India’s top court said Monday that the government’s surprise decision in 2016 to demonetise high-value bills was legal and taken after consultation with India’s central bank.
The five-judge constitution bench was hearing petitions challenging the currency ban that rendered 86 per cent of India’s currency invalid without warning. They contended that the move was not a considered decision of the government and should be struck down by the court.
Four judges in the five-member bench said the government made the decision after consulting with the Reserve Bank of India and stated there was no flaw in the decision-making process.
Justice BV Nagarathna, however, gave a dissenting judgement, calling the decision “unlawful” and “an exercise of power, contrary to law.” She said the currency ban could have been carried out through an act of Parliament, not by the government.
In November 2016, Prime Minister Narendra Modi made a surprise TV announcement that all Rs500 and Rs1,000 notes would be withdrawn immediately from circulation. The government defended the decision by saying it would root out illegally hoarded cash, fight corruption and crack down on money laundering and terrorist financing.
The government eventually released new currency notes worth Rs500 and Rs2,000. However, the sudden decision caused losses for small businesses and manufacturers, bringing on an economic slump and months of financial chaos for ordinary, cash-dependent Indians.