The Apex Court in the instant case, deliberated upon the elementary question requiring determination with respect to the nature of relief that could be granted by the Court on whether the challenge to the validity of the Central Government’s decision dated 8th November, 2016 to demonetize all Rs.500/ and Rs.1,000/ bank notes, having been adjudicated upon, at this juncture, i.e., after a lapse of over six years since the impugned action was carried out.
The Court held that there is a direct and proximate nexus between the restrictions imposed and the objectives sought to be achieved by placing reliance on the case of M.R.F. Ltd. v. Inspector Kerala Govt. and Others. i.e if there is a direct nexus between the restrictions and the object of the action, then a strong presumption in favour of the constitutionality of the action naturally arises. The court therefore, held that the impugned notification dated 8th November 2016 does not violate the principle of proportionality and as such, is not liable to be struck down on the said ground.
Issues Raised in the instant case:
(i) Whether the power available to the Central Government under sub-section (2) of Section 26 of the RBI Act can be restricted to mean that it can be exercised only for “one” or “some” series of bank notes and not “all” series in view of the word “any” appearing before the word “series” in the said subsection, specifically so, when on earlier two occasions, the demonetization exercise was done through the plenary legislations?
(ii) In the event it is held that the power under subsection (2) of Section 26 of the RBI Act is construed to mean that it can be exercised in respect of “all” series of bank notes, whether the power vested with the Central Government under the said sub-section would amount to conferring excessive delegation and as such, liable to be struck down?
(iii) As to whether the impugned Notification dated 8th November 2016 is liable to be struck down on the ground that the decision making process is flawed in law?
(iv) As to whether the impugned notification dated 8th November 2016 is liable to be struck down applying the test of proportionality?
Judgements relied on by the Supreme Court and the parties
The learned Attorney General placed reliance on Bajaj Hindustan Limited vs. Sir Lal Enterprises Limited (2011) 1 SCC 640, among several other judgements wherein it was observed that economic and fiscal regulatory measures are fields on which Judges should encroach upon very warily as Judges are not experts in these matters. The learned Attorney General submitted that the Bank is an expert body charged with the duty of conceiving and implementing various facets of economic and monetary policy and that there cannot be a straitjacket formula guiding the discharge of its duties. Therefore, it must be allowed to carry out its functions as it deems fit.
Reliance was also placed on Peerless General Finance and Investment Co. Ltd. vs. Reserve Bank of India (1992) 2 SCC 343 and BALCOEmployees’ Union (Regd.) vs. Union of India (2002) 2 SCC 333 to contend that courts cannot interfere with economic policy which is the function of experts.
Several landmark judgements were referred to and relied upon such as S.R. Bommai vs. Union of India AIR 1994 SC 1918, Golak Nath vs. State of Punjab (1967) 2 SCR 762, Orissa Cement Ltd. vs. State of Orissa 1991 Supp (1) SCC 430 to determine what relief could be granted following a declaration of a provision of an enactment as invalid.
This Court in Jayantilal Ratanchand Shah, Devkumar Gopaldas Aggarwal vs. Reserve Bank of India AIR 1997 SC 370.refer to the decision of this Court in Union of India vs. Charanjit S. Gill (2000) 5 SCC 742, wherein this Court held that any provisions introduced by way of “Notes” appended to the Sections of the Army Act, 1950, could not be read as a part of the Act and therefore such notes could not take away any right vested under the said Act. It was observed that issuance of an administrative order or a “Note” pertaining to a special type of weapon to bring it within the ambit of the Army Act, which was hitherto not included therein, could not be said to have been included in the manner in which it was supposed to be included. That the Army Act empowers the Central Government to make rules and regulations for carrying into effect the provisions of the Act; however, no power is conferred upon the Central Government of issuing “Notes” or “issuing orders” which could have the effect of the Rules made under the Act. That rules and Regulations or administrative instructions can neither be supplemented nor substituted by “Notes”. That administrative instructions issued or the “Notes” attached to the Rules which are not referable to any statutory authority cannot be permitted to bring about a result, which is supposed to be achieved through enactment of Rules. The said case pertains to the challenge to the Constitutional validity of the High Denomination Bank Notes (Demonetisation) Act, 1978. Although the enactment related to the year 1978 and its effects were immediate, as in the present case, the validity of the same was conclusively declared by this Court only in the year 1997. This Court, while upholding the validity of the legislation impugned therein, authoritatively clarified and declared the law on the Parliamentary power to enact such a legislation. A declaration of a similar nature, i.e., as to the validity or invalidity of the impugned actions and Notification, is what is sought for in the present petitions.
In conclusion, the 388 Page judgement was summarized as follows-