The Supreme Court in a 4:1 majority verdict on Monday upheld the government's 2016 decision to demonetise the Rs 1,000 and Rs 500 denomination notes, saying the decision-making process was not flawed.
There has to be great restraint in matters of economic policy and the court cannot supplant the wisdom of the executive by a judicial review of its decision, a five-judge Constitution bench of the apex court, headed by Justice S A Nazeer, said.
Justice B V Nagarathna dissented from the majority judgment on the point of the Centre's powers under section 26(2) of the RBI Act and said the scrapping of the Rs 500 and Rs 1,000 series notes had to be done through a legislation and not through a notification.
"Parliament should have discussed the law on demonetisation, the process should not have been done through a gazette notification. Parliament cannot be left aloof on an issue of such critical importance for the country," Justice Nagarathna said.
She also said there was no independent application of mind by the Reserve Bank of India (RBI) and only its opinion was sought, which cannot be said to be a recommendation.
The bench, also comprising justices B R Gavai, A S Bopanna and V Ramasubramanian, said the Centre's decision-making process could not have been flawed as there was consultation between the RBI and the Union government.
The top court's judgment came on a batch of 58 petitions challenging the demonetisation exercise announced by the Centre on November 8, 2016.
The court said the notification dated November 8, 2016, which announced the decision to scrap the high-value currency notes, cannot be said to be unreasonable and struck down on the ground of decision-making process.
It added that it is not relevant whether the objective behind the decision was achieved or not.
"There was consultation between the Centre and the Reserve Bank of India for a period of six months. We hold that there was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by the doctrine of proportionality," the bench said.
