals of New York) - referred to.
Prabhudas Swami and Another v. State of Rajasthan
and Others AIR 2003 RAJ 190 - referred to.
PER B.V. NAGARATHNA, J. (MINORITY JUDGMENT):
1.1. On a close reading of the Notification dated 8th
November, 2016, in juxtaposition with the records, the following
aspects emerge:
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i)
The proposal for demonetisation originated from the
Central Government, by way of its letter addressed
to the Bank, dated 7
th November, 2016.