NEW DELHI: The apex court of the country, the Supreme Court today dismissed a batch of petitions challenging the Narendra Modi-led central government’s 2016 to demonetise currency notes of Rs 500 and Rs 1000 denominations with a 4:1 majority. 

The constitution bench of five judges headed by Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna hearing the case said that the notification dated November 8, 20216, which announced demonetisation, cannot be struck down on the ground of decision-making process.

The court said, "The notification dated November 8, 2016, is valid and satisfies the test of proportionality." It also said the Reserve Bank of India (RBI) does not have any independent power to bring in demonetisation and the decision was taken after a consultation between the Centre and RBI.

The court held that the centre consulted with the RBI before implementing the ban and that it cannot be reversed and noted, "There was a reasonable nexus to bring such a measure, and we hold that demonetisation was not hit by the doctrine of proportionality."

The only judge who differed from the majority view Justice BV Nagarathna, wrote a dissenting judgment. She called the November 8, 2016 notification of the Centre "unlawful" and noted, "In my considered view, the action of demonetisation by November 8 notification was unlawful. But status quo ante cannot be restored now since it was in 2016," she said, adding that demonetisation was "an exercise of power, contrary to law, and therefore unlawful."

In a strongly worded dissenting ruling, she also noted, "Scrapping of Rs 500, Rs 1,000 series notes had to be done through legislation, not through notification. Parliament should have discussed law on demonetisation, the process should not have been done through a gazette notification. Parliament cannot be left aloof on the issue of such critical importance for the country."

She said documents and records submitted by the Centre and the RBI, which included phrases like 'As desired by the Central Government,' showed that there was 'no independent' application of mind by the central bank. 

On 8 November 2016, at about 8.15 pm, Prime Minister Narendra Modi publicly announced the demonetisation in an unscheduled nationally televised address declaring the move to outlaw Rs 500 and Rs 1,000 series notes which were nearly 86% of the cash in circulation to target undeclared 'black money' and 'fight corruption' in the country.

Over the years, despite the government and the central bank's push for digital payments and lower cash transactions, cash in the system steadily rose and about three years later as on March 15, 2019, the Currency in circulation (CIC) has jumped by 19.14 per cent from the pre-demonetisation level of Rs 17.97 lakh crore to a record high of Rs 21.41 lakh crore on November 4, 2016.

Five years after demonetisation, the currency in circulation was at a record high of ₹29.17 trillion on 29 October 2021, indicating that cash was back in the reckoning in the financial system.