Aware of ‘Lakshman Rekha’, says SC on noteban judicial review

The Supreme Court said on Wednesday it was aware of the “Lakshman Rekha” on judicial review of government policy decisions, but will have to review the 2016 demonetization decision to determine whether the issue has become a mere exercise” academic”.

Observing that when an issue arises before a Constitutional Bench, it is its duty to respond, a five-judge bench headed by Justice S.A. Nazeer ordered the Center and the Reserve Bank of India to file a full affidavit on petitions challenging the demonetization of `500 and `1,000 banknotes.

Attorney General R Venkataramani argued that unless the Demonetization Act is challenged from proper perspective, the issue will remain largely academic.

He stated that the High Denomination Bank Notes (Demonetization) Act was passed in 1978 to provide in the public interest for the demonetization of certain high denomination bank notes in order to control the illicit transfer of money harmful to the economy that these banknotes


The higher court said that in order to declare whether the exercise is academic or has become unsuccessful, it must consider the matter since both parties disagree.

“In order to answer this question, we will have to hear and give an answer, whether academic, non-academic or beyond the scope of judicial review. The point here is government policy and wisdom which is one aspect of the matter.

“We still know where the Lakshman Rekha is, but how it was done needs to be looked at.”

We have to hear the lawyer to decide that,” said the bench, which also includes judges BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna.

Solicitor General Tushar Mehta, representing the Center, said the court’s time should not be “wasted” on academic matters. Opposing Mehta’s submission, lead attorney Shyam Divan, representing petitioner Vivek Narayan Sharma, said he was surprised by the words “waste of the Constitutional bench’s time”, as the previous bench said these cases should be submitted to a bench of the constitution.

Senior barrister and former finance minister P Chidambaram, representing one of the parties, said the matter had not become academic and should be decided by the highest court. He said this type of demonetization requires a separate act of parliament. Chidambaram pointed out that in 24 hours between November 7 and November 8, 2016, the decision was made in a completely non-transparent manner to cancel 86% of the currency in circulation.

He pointed out that on November 7, the government asked RBI to recommend demonetization and that the RBI meeting with a very small number of members organized the meeting in Delhi to recommend demonetization and that the Cabinet took the decisions in a few hours.

“In the evening, Prime Minister Narendra Modi announced the policy by putting Cabinet ministers in the room,” Chidambaram said. The High Court has now released the case for hearing on November 9, 2022.

On December 16, 2016, a bench headed by then Chief Justice TS Thakur had referred the issue of the validity of the decision and other related matters to a larger bench of five judges for an authoritative decision.