A panel of five judges upheld the legality of the measure, demonstrating 86 percent of the country’s cash in circulation.
India’s Supreme Court has upheld the legality of the government’s 2016 decision to debase 86 percent of the country’s cash in circulation, saying the decision was made in consultation with the central bank and followed due process.
A five-judge chamber of the country’s top court ruled by a majority on Monday on a series of petitions challenging the move. One in five judges wrote a dissenting opinion.
“The . . . notice dated November 8, 2016 reveals no flaws in the decision-making process,” said Justice BR Gavai, one of the four justices who agreed on the decision, in a written statement.
Judge BV Nagarathna, however, gave a dissenting verdict, calling the decision “unlawful” and “an unlawful exercise of power”. She said the currency ban could have been implemented by an act of parliament rather than the government.
Petitioners included lawyers, a political party, credit unions and individuals.
India’s former Finance Minister P. Chidambaram was among the advocates arguing against the banknote ban measure.
In a surprise TV announcement in November 2016, Prime Minister Narendra Modi led the shock ban on all 500 rupee and 1,000 rupee notes – 86 per cent of cash in circulation – to target undeclared “black money”. and fight corruption.
But the move, widely known as demonetization, has severely hurt India’s cash-dependent economy. It caused losses for small businesses and manufacturers, and brought about an economic slump and months of financial chaos for ordinary, cash-dependent Indians.
Hundreds of thousands of people queued outside banks and ATMs for days to exchange their savings for legal tender as cash ran out. The government eventually issued new 500 and 2,000 rupee notes.
According to the Center for Monitoring the Indian Economy, a Mumbai-based research firm, India lost 3.5 million jobs in the year after demonetization.
The economy took another hit in 2017 when the government replaced a complex system of cascading federal and state taxes with a single Goods and Services Tax (GST). Many small businesses – the backbone of much of India’s economy – failed to comply with the new law and closed.
Despite the chaos caused, many people supported the demonization after Modi described the decision as a battle of the poor against the corrupt rich.
Some of the petitioners had argued that the recommendation to ban or invalidate series of banknotes should have come from the Reserve Bank of India, the central bank, and not from the government.
India’s main opposition party in Congress said the top court’s decision says nothing about the impact of demonetization, which the party called “a uniquely disastrous move”.
“The Supreme Court’s majority ruling addresses the limited issue of the decision-making process, not its outcome,” party spokesman Jairam Ramesh said in a statement.