New Delhi: The Supreme Court on Monday, upholding the Centre's 2016 decision to demonetise the Rs 1000 and Rs 500 denomination notes, said the record reveals that RBI and the Centre were in consultation with each other for at least a period of six months preceding the demonetisation notification.
A five-judge constitution bench headed by Justice S A Nazeer and comprising Justices B R Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna pronounced the judgment on a clutch of petitions challenging the Centre's 2016 decision to demonetise currency notes of Rs 1000 and Rs 500 denominations.
Justice Nagarathna dissented with the majority judgment, which affirmed the Centre's 2016 decision.
Justice Gavai, who authored the majority judgment, said the record itself reveals that the RBI and the Central government were in consultation with each other for a period of six months before the demonetisation notification was issued. During the demonetisation period, Urjit R Patel was the RBI Governor and before him, Raghuram Rajan headed the central bank from September 4, 2013 to September 4, 2016.
The bench added that the record would also reveal that all the relevant information was shared by both the Central Board of the RBI as well as the Central government with each other. "As such, it cannot be said that there was no conscious, effective, meaningful and purposeful consultation," said Justice Gavai.
The top court noted that the RBI has a pivotal role in the matters of monetary policy and issuance of currency. "The scheme mandates that before the Central government takes a decision with regard to demonetisation, it would be required to consider the recommendation of the Central Board. We find that, in the context in which it is used, the word recommendation would mean a consultative process between the Central Board and the Central Government," said Justice Gavai.
The top court noted that the material placed on record would show that the RBI and the Central government were in consultation with each other for at least a period of six months preceding the action.
It added that perusal of Sections 22, 24 and 26 of the RBI Act would reveal that in various matters pertaining to currency, the course of action is to be taken by the Central government on the recommendation of the Central Board. "It cannot be disputed that the final say with regard to economic and monetary policies of the country will be with the Central Government.
However, in such matters, it has to rely on the expert advice of the RBI. In a matter like the present one, it cannot be expected that the RBI and the Central Government will act in two isolated boxes. An element of interaction/consultation in such important matters pertaining to economic and monetary policies cannot be denied to the RBI and the Central government," said the bench.
It further added that as such, merely because the Central government has advised the Central Board to consider recommending demonetisation and that the Central Board, on the advice of the Centre, has considered the proposal for demonetisation and recommended it and, thereafter, the Centre has taken a decision, "in our view, cannot be a ground to hold that the procedure prescribed under Section 26 of the RBI Act was breached".
Justice Nagarathna, in her minority judgment, noted that the consultations between the Centre and the bank began in February 2016; however, the process of consolidation and decision-making were kept confidential.