In Brief
This landmark Constitution Bench decision upheld the validity of the Government's demonetization of Rs.500 and Rs.1,000 notes (November 2016), with a 4-1 split verdict. The majority held that sub-section (2) of the RBI Act permits the Central Government, on the RBI's recommendation, to demonetize 'all series' of bank notes, not just 'some'. The decision-making process was not flawed, the measure satisfied proportionality principles, and the 52-day exchange period was reasonable. The dissent argued the proposal originated from the government, not the RBI, violating the statutory scheme requiring RBI recommendation. Though the dissent found the notification unlawful, it applied the declaration prospectively without overturning actions taken. The case fundamentally interprets currency powers and deference owed to central bank expertise in monetary policy.
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