Vivek Narayan Sharma vs Union Of India 2 January, 2023
Vivek Narayan Sharma vs Union Of India 2 January, 2023
Whether the notification dated 8th November 2016 is ultra vires Section 26(2) of the Reserve Bank of India Act, 1934
Held, Subsection (2) of Section 26 of the 1934 Act applies only when a proposal for demonetisation is initiated by the Central Board of the Bank by way of a recommendation being made to the Central Government. On receipt of the said recommendation made by the Central Board of the bank under subsection (2) of Section 26 of the Act, the Central Government may accept the said recommendation or may not do so. If the Central Government accepts the recommendation, it may issue a notification in the Gazette of India specifying the date w.e.f. which any specified series of bank notes of any specified denomination shall cease to be legal tender and shall cease to have the guarantee of the Central Government. The provisions of the Act do not bar the Central Government from proposing or initiating demonetisation. It could do so having regard to its plenary powers under Entry 36 of List I of the Seventh Schedule of the Constitution of India. However, it has to be done only by an Ordinance being issued by the President of India followed by an Act of Parliament or by plenary legislation through the Parliament. The Central Government cannot demonetise bank notes by issuance of a gazette notification as if it is exercising power under subsection (2) of Section 26 of the Act. In such circumstances when the Central Government is initiating the process of demonetisation, it would not be acting under sub section (2) of Section 26 of the Act but notwithstanding the said provision through a legislative process. Impugned notification dated 8th November, 2016 issued under subsection (2) of Section 26 of the Act is unlawful. In the circumstances, the action of demonetisation of all currency notes of Rs.500/ and Rs.1,000/ is vitiated. Further, the subsequent Ordinance of 2016 and Act of 2017 incorporating the terms of the impugned notification are also unlawful. However, having regard to the fact that the impugned notification dated 8th November, 2016 and the Act have been acted upon, the declaration of law made herein would apply prospectively and would not affect any action taken by the Central Government or the Bank pursuant to the issuance of the Notification dated 8 th November, 2016. This direction is being issued having regard to Article 142 of the Constitution of India. Hence, no relief is being granted in the individual matters
demonetisation was an initiative of the Central Government, targeted to address disparate evils, plaguing the Nation’s economy, including, practices of hoarding “black” money, counterfeiting, which in turn enable even greater evils, including terror funding, drug trafficking, emergence of a parallel economy, money laundering including Havala transactions. It is beyond the pale of doubt that the said measure, which was aimed at eliminating these depraved practices, was wellintentioned. The measure is reflective of concern for the economic health and security of the country and demonstrates foresight. At no point has any suggestion been made that the measure was motivated by anything but the best intentions and noble objects for the betterment of the Nation. The measure has been regarded as unlawful only on a purely legalistic analysis of the relevant provisions of the Act and not on the objects of demonetisation