The Reserve Bank of India declared in the Supreme Court on Tuesday that demonetisation was an “integral part of nation-building”.
“I don’t want to sound pompous. But this was really a part of nation-building. There is a lot of consensus, unanimity that everybody was prepared to suffer some hardship…Some people do not agree, but that’s alright,” the central bank, represented by senior advocate Jaideep Gupta, told a Constitution Bench hearing the challenge to the demonetisation exercise of 2016.
At one point, Justice BV Nagarathna, on the Bench reminded Gupta of the long queues outside banks and ATMs. Many returning home without money after banking hours.
“Each bank had only limited cash which had to be distributed among its branches. There were cases when a 100 people could exchange their notes and the 101st person had to come back again and again,” senior advocate P Chidambaram submitted for the petitioners.
Gupta said “some hardships may not have been anticipated, but we had everything in place from the first day. It is not possible to take out money one day and remonetise the next day. Care was taken to see that nobody’s money was destroyed unnecessarily.”
He said elaborate arrangements were made to provide everybody a reasonable opportunity and time to exchange the demonetised currency for new ones. It was for people to arrange their affairs. Whenever problems arise, changes were made. A control room was in operation.
Justice Nagarathna referred to people who would have returned empty-handed on December 31, 2016, the last day of legal exchange of the demonetised ₹ 500 and ₹ 1000 currency notes for the new currency, because the queue outside the bank was too long.
Gupta said banks during those days worked 24 hours. Bank officers sustained the system. “They were a marvel,” he declared.
Justice Nagarathna said many of those people in queues may have been domestic workers and labourers paid in the old currency and waiting to exchange it day after day.
Such payments in old notes were illegal. The act was illegal. From November 9, demonetised notes could only be exchanged, Gupta reasoned.
In the practicality of a comatose person or an Indian who had gone abroad at the time leaving his money home, Gupta said they could have come or asked somebody to go to the bank on their behalf to exchange the old notes.
“And if the money was in a locker, you cannot give the key to somebody?” Justice Nagarathna asked.
“But why would you not come back to India in accordance with the law?” Gupta questioned in reply.
Chidambaram said the RBI had “meekly submitted to the government’s recommendation after a deliberation of one hour in one day”.
He said finding the objectives of the 2016 demonetisation exercise was like looking for a “black cat in a dark room”. He submitted in his rejoinder that the government cannot “frighten” the court to not judicially review the policy by saying that judges were not experts in economic policy.
He flagged that the government has not shared with the court the records of the decision-making process leading to demonetisation. The senior lawyer said the government has not claimed “privilege” either in its oral arguments or on affidavit.
“A fair decision-making process usually leads to a fair decision. If so, they (government) should be able to confidently defend not only the decision but also the decision-making process,” Chidambaram submitted.