On demonetisation, the Supreme Court has acted with greater caution than the government

When the legality of the demonetisation of Rs 500 and Rs 1,000 notes was put to the Supreme Court, nine questions were framed for its consideration. By referring these to a Constitution bench, the Supreme Court, in effect, has reduced the exercise to an academic question. It is not so different from what the court did when the demonetisation of 1978 was challenged. The Constitution bench ultimately decided that the law was constitutional in 1994 – a full 16 years after it was passed and long after it ceased to have any relevance.

This time, from the looks of it, almost all the demonetised currency will have returned to the system well before the final deadline of March 31, 2017, rendering any judgment that the Supreme Court may deliver on the legality of the exercise entirely pointless.

This judicial procrastination has been attributed by some to the tendency of the court to defer to legislative and executive wisdom on matters of economic and financial policy. This is prompted by, among other things, the awareness that the court is ill-equipped to understand these issues within a purely adjudicative framework and also, that the success or failure of the policy ought to be tested at the poll booth and not in a court of law.

Exceptions to the rule

There are exceptions to this general principle, of course, especially when the legislation or notifications implementing these policies have constitutional or legal defects. Bank nationalisation under Indira Gandhi was initially struck down for not affording enough compensation to shareholders. A provision of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, requiring pre-deposit of amount claimed by banks in the tribunal before a case could be initiated, was also struck down by the Supreme Court for impeding access to justice.

One area where the court has utterly disregarded this principle of deference is environment. Here the court has proceeded to try and clean up rivers, tackle Delhi’s polluted air, and regulate land use in cities, all in the absence of firm legislative backing. The Supreme Court’s record on these fronts has been mixed. In some cases it has ended up placing the burden of enforcement of these measures on those who can least afford to bear it, without hearing them, and making a mockery of the Public Interest Litigation jurisdiction, originally intended to help those who could not approach the court themselves.

There is therefore good reason for the court to exercise caution when it comes to testing the legality of demonetisation.

Weak arguments

That said, the legal argument against the manner in which demonetisation has been undertaken is largely weak, save perhaps for certain specific acts such as the government backtracking on its initial promises. It is difficult to make a legal argument that the government has exercised its powers to demonetise the Rs. 500 and Rs. 1,000 notes illegally and in a manner contrary to the Reserve Bank of India Act or the Constitution.

Without gainsaying the court’s ultimate judgment, there is perhaps another reason that the court may have had in mind while postponing the hearing to a time when it will be largely an academic exercise – the fact that the persons who have challenged it have no immediate personal stake in the decision one way or the other. Save for district cooperative banks, no person has approached the Supreme Court in a personal capacity alleging loss of money, property, business or livelihood and seeking urgent relief in one way or another. In the absence of any person seeking immediate relief from the court, the case was largely academic right from the start.

Whatever be the ill effects of demonetisation or the doubtful wisdom of the move, it cannot be reduced to simple questions of legal rights and wrongs that can only be answered in a court of law. In fact, it is unclear what the parties really hoped to achieve in this case: did they really think the Supreme Court would just “re-monetise” the Rs 500 and Rs 1,000 notes? Did they expect some ameliorative measures on withdrawal limits and exchange? Did they hope to get answers from the government on the whys and hows of the move? Or was it just to get some publicity, as has become depressingly usual, by filing ill-thought out PILs on this issue?

It is simplistic to assume that there’s a legal remedy for every problem in this country, whether its origins lie in the present or past; its causes natural or human. Sometimes there isn’t and sometimes the remedy may only worsen the malaise. Faced with a shortage of time, the unavailability of enough information, and the absence of any persons adversely impacted by demonetisation, the Supreme Court took the safe way out. It has perhaps acted with greater caution than the government did in demonetising high value currency notes.

Alok Prasanna Kumar is an advocate based in Bengaluru and was a Senior Resident Fellow of the Vidhi Centre for Legal Policy. Views expressed here are purely personal and not a reflection of any other organisation’s views.