Demonetisation decision was deeply flawed: Chidambaram in Supreme Court Pipa News

Demonetisation decision was deeply flawed: Chidambaram in Supreme Court

Senior advocate P Chidambaram termed the decision-making process that led to the Centre’s move to invalidate Rs 500 and Rs 1,000 currency notes in 2016 as “deeply flawed”.

He told a five-judge Constitution bench of the Supreme Court headed by Justice S Abdul Nazeer, which is hearing petitions challenging demonetisation, that the process could have started only from the RBI.

Chidambaram referred to the Preamble of the Reserve Bank of India Act, 1934, which states that the authority to regulate the issue of banknotes rests solely with the RBI. It also generally operates the currency and credit systems. “That’s why anything with currency would have to come out of the Reserve Bank of India,” he argued. He said that the government could exercise the power of demonetisation only on the recommendation of the RBI.

However, what was seen in the 2016 demonetisation was a “reversal of the process”, he said. The Center issued a “virtual command”, and it was “meekly and meekly” accepted by the RBI, he told the bench, also comprising Justices BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna. “It can’t start with the government, because it doesn’t have the data to properly assess what kind of burden such a decision would be,” he said.

Chidambaram submitted that “there was a deep error in the decision making process”.

As he pointed out that the hardships faced by the people due to the government’s “arbitrary and unreasonable policy” decision, Justice Nagaratna said that the effect of the government action could have no bearing on its validity.

Chidambaram said the government’s action can be tested on the basis of proportionality. “Time cannot be turned back, but an act can be declared unwarranted,” he said.

In its affidavit filed in the matter, the Center had said that “withdrawal of legal tender character of a significant part of the total currency value was a considered decision. It has been taken after extensive deliberations and advance preparations with the RBI.” It said That the government had started consultations with the RBI from February 2016, at least eight months before it notified on November 8, 2016.

Chidambaram, however, said that there was no care or thought put into such an important decision by the RBI, and no time was given before the central government speeds it up. This conclusively establishes that there was no application of mind by the RBI, the central board of the bank, or the Union Cabinet, he argued.

Stating that very little time was given for a decision, he said, “The letter reached the RBI after noon on November 7, following which the Central Board was telephonically called to meet in Delhi, possibly on November 8. They See you at 5:30 pm, within an hour or an hour and a half, the recommendation is taken by hand to the cabinet, which is waiting. Then, the prime minister goes on television at 8 pm.”


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