Author: Devraj Sankla, Student at University College of Law, Osmania University.
Introduction:
The case of “Vivek Narayan Sharma vs Union of India” is one of the recent landmark judgments by the Supreme Court of India. This case was filed on 2nd January, 2016 as Writ Petition (Civil) No. 906 of 2016. This case was about the controversial issue of demonetization of ₹500 and ₹1000 currency notes, announced by the Indian government on 8th November, 2016. The Prime Minister, Narendra Modi claimed that this move will eliminate fake currencies and will also stop corruption and terror funding in the country. The case was about that the government had powers to demonetize all series of a particular denomination of currency notes. In this case the Supreme Court had significantly examined the constitutional validity of the demonetization order by the government and its impact on the citizens and the economy.
Parties Involved in the Case:
1. Petitioner: Vivek Narayan Sharma
2. Respondent: Union of India
On the bench of Justices Abdul Nazeer, B.R. Gavai, A.S. Bopanna, V. Ramasubramanian, and B.V. Nagarathna (dissenting).
Facts of the Case:
The Indian government announced the demonetization of ₹500 and ₹1000 currencies, making them invalid from that date on 8th November, 2016. A lawyer, Vivek Narayan Sharma challenged the constitutional validity of this decision of Indian government in the Supreme Court in 2016. Vivek Narayan Sharma argued that the decision of demonetization was an unfair exercise of power that violated various fundamental rights. He also argued that the sudden announcement of demonetization caused problems to the public, especially to those people who were mostly depended on cash. He also alleged that the government’s decision on demonetization was without sufficient justification under the Reserve Bank of India Act. The demonization had severe impact on the Indian economy, which caused problems in various sectors. The Union of India, represented by the government, defended the decision, stating that this move will eliminate fake currencies and curbing black money and it will also stop corruption and terror funding in the country.
Issues regarding the case:
The Vivek Narayan Sharma vs Union of India case raised several key issues regarding the impacts of the decision of the Indian government on demonetization in November 2016. The main issue raised was that the decision demonetization of ₹500 and ₹1000 notes, was within the legal framework or not. The petitioner also argued that the decision of the Indian government on demonetization violated the regulations of the Reserve Bank of India Act, 1934. The petitioner also claimed that the decision also violated their fundamental rights and the sudden announcement of demonetization caused many problems to the public, especially to those people who were mostly depended on cash and it had severe impact on the Indian economy, which caused problems in various sectors. He also claimed that the process in which demonetization was implemented was also under scrutiny. The Supreme Court had examined whether the government had followed due process of law while implementing demonetization and whether the government had sought adequate guidance and oversight from the Reserve Bank of India (RBI) during the process of demonetization. There were concerns about the short period for exchanging old notes, the long queues at banks, and the insufficient supply of new currency notes. Another main issue was the wider economic impact of demonetization. The demonetization decision had severe impacts on the various sectors of the economy, job losses, a decline in consumer spending and it led to a slowdown in growth of the economy. And whether this move will eliminate fake currencies and will also stop corruption and terror funding in the country. The petitioners questioned whether the decision of the government had actually achieved the claims of government or if it had instead caused more harm than good. The case raised important questions regarding the balance of power between the executive and the judiciary. The court needs to determine whether the government had overstepped its authority in implementing demonetization and whether judicial intervention was necessary to address the key issues raised by the petitioner.
Legal Provisions:
Whether the government’s power under the Section 26(2) of the Reserve Bank of India (RBI) Act, 1934, could be restricted to “one” or “some” series of banknotes rather than “all” series and whether the RBI had the authority to accept demonetised notes beyond the period specified in the notifications issued under the Section 4(2) Specified Bank Notes (Cessation of Liabilities) Act, 2017
Petitioner’s Arguments:
The petitioners in the Vivek Narayan Sharma vs Union of India case gave several arguments against the demonetization policy. The petitioner argued that the decision of the Indian government on demonetization was against the law as it did not comply with Section 26(2) of the Reserve Bank of India Act, 1934. The petitioner said that the government did not have the authority to demonetise all series of currency notes without the recommendation of the Reserve Bank of India. The petitioners also claimed that demonetization violated their fundamental rights and the sudden announcement of demonetization caused many problems to the public, especially to those people who were mostly depended on cash. The decision had also severe impacts on the various sectors of the economy, job losses, a decline in consumer spending and it led to a slowdown in growth of the economy. The petitioners also raised concerns about short time period for exchanging old notes, the long queues at banks, and the insufficient supply of new currency notes and the restrictions on withdrawing money from bank accounts they said that the limit was ₹24,000 per week per account holder was insufficient and caused problems to individuals and businesses.
These arguments formed the basis of the legal challenge against the demonetization policy, and the Supreme Court had to consider these issues in its judgment
Respondent’s Arguments:
The respondent, the Union of India, presented several arguments in the Vivek Narayan Sharma vs Union of India (2023) case to defend the demonetization policy. The Union of India argued that the demonetization decision was legally valid under Section 26(2) of the Reserve Bank of India Act, 1934. They said that government had the authority to demonetise “all” series of currency notes without the recommendation of the Reserve Bank of India. The government also claimed that the measures taken were necessary to fulfil the objective of to eliminate fake currencies and curbing black money and to stop corruption and terror funding in the country. The government also defended the implementation process of the decision, arguing that it was implemented after enough planning. The government had also sought necessary guidance from the Reserve Bank of India (RBI). It had also highlighted the long-term economic benefits of demonetization, such as formalization of the economy, and a shift towards digital transactions. They argued that these benefits outweighed the short-term problems caused by the demonetization. The government urged the court to defer to the executive’s decision-making authority, emphasizing that the judiciary should not interfere with policy decisions unless there is a clear violation of the law or fundamental rights.
Judgement:
The case of “Vivek Narayan Sharma vs Union of India” is one of the recent landmark judgments by the Supreme Court of India, that challenged the constitutional validity of the demonetization of Rs. 500 and Rs. 1000 currency notes in 2016. This case was filed on 2nd January, 2016 as Writ Petition (Civil) No. 906 of 2016.
The Supreme Court has passed its judgement on the demonetization in a majority 4-1 by a five-judge Constitution Bench on 2nd January 2023. The bench, comprising Justices S. Abdul Nazeer, B.R. Gavai, A.S. Bopanna, V. Ramasubramanian, and B.V. Nagarathna, ruled that the demonetization decision was valid under Section 26(2) of the Reserve Bank of India Act, 1934 and ruled that the decision-making process was lawful. The majority opinion held that the government had the power under the Reserve Bank of India Act to demonetize “any” and “all” series of banknotes.
However, Justice B.V. Nagarathna, in her dissenting opinion, argued that the demonetization was not valid as it was not properly debated in Parliament and Section 26(2) of the RBI Act is applicable only when the recommendation is initiated by Reserve Bank of India to the government. The Central Government has the right of initiate demonetization but it can only be done through legislation and not by way of issuance of notification under section 26(2) of the RBI Act. Here the demonetization was initiated by the government therefore, it cannot be done by just issuing notification under section 26(2) of the Act, it can only be done through legislation and the RBI just guided the government and didn’t initiate the demonetization. Therefore, the notification issued under section 26(2) of the RBI Act is unlawful and the Specified Bank Notes (Cessation of Liabilities) Act of 2017 is also unlawful.
Conclusion:
The case of “Vivek Narayan Sharma vs Union of India” is one of the recent landmark judgments by the Supreme Court of India This case was about the controversial issue of demonetization of ₹500 and ₹1000 currency notes, announced by the Indian government on 8th November, 2016. The petitioner Vivek Narayan Sharma challenged the constitutional validity of this decision of Indian government in the Supreme Court. He argued that the decision of demonetization was an unfair exercise of power. The judgement was delivered by a 4:1 majority and it upheld the validity of the demonetization policy implemented by the Indian government in November 2016. However, Justice B.V. Nagarathna, in her dissenting opinion, argued that the demonetization was not valid as RBI has the right to initiate the demonetization process not the government and if the government wanted then it can be done through legislation not through a government notification. The majority opinion, however, emphasized the necessity of the demonetization move in curbing black money, fake currency, and terror funding.
Frequently Asked Questions:
1. What was the case about?
A. This case was about the controversial issue of demonetization of ₹500 and ₹1000 currency notes.
2. When did the government demonetize currency notes?
A. On 8th November, 2016.
3. Which bench delivered the judgement?
A. Five-judge Constitution Bench of Supreme Court by a 4-1 majority.
4. Who delivered dissenting judgement?
A. Justice B.V. Nagarathna.
