Demonetisation not bad in law merely because some citizens suffered through hardships: Supreme Court

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A Constitution Bench of the Supreme Court today held that merely because some citizens suffered hardships due to demonetisation, it was not reason enough to hold the exercise illegal [Vivek Narayan Sharma v. Union of India].

Four of the five judges on the Bench – Justices S Abdul Nazeer, BR Gavai, AS Bopanna and V Ramasubramanian – upheld the legality of the Central government’s 2016 demonetisation exercise, while Justice BV Nagarathna deemed it illegal in her dissenting opinion.

Regardless, all judges found that there were undoubtedly various hardships faced by citizens on account of demonetisation.

However, the majority opinion stated,

“No doubt that on account of demonetization, the citizens were faced with various hardships. However, we may again gainfully refer to the following observations of this Court in the case of R.K. Garg (supra):

“8. ……The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.””

In the present case, the majority held that if the demonetisation notification had a nexus with the objectives to be achieved, then, merely because some citizens have suffered through hardships, would not be a ground to hold the notification to be bad in law

“As such, the contention that the impugned notification is liable to be set aside on the ground that it caused hardship to individual/citizens will hold no water. The individual interests must yield to the larger public interest sought to be achieved by impugned Notification”, the Court held.

The majority opinion also referred to the judgment in Km Sonia Bhatia v. State of UP and Others, wherein it was held that if a few individuals suffer severe hardship on account of a provision, it cannot be helped, “for individual interests must yield to the larger interests of the community or the country as indeed every noble cause claims its martyr.”

Though she delivered a dissenting verdict in the case, Justice Nagarathna said no relief could be granted in individual matters.

The judge’s decision came in light of the fact that the notification was published in 2016 and the legislation had already been acted on.

“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 8th November, 2016,” her judgment stated.

A declaration that the exercise was unlawful would only have the effect of deterring future measures from being carried out in a like manner, in order to save such measures from the vice of unlawfulness, she opined.

The petitioners had contended that the people of India were exposed to undue hardships owing to the lack of financial resources and had to undergo not only a severe financial crunch, but were also exposed to other socio-economic and psychological hardships.

Justice Nagarathna noted that 98% of the value of the demonetised currency exchanged for bank notes continues to be legal tender, suggesting that the exercise was not effective as it was intended to be.

“However, this Court does not base its decision on the legality of a legislation, qua the effectiveness of such action in achieving the stated objectives. Therefore, it is clarified that any relief moulded in the present cases is de hors considerations of success of the measure.”

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