A five-member Constitution bench of the Supreme Court on January 2 upheld, by a four to one majority, the Indian government’s decision in November 2016 to demonetise old currency notes of Rs 1,000 and Rs 500. The legality of the policy was the subject of judicial review – not its wisdom or soundness.
Demonetisation was held to be a valid exercise of power by the Central government under Section 26(2) of the Reserve Bank of India Act, following the proper procedure of consultation with the bank.
The judgement, coming six years after demonetisation, was largely an academic exercise as there could be no redressal of any injury to the public caused by the measure. However, it was a missed opportunity to discuss the trust and public confidence in the currency of the nation. This question is likely to become more critical as the government proceeds to introduce digital currency, a fundamental transformation of the nature of money as we know it.
It could have provided an occasion to discuss if the government may unilaterally cease to guarantee the value of the currency, by a notification or by an act of Parliament. By the same logic, could a government also modify or limit the character of…