Demonetisation #2: SC Rebukes the Union for Seeking Additional TimeChallenge to Union’s 2016 Demonetisation Scheme
In an unusually brief hearing today, the 5-Judge Constitution Bench led by Justice Abdul Nazeer, granted the Union’s request for additional time to file documents, albeit with a sharp rebuke. The Bench and the counsels opposing the demonetisation scheme both termed the Union’s request as ‘embarrassing’ for the Court. However, the Bench granted the request and listed the case to be next heard on November 24th and 25th, 2022.
In the previous hearing, on October 12th, 2022, Senior Advocates Shyam Divan and P. Chidambaram attempted to convince the Court that the challenges raised important legal questions and not mere academic discussions. Solicitor General Tushar Mehta argued that the case became infructuous while it remained pending since 2016. Despite the Union’s protests, the Bench directed the Union government to provide details on what factors were considered before implementing the demonetisation scheme.
On November 8th, 2016, the Union government declared all ₹500 and ₹1000 as invalid tenders and discontinued their circulation. The Union claimed that this measure was to curb the circulation of black money—undeclared and illegally obtained income—and that the measure would aid the shift to a ‘cashless society’. The Union is empowered to declare specific currency notes as illegal under Section 26 of the Reserve Bank of India Act, 1934.
On the day after the announcement, advocate Vivek Narayan Sharma challenged the demonetisation scheme claiming that it was unconstitutional and that its application was carried out in an unreasonable manner. The challenge was heard by a 3-Judge Bench comprising former Chief Justice T.S. Thakur, former Justice A.M. Khanwilkar and Justice D.Y. Chandrachud.
On December 16th, 2016, the Bench ordered a stay on similar pending challenges before various High Courts and transferred the cases to the Supreme Court. The Bench also referred the challenges to the scheme to a 5-Judge Constitution Bench. However, the case remains pending after 6 years.
Today, Attorney General R. Venkataramani, appearing for the Union government, requested an adjournment for one week to prepare a comprehensive affidavit containing details of the Union and RBI’s deliberations over the policy. The Bench had asked for this document four weeks ago on October 12th, 2022.
Sr. Adv. Shyam Divan, arguing against the demonetisation scheme, protested. He pointed out that it was highly unusual to ask a Constitution Bench for an adjournment. Sr. Adv. P. Chidambaram, also arguing against the scheme, stated that it was a highly embarrassing situation.
Constitution Benches convene rarely—they are of larger Bench size due to the relatively greater importance of the cases they hear. As a result, two to three smaller Benches cannot convene when a 5-Judge Constitution Bench is hearing a case. Therefore, it is unusual to seek adjournments for additional time in Constitution Bench hearings.
The Bench expressed its dismay as well. Justice B.V. Nagarathna declared that Constitution Benches did not normally rise in this manner and that the situation was ‘truly embarrassing’ for the Court. Justice B.R. Gavai quipped that the Bench wished to finish hearing the matter this year.
Finally, the Bench granted the adjournment. The matter will next be heard on November 24th, 2022.