Reserve Bank of India Act, 1934
Section 26(2)—Exercise of power by Central Government—Power available to the Central Government under sub-section (2) of Section 26 of the RBI Act cannot be restricted to mean that it can be exercised only for ‘one’ or ‘some’ series of bank notes and not for ‘all’ series of bank notes—Power can be exercised for all series of bank notes—Merely because on two earlier occasions, the demonetization exercise was by plenary legislation, it cannot be held that such a power would not be available to the Central Government under sub-section (2) of Section 26 of the RBI Act.
[Paras 157, 158 & 304]
Section 26(2)—Exercise of power by Central Government—Sub-section (2) of Section 26 of the RBI Act does not provide for excessive delegation inasmuch as there is an inbuilt safeguard that such a power has to be exercised on the recommendation of the Central Board—As such, sub-section (2) of Section 26 of the RBI Act is not liable to be struck down on the said ground.
[Paras 210, 211 & 304]
Demonetization
Notification of demonetization—Challenged to—Contention that impugned notification is liable to be set aside on ground that it caused hardship to individual/citizens—Rejected—Individual interests must yield to the larger public interest sought to be achieved by impugned notification—Notification of demonetization does not suffer from any flaws in decision-making process—It satisfies the test of proportionality and, as such, cannot be struck down on the said ground—Period provided for exchange of notes vide impugned notification cannot be said to unreasonable.
[Paras 262, 280, 281, 288, 301 & 304]
Judicial Review
Scope of interference—It is not the function of the Apex Court or of any other Court to sit in judgment over such matters of economic policy and they must necessarily be left to the Government of the day to decide since in such matters with regard to the prediction of ultimate results, even the experts can seriously err and doubtlessly differ—Courts can certainly not be expected to decide them without even the aid of experts—Court must defer to legislative judgment in matters relating to social and economic policies and must not interfere unless the exercise of executive power appears to be palpably arbitrary.
[Paras 225 & 252]
Specified Bank Notes (Cessation of Liabilities) Act, 2017
Section 4—Power of RBI—RBI does not possess independent power under sub-section (2) of Section 4 of the Specified Bank Notes (Cessation of Liabilities) Act of 2017 in isolation of the provisions of Sections 3 and 4(1) thereof to accept the demonetized notes beyond the period specified in notifications issued under sub-section (1) of Section 4 of the 2017 Act.
[Paras 303 & 304]
Statutes
Interpretation—To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment—Ascertainment of legislative intent is the basic rule of statutory construction.
[Para 143]
Held : The modern approach of interpretation is a pragmatic one, and not pedantic. An interpretation which advances the purpose of the Act and which ensures its smooth and harmonious working must be chosen and the other which leads to absurdity, or confusion, or friction, or contradiction and conflict between its various provisions, or undermines, or tends to defeat or destroy the basic scheme and purpose of the enactment must be eschewed. The primary and foremost task of the Court in interpreting a statute is to gather the intention of the legislature, actual or imputed. Having ascertained the intention, it is the duty of the Court to strive to so interpret the statute as to promote or advance the object and purpose of the enactment. For this purpose, where necessary, the Court may even depart from the rule that plain words should be interpreted according to their plain meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment. Ascertainment of legislative intent is the basic rule of statutory construction.
[Para 143]
Words and Phrases
Any—Meaning under Section 26(2) of the RBI Act—Word “any” would mean “all” under sub-section (2) of Section 26 of the RBI Act.
[Para 158]
Reserve Bank of India Act, 1934
Section 26(2)—Exercise of power by Central Government—Central Government possesses the power to initiate and carry out the process of demonetisation of all series of bank notes, of all denominations—However, all series of bank notes, of all denominations could not be recommended to be demonetised, by the Central Board of the Bank under Section 26 (2) of the RBI Act—Sub-section (2) of Section 26 of the Act applies only when a proposal for demonetisation is initiated by the Central Board of the Bank by way of a recommendation being made to the Central Government—On receipt of a recommendation from the Central Board of the Bank for demonetisation under Section 26 (2) of the Act, the Central Government may accept the said recommendation or may not do so—If the Central Government accepts the recommendation, it may issue a notification in the Gazette in this regard—Central Government may also initiate and carry out demonetisation, even in the absence of a recommendation by the Central Board of the Bank—However, this must be carried out only by enacting a plenary legislation or law in this regard, and not through issuance of a Notification under sub section (2) of Section 26 of the Act as this provision is not applicable in cases where the proposal for demonetisation is initiated by the Central Government. {View per Hon’ble Justice B.V. Nagarathna}
[Paras 5 & 21]
Section 26(2)—Exercise of power by Central Government—Power under sub-section (2) of Section 26 of the RBI Act cannot be construed to mean "all" series or “all” denominations—If the Central Board of the Bank is vested with the power to recommend demonetisation of "all" series or “all” denominations of bank notes, the same would amount to a case of excessive vesting of powers with the Bank. {View per Hon’ble Justice B.V. Nagarathna}
[Paras 5 & 21]
Demonetization
Notification of demonetization—Legality of—Measure of demonetisation ought to have been carried out by the Central Government by way of enacting an Act or plenary legislation—Proposal for demonetisation arose from the Central Government and therefore, could not be given effect to by way of issuance of a notification as contemplated under sub-section (2) of Section 26 of the RBI Act, as, such provision would not apply in cases where the proposal for demonetisation has originated from the Central Government, such as the instant case—Decision making process was also tainted with elements of “non-exercise of discretion” by the Central Board of the Bank in rendering its advise on the impugned measure. That the Bank acted at the behest of the Central Government and did not render an independent opinion to the Central Government—Impugned notification issued under sub-section (2) of Section 26 of the Act is unlawful—Further, the subsequent Ordinance of 2016 and Act of 2017 incorporating the terms of the impugned Notification are also unlawful. {View per Hon’ble Justice B.V. Nagarathna}
[Paras 5 & 21]