The Centre on Friday defended demonetisation policy before the Supreme Court and said it is wrong to say that the exercise failed to achieve its objectives.
The Centre told the Supreme Court that despite demonetisation, investment, government spending, exchange rates, interest rates and money supply remained stable.
By Srishti Ojha: The Attorney General of India R Venkataramani on Friday defended the Centre’s 2016 demonetisation policy before a Constitution bench of the Supreme Court. He said the argument that the note ban failed in its stated objective while causing undue hardships is misconceived.
The AG was arguing before a bench of Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian, and BV Nagarathna.
In over 50 petitions challenging the policy, former Finance Minister and Senior Advocate P Chidambaram had told the apex court that demonetisation policy was brought following the most outrageous decision-making process, making a mockery of the rule of law of this country.
According to the AG, the submission that the demonetisation notification failed in its stated objective while causing undue hardships is misconceived.
“If seen from a larger perspective of economic and social benefits, it can’t be said that demonetisation failed,” AG said. He added that this being the correct perspective, scope for scrutinising this measure can hardly exist.
While pointing out that demonetisation extricated fake currency significantly from the system, AG said that the notification has worked itself out.
‘Don’t look at demonetisation in isolation’
The AG said that the Centre’s stand is, demonetisation shouldn’t be looked at in isolation, as it’s not a standalone provision and has larger ramifications. The AG also argued that considering the cessation of effect or impact ascertained following demonetisation notification and the subsequent economic development, the need and relevance of engaging in judicial scrutiny of notification and its impact have become moot.
He further said that the asserted impact of demonetisation on individuals is not enduring in nature and has come to an end, and there’s no continuing wrong which warrants engagement by the court.
‘Demonetisation extricated fake currency significantly’
The Attorney General submitted that demonetisation extricated fake currency significantly from system, and extricating is important as fake currencies and black money are “such enemies that cannot be easily identified and wear masks all the time”.
The bench then sought the AG’s response to P Chidambaram’s argument that the recommendation for demonetisation has to come from the RBI.
“According to them, everything that has to be done with regard to currency is the primary duty of RBI and section 26(2) requires recommendation to come from RBI. There’s no dispute with the proposition that RBI has primary role as far as management of currency is concerned,” Justice Gavai said.
The AG said that the connection between RBI and the government should be seen from a flexible point of view.
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“Its not the case where the RBI is impeded by an outside agency like Government of India that doesn’t do this. We’re looking at the necessary symbiotic connection between RBI and GOI to have a stable economic policy,” AG argued.
Justice Nagarathna, however, observed that the RBI Act recognises the expertise of persons in RBI and it’s that expertise which must be recommended to the Centre.
“We’re at a position of where it should emanate. No doubt symbiotic relationship and all that is there. But legislation is not like that. Legislation recognises expertise of the central board, application of mind by the board. Where’s that?” Justice Nagarathna asked.
‘Well settled principle to have judicial deterrent in economic policy matters’
The AG submitted that it’s a well settled principle that there must be judicial deterrents in matters of economic policy. He said that the court can’t be called upon to render a decision on the question of inaction or perfection in the sphere of economic policy and legislation.
Justice Bopanna said that instead of focusing on what objectives were achieved, the AG should show if the required procedure was followed or not.
‘Economic benefits of demonetisation’
AG submitted that the demonetisation policy brought in digital economy benefits, as electronic transactions increased, value of UPI transactions grew, and digitalisation along with demonetisation made electronic payment mechanisms viable and cost-effective.
He pointed out that in spite of demonetisation, parameters like investment, government spending, exchange rates, interest rates and money supply remained stable.
The Attorney General will continue with his submissions on December 5.