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RBI backs Centre on demonetisation move in Supreme Court

New Delhi: The Reserve Bank of India (RBI) told the Supreme Court on Tuesday that demonetisation was not a "thoughtless" move while backing the Centre's 2016 contentious decision.

The petitioners had submitted to the court that the controversial move to remove Rs 1,000 and Rs 500 notes as legal tender was a “thoughtless move” to which the RBI said that the court should refrain from scrutinising it because it was an economic policy decision.



Senior attorney Jaideep Gupta stated before a five-judge constitution bench of Justices S Abdul Nazeer, B R Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna that it was an intrinsic aspect of nation-building and that there was consensus on it except for few people who opposed it.

Gupta, representing the RBI, stated that the court should refrain from interfering with the government's economic policy and that the validity of the decision to demonetise Rs 500 and Rs 1,000 currency notes in 2016 should not be considered by the court.

Gupta stated, citing various Supreme Court decisions, that courts should not intervene in policy matters until the policy is proven to be discriminatory and arbitrary.

The bench, however, stated that it would not consider the demonetisation's merits, but rather the procedure used to reach the result. “We are not going into the legality of the decision but the process of decision-making,” Justice Nagarathna noted.

Gupta said that detailed plans had been made to ensure the decision's seamless execution, but he admitted that citizens will endure hardship as a result of it.

“Temporary hardships are also an integral part of the nation-building process. Some of the hardships may not have been anticipated. But we had a mechanism by which problems that arose were solved,” Gupta said.

In response to the arguments of the Centre and the RBI, former finance minister and senior advocate P Chidambaram, appearing on behalf of the petitioners, stated that the court should not be intimidated by terms such as economic policy and monetary policy and that demonetisation is not a part of monetary policy.

He asked the court to rule on the constitutionality of the decision-making process and to overturn it if it was arbitrary so that such an exercise would not be repeated in the future in contravention of the law.



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