Demonetisation: Majority Verdict Based on ‘Secret’ Documents not shared with petitioners

“It is the judicial equivalent of me asking you for a source for your claim that Lionel Messi is going to play for Manchester United, and you answering: “trust me, bro.” That may be good for football banter, but it is not good for a constitutional court,” writes Gautam Bhatia the day after a five-member constitution bench of the Supreme Court upheld by a majority (4 to1) the procedure followed to demonetise 86 per cent of the currency in circulation in November, 2016.

In a scathing critique of the judgment in his blog Bhatia goes on to write, “The documents on the basis of which the majority gives a clean chit to the government were secret documents, submitted after the hearing was over. The petitioners were given no chance to see or respond to them. The public has not seen them (other than a couple that were published by the newspapers). But nonetheless, the majority assures us that everything is fine, and that on the basis of the documents that it has seen, the RBI evidently applied its mind and acted independently when recommending demonetisation.” Not sharing the documents with the petitioners, he suggests, was unfair and would have affected their arguments.

While the procedural debate may have drawn to a close with the majority verdict, questions abound. Writing in The Hindustan Times, Praveen Chakravarty wonders at the implications of bypassing the Parliament while taking economic policy decisions. He cites how the union government in 2019 had lowered corporate taxes barely months after the union budget was presented in Parliament without making a squeak on the proposal. Does the Supreme Court judgment in the Demonetisation case mean that in future the union government can unilaterally abolish corporate tax without any reference to Parliament, he questions.

Writing in The Indian Express, Pratap Bhanu Mehta, academic, public intellectual and former vice chancellor of Ashoka University says that what the majority judgment says is that a cruel policy based on false pretences and which made fools of citizens can yet be ‘Constitutional’.

On social media people interpreted the judgment as upholding the right of Mohammad-bin-Tughlaq to order the capital and its inhabitants to shift, disregarding the suffering and inconvenience it caused, because he was the ‘sovereign’.

Former union finance minister P. Chidambaram, who had pleaded on behalf of some of the petitioners before the bench, tweeted, “the majority has not upheld the wisdom of the decision; nor has the majority concluded that the stated objectives were achieved. In fact, the majority has steered clear of the question whether the objectives were achieved at all. We are happy that the minority judgement has pointed out the illegality and the irregularities in the Demonetisation. It may be only a slap on the wrist of the government, but a welcome slap on the wrist.”

Bhatia, in his scathing critique of the majority judgment, writes, “Up until paragraph 203, the argument seems to be that section 26(2) does not suffer from excessive delegation because of the presence of a technical, expertise-filled, autonomous body like the RBI. The underlying premise here is that demonetisation (as an aspect of currency management) is a technical issue, and the “guidance”, therefore, will come from a technical body; consequently, the guidance need not be in the legislation itself, as it is the RBI that will formulate it, keeping in mind its technical and autonomous status.”

“But then, in paragraph 208, we see a complete flip: section 26(2) is fine because the delegate is the highest political body in the country. But if that is the justification, then the doctrine of excessive delegation bites back with a vengeance: the whole point of the doctrine is that the legislature is not meant to delegate essential lawmaking functions, to administrative bodies such as the executive.”

“The majority, thus, sets up two contradictory premises within the same argument: that section 26(2) is fine because the essential legislative task has been delegated to an independent, technical and autonomous body, but also, it is fine because the ultimate delegate is the political executive,” he goes on to highlight.

It is the dissenting judgment of Justice Nagarathna that points out that the RBI Act and the Constitution provide two procedures for Demonetisation of currency. If it is meant for just currency management then the Reserve Bank of India is empowered to recommend demonetisation. But if the goals are political (putting an end to black money or terror funding, for example) then the Parliament is empowered under the Seventh Schedule to make a law for the purpose.

If secrecy or speed are necessary, the government could have promulgated an ordinance for Demonetisation, before getting the parliament to enact the necessary legislation.