This writ petition challenged the Government's decision to demonetize 500 and 1000 rupee notes. The Court rejected arguments that the move violated the Reserve Bank of India Act or Article 21 of the Constitution. It held that economic policy wisdom is not subject to judicial review.
Writ Petition and connected miscellaneous petitions were dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 10.11.2016
CORAM:
THE HONOURABLE MR.JUSTICE S.NAGAMUTHU AND
THE HONOURABLE MR.JUSTICE M.V.MURALIDARAN
W.P.[MD].No.21634 of 2016 and W.M.P.(MD)Nos.15454 to 15456 of 2016
M.Seeni Ahamed
: Petitioner
Vs.
1.The Union of India, represented by its Secretary, Ministry of Finance, Department of Economic Affairs, Room No.39-B, New Delhi-110 001.
2.The Director, Department of Economic Affairs, Room No.166-D, North Block, New Delhi-110 001.
3.The Governor, Reserve Bank of India, Central Office Building, Shahid Bhagat Singh Marg, Mumbai-400 001.
4.The Regional Director for Tamil Nadu, Reserve Bank of India, Fort Glacis, Rajaji Salai, P.B.No.40, Chennai-600 001.
: Respondents
PRAYER: Writ Petition is filed under Article 226 of the Constitution of India to issue a Writ of Certiorarified Mandamus, to call for the records pertaining to the notification issued by the respondent No.1, dated 08.11.2016 and quash the same and consequently, direct the respondent Nos.1 to 4 to pass an order to open money transactions in all banks, ATMs and other financial organization on 09.11.2016 and 10.11.2016 to enable the people to https://hcservices.ecourts.gov.in/hcservices/ change their 500,1000 Rupees currencies and to declare the high denomination notes Rs.1000 and Rs.500 as valid till 30.12.2016.
2
For Petitioner : Mr.S.M.A.Jinnah For Respondents 1&2 : Mr.G.R.Swaminathan, Assistant Solicitor General of India, For Mr.D.Saravanan For Respondents 3&4 : Mr.K.R.Laxman
O R D E R
[Order of the Court was made by S.NAGAMUTHU, J.]
The Hon'ble Prime Minister of India, while addressing the Nation on the night of 08.11.2016, announced the decision of the Government of India, to demonetize the existing Rupees 500 and 1000 currency notes, which are in circulation in the Country. The Hon'ble Prime Minister also highlighted that the said measure is an attempt to tackle black money in the economy, to lower the cash circulation, which is directly related to corruption in our Country, to eliminate fake currency and dodgy funds, which have been used by terror groups to fund terrorism in India. The Hon'ble Prime Minister further clarified that it is a move estimated to scoop out more than Rs.5 Lakhs Crore black money from the economy. The Hon'ble Prime Minister further assured the Nation that the said action taken would not in any manner affect the common man and the people who have earned money, by honest means.
2.1. On the same day, as announced by the Hon'ble Prime Minister of India, the Government of India, Ministry of Finance, Department of Economic Affairs, issued a Notification in S.O.3407 (E), which reads as follows:
"Whereas, the Central Board of Directors of the Reserve Bank of India (hereinafter referred to as the Board) has recommended that bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees (hereinafter referred to as specified bank notes) shall be ceased to be legal tender;
And whereas, it has been found that fake currency notes of the specified bank notes have been largely in circulation and it has been found to be difficult to easily identify genuine bank notes from the fake ones and that the use of fake currency notes is causing adverse effect to the economy of the country;
And whereas, it has been found that high denomination bank notes are used for storage of unaccounted wealth as has been evident from the large cash recoveries made by law enforcement agencies;
And whereas, it has also been found that fake https://hcservices.ecourts.gov.in/hcservices/ currency is being used for financing subversive activities such as drug trafficking and terrorism,
3
causing damage to the economy and security of the country and the Central Government after due consideration has decided to implement the recommendations of the Board;
Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as the said Act), the Central Government hereby declares that the specified bank notes shall cease to be legal tender with effect from the 9th November, 2016 to the extent specified below, namely:-
1.(1) Every banking company defined under the Banking Regulation Act, 1949 (10 of 1949) and every Government Treasury shall complete and forward a return showing the details of specified bank notes held by it at the close of business as on the 8th November, 2016, not later than 13:00 hours on the 10th November, 2016 to the designated Regional Office of the Reserve Bank of India (hereinafter referred to as the Reserve Bank) in the format specified by it.
(2) Immediately after forwarding the return referred to in sub-paragraph (1), the specified bank notes shall be remitted to the linked or nearest currency chest, or the branch or office of the Reserve Bank, for credit to their accounts.
2. The specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks for a period upto and including the 30th December, 2016, subject to the following conditions, namely:-
(i) the specified bank notes of aggregate value of Rs.4,000/- or below may be exchanged for any denomination of bank notes having legal tender character, with a requisition slip in the format specified by the Reserve Bank and proof of identity;
(ii) the limit of Rs.4,000/- for exchanging specified bank notes shall be reviewed after fifteen days from the date of commencement of this notification and appropriate orders may be issued, where necessary;
(iii) there shall not be any limit on the quantity or value of the specified bank notes to be credited to the account maintained with the bank by a person, where
the specified bank notes are tendered; however, where https://hcservices.ecourts.gov.in/hcservices/ compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of
4
specified bank notes as may be deposited shall be Rs.50,000/-;
(iv) the equivalent value of specified bank notes tendered may be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of identity;
(v) the equivalent value of specified bank notes tendered may be credited to a third party account, provided specific authorisation therefor accorded by the third party is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually tendering;
(vi) cash withdrawal from a bank account over the counter shall be restricted to Rs.10,000/- per day subject to an overall limit of Rs.20,000/-a week from the date of commencement of this notification until the end of business hours on 24th November, 2016, after which these limits shall be reviewed;
(vii) there shall be no restriction on the use of any non-cash method of operating the account of a person including cheques, demand drafts, credit or debit cards, mobile wallets and electronic fund transfer mechanisms or the like;
(viii) withdrawal from Automatic Teller Machines (hereinafter referred to as ATMs) shall be restricted to Rs.2,000/- per day per card upto 18th November, 2016 and the limit shall be raised to Rs.4,000/- per day per card from 19th November, 2016;
(ix) any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the 30th December, 2016, shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by it.
3. (1) Every banking company and every Government Treasury referred to in sub-paragraph (1) of paragraph 1 shall be closed for the transaction of all business on 9th November, 2016, except the preparation for implementing this scheme and remittance of the specified bank notes to nearby currency chests or the branches or offices of the Reserve Bank and receipt of bank notes having legal tender character.
(2) All ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash shall be shut on 9th and 10th November, 2016.
5
(3) Every bank referred to in sub-paragraph (1) of paragraph 1 shall recall the specified bank notes from ATMs and replace them with bank notes having legal tender character prior to reactivation of the machines on 11th November, 2016.
(4) The sponsor banks of White Label ATMs shall be responsible to recall the specified bank notes from the White Label ATMs and replacing the same with bank notes having legal tender character prior to reactivation of the machines on 11th November, 2016.
(5) All banks referred to in sub-paragraph (1) of paragraph 1 shall ensure that their ATMs and White Label ATMs shall dispense bank notes of denomination of Rs.100 or Rs.50, until further instructions from the Reserve Bank.
(6) The banking company referred to in subparagraph (1) of paragraph 1 and Government Treasuries shall resume their normal transactions from 10th November, 2016.
4. Every banking company referred to sub-paragraph (1) of paragraph 1, shall at the close of business of each day starting from 10th November, 2016, submit to the Reserve Bank, a statement showing the details of specified bank notes exchanged by it in such format as may be specified by the Reserve Bank."
2.2. The Government of India, Ministry of Finance, Department of Economic Affairs, issued yet another Notification in S.O.3408 (E), which reads as follows:
"Whereas, by the notification of the Government of India in the Ministry of Finance, vide F. No. 10/3/2016Cy.I dated 8th November, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 8th November, 2016, the Central Government declared that the bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter referred to as the specified bank notes), shall cease to be legal tender on and from the 9th November, 2016;
And whereas, it has become necessary to notify certain exemptions for the convenience of the members of public in carrying out certain emergent and urgent transactions using the specified bank notes;
Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government hereby declares that the specified bank notes shall not https://hcservices.ecourts.gov.in/hcservices/ be ceased to be legal tender, with effect from the 9th November, 2016 until the 11th November, 2016, to the
6
extent of transactions specified below, namely:—
(a) for making payments in Government hospitals for medical treatment and pharmacies in Government hospitals for buying medicines with doctor's prescription;
(b) at railway ticketing counters, ticket counters of Government or Public Sector Undertakings buses and airline ticketing counters at airports for purchase of tickets;
(c) for purchases at consumer cooperative stores operated under authorisation of Central or State Governments;
(d) for purchase at milk booths operating under authorisation of the Central or State Governments;
(e) for purchase of petrol, diesel and gas at the stations operating under the authorisation of Public Sector Oil Marketing Companies;
(f) for payments at crematoria and burial grounds;
(g) at international airports, for arriving and departing passengers, who possess specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character;
(h) for foreign tourists to exchange foreign currency or specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character.
2. All establishments referred to in paragraph 1, shall maintain complete account of record of stock and sale of transactions made with the specified bank notes during the period between 9th November, 2016 and 11th November, 2016."
2.3. The third Notification issued by the Government of India, Ministry of Finance, Department of Economic Affairs, in S.O.3409 (E), reads as follows:
"In exercise of the powers conferred by sub-section (2) of section 24 of the Reserve Bank of India Act, 1934 (2 of 1934) and on the recommendations of the Central Board of Directors of the Reserve Bank of India, the Central Government hereby specifies the denomination of bank notes of the value of two thousand rupees."
2.4. The fourth Notification issued by the Government of India, Ministry of Finance, Department of Economic Affairs, in S.O.3416(E), reads as follows:
"S.O. 3416(E).—In exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government https://hcservices.ecourts.gov.in/hcservices/ hereby amends the notification of the Government of India, Ministry of Finance, Department of Economic
7
Affairs number S.O. 3408(E) dated the 8th November, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) dated the 8th November, 2016, namely:-
1. In the said notification, in paragraph 1, after clause (h), the following clauses shall be inserted, namely :-
“(i) for making payments in all pharmacies on production of doctor’s prescription and proof of identity;
(j) for making payments on all toll plazas on the State and National Highways;
(k) for payments on purchases LPG gas cylinders;
(l) for making payments to catering services on board, during travel by rail;
(m) for making payments for purchasing tickets for travel by suburban and metro rail services;
(n) for making payments for purchase of entry tickets for any monument maintained by the Archeological Survey of India.”.
"It has been found that fake currency notes of the specified bank notes have been largely in the circulation and it has been found to be difficult to easily identify genuine bank notes from the fake ones and that the use of fake currency notes is causing adverse effect to the economy of the Country. Secondly, the Board took into account that high denomination bank notes are used for storage of unaccounted wealth as has been evident from the large cash recoveries made by the law enforcement agencies and the third one in the mind of the Board of Directors is that fake currency is being used for financing subversive activities such as drug trafficking and terrorism, causing damage to the economy and security of the Country. "
8
https://hcservices.ecourts.gov.in/hcservices/ 8. The learned counsel, however, submitted during the course of argument that it violates Article 21 of the Constitution of India. Of course, it is true that the scope and ambit of right to
9
life, as guaranteed under Article 21 of the Constitution of India, has been expanded time and again by the Hon'ble Supreme Court, taking into account the need of the hour. But, it cannot be, at the same time, overstretched. In order to substantiate the contention that right to life of the citizens is infringed by the action of the Government, the learned counsel submitted that the action of the Government in not giving prior notice to the people, has caused unnecessary and unbearable hardship and thus, it violates Article 21 of the Constitution of India.
10
three heads of grounds, upon which, administrative action is subject to control by judicial review, viz., (i) illegality, (ii) irrationality and (iii) procedural impropriety. He has also stated that the three grounds evolved till then did not rule out that "further developments on a case by case basis may not in course of time add further grounds" and has added that "principle of proportionality" which is recognized in the administrative law by several members of European Economic Community may be a possible ground for judicial review. The Hon'ble Supreme Court in S.R.Bommai's case has further held that a decision may be so outrageous or in defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided, could have arrived at it, and it is for the judges to decide whether a decision falls in the said category. By "procedural impropriety", he means not only failure to observe the basic rules of natural justice or failure to act with procedural fairness, but also failure to observe procedural rules that are expressly laid down in the legislative instrument by which the tribunal's jurisdiction is conferred even where such failure does not involve any denial of natural justice. Where the decision is one which does not alter rights or obligations enforceable in private law, but only deprives a person of legitimate expectations, procedural impropriety will normally provide the only ground on which the decision is open to judicial review.
"92. In a democracy, it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se interfered with by https://hcservices.ecourts.gov.in/hcservices/ the court.
93. Wisdom and advisability of economic policies are
11
ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts.
12
Sd/-
Assistant Registrar(Records) /True copy/
Sub Assistant Registrar
To
1.The Secretary, Union of India, Ministry of Finance, Department of Economic Affairs, Room No.39-B, New Delhi-110 001.
2.The Director, Department of Economic Affairs, Room No.166-D, North Block, New Delhi-110 001.
3.The Governor, Reserve Bank of India, Central Office Building, Shahid Bhagat Singh Marg, Mumbai-400 001.
4.The Regional Director for Tamil Nadu, Reserve Bank of India, Fort Glacis, Rajaji Salai, P.B.No.40, Chennai-600 001.
+2cc to Mr.D.Saravanan, Advocate SR.No.67543,67561 +1cc to Mr.K.R.Laxman, Advocate SR.No.68125 sml sm:SS3:SAR J:16/11/2016:12P/8C
Order made in W.P.[MD].No.21634 of 2016 Dated: 10.11.2016
3 issues framed by the court
Whether the notifications demonetizing 500 and 1000 rupee notes violated Section 24 of the Reserve Bank of India Act, 1934.
Whether the demonetization order violated Article 21 of the Constitution of India by causing undue hardship due to lack of notice.
Whether the High Court can exercise judicial review to examine the merits or wisdom of the Central Government's economic policy decision on demonetization.
Colour shows how this judgement treated each authority
Jayantilal Ratanchand Shah vs. Reserve Bank of India & OrsReferred¶88
Jayantilal Ratanchand Shah vs. Reserve Bank of India & Ors
S.R. Bommai vs. Union of IndiaReferred¶93
S.R.Bommai vs. Union of India
Chief Constable of the North Wales Police v. EvansReferred¶94
Chief Constable of the North Wales Police v. Evans
Council of Civil Service Unions v. Minister for the Civil ServicesReferred¶94
Council of Civil Service Unions v. Minister for the Civil Services
BALCO Employees' Union (Regd) v. Union of IndiaFollowed¶98
BALCO Employees' Union (Regd) v. Union of India
Centre for Public Interest Litigation v. Union of IndiaReferred¶103
Centre for Public Interest Litigation v. Union of India
4 provisions across 2 enactments
M. Seeni Ahamed
Union of India
Director, Department of Economic Affairs
Governor, Reserve Bank of India
Regional Director for Tamil Nadu, Reserve Bank of India
S. Nagamuthu
M. V. Muralidaran
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
