The Union government has informed the Supreme Court that the 2016 demonetisation was a carefully considered decision, forming part of a broader strategy to combat issues such as counterfeit currency, terror financing, black money, and tax evasion. In response to a set of petitions challenging the demonetisation decision, the government defended its move, stating that it was taken after extensive consultations with the Reserve Bank of India (RBI) and thorough preparations were made before implementing the note ban.
In an affidavit submitted to the Supreme Court, the government emphasized that the withdrawal of legal tender for Rs 500 and Rs 1000 notes was an effective measure and a crucial part of a larger plan to address various economic challenges. The decision was described as an economic policy executed in accordance with the powers granted by the RBI Act of 1934. The government highlighted that the Parliament later affirmed this decision in the Specified Bank Notes (Cessation of Liabilities) Act, 2017.
The government argued that demonetisation was not only aimed at tackling fake money, terror financing, black money, and tax evasion but was also a transformative economic policy step. The decision, it asserted, was based on the specific recommendation of the Central Board of the RBI, and the RBI had proposed a draft scheme for its implementation.
A five-judge constitution bench is currently overseeing the case, and the government’s response is scheduled for further consideration on November 24. The government stated that demonetisation was implemented with the objective of curbing the menace of fake currency, expanding the formal sector, promoting digital transactions, broadening the tax base, and enhancing tax compliance. It also highlighted measures taken to minimize hardships faced by the public, such as exemptions for specified bank notes in certain transactions.
This legal proceeding involves 58 petitions challenging the government’s decision on demonetisation, and the Supreme Court had referred the matter to a larger bench of five judges in December 2016 for a comprehensive examination of its validity and related issues.