VIVEK NARAYAN SHARMA v. UNION OF INDIA

[B. R. GAVAI, J.]

consideration of the various provisions of the Delhi Municipal Corporation A Act, 1957, the Court held that the power conferred by Section 150 thereof on the Corporation is not unguided and cannot be said to be amounting to excessive delegation.

179Copy pinpoint179. It will also be apposite to refer to the concurring judgment of S.M. Sikri, J., wherein he observed thus: B “But assuming I am bound by authorities of this Court to rest the validity of Section 113(2)(d) and Section 150 of the Act by ascertaining whether a guide or policy exists in the Act, I find adequate guide or policy in the expression “purposes of the Act” in Section 113. The Act has pointed out the objectives or C the results to be achieved and taxation can be levied only for the purpose of achieving the objectives or the results. This, in my view, is sufficient guidance especially to a self-governing body like the Delhi Municipal Corporation. It is not necessary to rely on the safeguards mentioned by the learned Chief Justice to sustain the delegation.” D

[emphasis supplied]

180Copy pinpoint180. S.M. Sikri, J. in his concurring judgment also held that he found adequate guide or policy in the expression “purposes of the Act” in Section 113. He observed that the Act has pointed out the objectives or the results to be achieved and taxation can be levied only for the purpose of achieving the objectives or the results. In the view of His Lordship, this was sufficient guidance especially to a self-governing body like the Delhi Municipal Corporation.

181Copy pinpoint181. It will also be apposite to refer to the following observations of M. Hidayatullah, J., in his concurring judgment: “…..The question always is whether the legislative will has been exercised or not. Once it is established that the legislature itself has willed that a particular thing be done and has merely left the execution of it to a chosen instrumentality (provided that it has not parted with its control) there can be no question of excessive delegation. If the delegate acts contrary to the wishes of the legislature the legislature can undo what the delegate has done. Even the courts, as we shall show presently, may be asked to intervene when the delegate exceeds its powers and functions…..” H

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A “To insist that the legislature should provide for every matter connected with municipal taxation would make municipalities mere tax collecting departments of the Government and not self- governing bodies which they are intended to be. The Government might as well collect the taxes and make them available to the municipalities. That is not a correct reading of the history of B Municipal Corporations and other self-governing institutions in our country.” [emphasis supplied]

182Copy pinpoint182. Observing thus, M. Hidayatullah, J. also rejected the contention that provisions of Section 150 suffer from excessive delegation. His Lordship has observed that once it is established that the legislature itself has willed that a particular thing be done and has merely left the execution of it to a chosen instrumentality, there can be no question of excessive delegation. This is, however, subject to the proviso that the legislature has not parted with its control. It is observed that if the delegatee acts contrary to the wishes of the legislature the legislature can undo what the delegate has done.

183Copy pinpoint183. Another Constitution Bench of this Court in the case of Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. (supra) was considering the validity of Section 8(2)(b) of the Central Sales Tax Act, 1956 on the ground that it suffered from the vice of excessive delegation. In the said case, H.R. Khanna, J., speaking for the majority, after surveying the earlier judgments of this Court including that in the case of Birla Cotton, Spinning and Weaving Mills Delhi (supra), observed thus: “13. It may be stated at the outset that the growth of the legislative powers of the Executive is a significant development of the twentieth century. The theory of laissezfaire has been given a go-by and large and comprehensive powers are being assumed by the State with a view to improve social and economic well- being of the people. Most of the modern socio-economic legislations passed by the Legislature lay down the guiding principles and the legislative policy. The Legislatures because of limitation imposed upon by the time factor hardly go into matters of detail. Provision is, therefore, made for delegated legislation to obtain flexibility, elasticity, expedition and opportunity for experimentation. The practice of empowering H

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the Executive to make subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare State. At the same time it has to be borne in mind that our Constitution-makers have entrusted the power of legislation to the representatives of the people, so that the said power may be exercised not only in the name of the people but also by the people speaking through their representatives. The role against excessive delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. The rule contemplates that it is not permissible to substitute in the matter of legislative policy the views of individual officers or other authorities, however competent they may be, for that of the popular will as expressed by the representatives of the people.” [emphasis supplied]

184Copy pinpoint184. The Court observed that the growth of the legislative powers of the Executive is a significant development of the twentieth century. D The theory of laissez faire has been given a go-by and large and comprehensive powers are being assumed by the State with a view to improve social and economic well-being of the people. It has been held that most of the modern socio-economic legislations passed by the Legislature lay down the guiding principles and the legislative policy. It is not possible for the Legislatures to go into matters of detail. Therefore, a provision has been made for delegated legislation to obtain flexibility, elasticity, expedition and opportunity for experimentation. It has been held that the practice of empowering the Executive to make subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare State. It has been observed that the role against excessive delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. It has been held that the rule contemplates that it is not permissible to substitute in the matter of legislative policy the views of individual officers or other authorities, however competent they may be, for that of the popular will as expressed by the representatives of the people.

185Copy pinpoint185. It has further been observed thus: “15. The Constitution, as observed by this Court in the case of Devi Das Gopal Krishnan v. State of Punjab [AIR 1967 SC 1895 : H

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186Copy pinpoint186. It has been held that the essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. The Legislature cannot abdicate its functions in favour of another. However, in view of the multifarious activities of a welfare F State, it cannot presumably work out all the details to suit the varying aspects of a complex situation. It must, therefore, necessarily delegate the working out of details to the Executive or any other agency. The Court also cautions about the danger inherent in the process of delegation. It observed that an over-burdened Legislature or one controlled by a G powerful Executive may unduly overstep the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the Executive; it may confer an arbitrary power on the Executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation. It has been held that it is for the Court to H

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hold on a fair, generous and liberal construction of an impugned statute to examine whether the Legislature exceeded such limits.

187Copy pinpoint187. We may gainfully refer to the following observations in the concurring judgment of K.K. Mathew, J.: “57. Delegation of “law-making” power, it has been said, is the dynamo of modern Government. Delegation by the Legislature is necessary in order that the exertion of legislative power does not become a futility. Today, while theory still affirms legislative supremacy, we see power flowing back increasingly to the Executive. Departure from the traditional rationalization of the status quo arouses distrust. The Legislature comprises a C broader cross-section of interests than any one administrative organ; it is less likely to be captured by particular interests. We must not, therefore, lightly say that there can be a transfer of legislative power under the guise of delegation which would tantamount to abdication. At the same time, we must be aware of the practical reality, and that is, that Parliament cannot go into the details of all legislative matters. The doctrine of abdication expresses a fundamental democratic concept but at the same time we should not insist that law-making as such is the exclusive province of the Legislature. The aim of Government is to gain acceptance for objectives demonstrated as desirable and to realise them as fully as possible. The making of law is only a means to achieve a purpose. It is not an end in itself. That end can be attained by the Legislature making the law. But many topics or subjects of legislation are such that they require expertise, technical knowledge and a degree of adaptability to changing situations which Parliament might not possess and, therefore, this end is better secured by extensive delegation of legislative power. The legislative process would frequently bog down if a Legislature were required to appraise beforehand the myriad situations to which it wishes a particular policy to be applied and to formulate specific rules for each situation. The presence of Henry VIII clause in many of the statutes is a pointer to the necessity of extensive delegation. The hunt by Court for legislative policy or guidance in the crevices of a statute or the nook and cranny of its preamble is not an edifying spectacle. It is not clear what difference does it H

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A make in principle by saying that since the delegation is to a representative body, that would be a guarantee that the delegate will not exercise the power unreasonably, for, if ex hypothesi the Legislature must perform the essential legislative function, it is certainly no consolation that the body to which the function has been delegated has a representative character. In other words, B if, no guidance is provided or policy laid down, the fact that the delegate has a representative character could make no difference in principle.” [emphasis supplied]

188Copy pinpoint188. Though the learned Judge cautions against abdication under the guise of delegation, he also emphasizes a necessity to be aware about the practical reality, i.e. Parliament cannot go into the details of all legislative matters. The learned Judge observed that the aim of Government is to gain acceptance for objectives demonstrated as desirable and to realise them as fully as possible. The learned Judge D observed that there are many topics or subjects of legislation which are such that they may require expertise, technical knowledge and a degree of adaptability to changing situations which Parliament might not possess and, therefore, this end is better secured by extensive delegation of legislative power. It has been held that the legislative process would E frequently bog down if a Legislature were required to appraise beforehand the myriad situations to which it wishes a particular policy to be applied and to formulate specific rules for each situation. The Court further emphasized for a guidance for the delegate to exercise the delegated power.

189Copy pinpoint189. This Court, in the case of The Registrar of Co-operative Societies, Trivandrum and another v. K. Kunjabmu and others (supra),while reversing the judgment of the Kerala High Court, which had held Section 60 of the Madras Co-operative Societies Act, 1932 to be unconstitutional on the ground of vice of excessive delegation, observed thus: G “3. ….Executive activity in the field of delegated or subordinate legislation has increased in direct, geometric progression. It has to be and it is as it should be. Parliament and the State Legislatures are not bodies of experts or specialists. They are skilled in the art of discovering the aspirations, H

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the expectations and the needs, the limits to the patience and the acquiescence and the articulation of the views of the people whom they represent. They function best when they concern themselves with general principles, broad objectives and fundamental issues instead of technical and situational intricacies which are better left to better equipped full time expert executive bodies and specialist public servants. Parliament and the State Legislatures have neither the time nor the expertise to be involved in detail and circumstance. Nor can Parliament and the State Legislatures visualise and provide for new, strange, unforeseen and unpredictable situations arising from the complexity of modern life and the ingenuity of modern man. That is the raison d’etre for delegated legislation. That is what makes delegated legislation inevitable and indispensable. The Indian Parliament and the State Legislatures are endowed with plenary power to legislate upon any of the subjects entrusted to them by the Constitution, subject to the limitations imposed by the Constitution itself. The power to legislate carries with it the power to delegate. But excessive delegation may amount to abdication. Delegation unlimited may invite despotism uninhibited. So the theory has been evolved that the legislature cannot delegate its essential legislative function. Legislate it must by laying down policy and principle and delegate it may to fill in detail and carry out policy. The legislature may guide the delegate by speaking through the express provision empowering delegation or the other provisions of the statute, the preamble, the scheme or even the very subject-matter of the statute. If guidance there is, wherever it may be found, the delegation is valid. A good deal of latitude has been held to be permissible in the case of taxing statutes and on the same principle a generous degree of latitude must be permissible in the case of welfare legislation, particularly those statutes which are designed to further the Directive Principles of State Policy.” G [emphasis supplied]

190Copy pinpoint190. This Court has observed that the executive activity in the field of delegated or subordinate legislation has increased in direct, geometric progression. The Court observed that Parliament and the State H

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A Legislatures are not bodies of experts or specialists. It is observed that the legislative bodies function best when they concern themselves with general principles, broad objectives and fundamental issues instead of technical and situational intricacies which are better left to better equipped full time expert executive bodies and specialist public servants. It has been held that Parliament and the State Legislatures cannot visualize and provide for new, strange, unforeseen and unpredictable situations arising from the complexity of modern life and the ingenuity of modern man. It has been further reiterated that guidance could be found from various factors and once it is found, the delegation is valid. It has been held that a good deal of latitude has to be held to be permissible in the case of taxing statutes and welfare legislations.

191Copy pinpoint191. This Court in the case of Ramesh Birch and others (supra) again, after referring to the earlier judgments and after considering the views expressed by various learned Judges on the aspect of delegated legislation, observed thus: D “23. But, these niceties apart, we think that Section 87 is quite valid even on the “policy and guideline” theory if one has proper regard to the context of the Act and the object and purpose sought to be achieved by Section 87 of the Act. The judicial decisions referred to above make it clear that it is not necessary that the E legislature should “dot all the i’s and cross all the t’s” of its policy. It is sufficient if it gives the broadest indication of a general policy of the legislature…...”

192Copy pinpoint192. Recently, the Constitution Bench of this Court in the case of Rojer Mathew (supra) considered the question, as to whether Section F 184 of the Finance Act, 2017, which does not prescribe qualifications, appointment, term and conditions of service, salary and allowances, etc. suffers from the vice of excessive delegation. Rejecting the contention, this Court observed thus: “145. Cautioning against the potential misuse of Section 184 by G the executive, it was vehemently argued by the learned counsel for the petitioner(s) that any desecration by the executive of such powers threatens and poses a risk to the independence of the tribunals. A mere possibility or eventuality of abuse of delegated powers in the absence of any evidence supporting such claim, cannot be a ground for striking down the provisions of the Finance H

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[B. R. GAVAI, J.]

Act, 2017. It is always open to a constitutional court on challenge A made to the delegated legislation framed by the executive to examine whether it conforms to the parent legislation and other laws, and apply the “policy and guideline” test and if found contrary, can be struck down without affecting the constitutionality of the rule-making power conferred under Section 186 of the B Finance Act, 2017.”

193Copy pinpoint193. It can thus be seen that this Court has held that a mere possibility or eventuality of abuse of delegated powers in the absence of any evidence supporting such claim, cannot be a ground for striking down such a provision. It has been held that if a challenge is made to the delegated legislation framed by the executive, the same can be examined C by the constitutional court. It has been held that applying the “policy and guideline” test, if it is found that the delegated legislation does not satisfy the said test, the legislation can be struck down without affecting the constitutionality of the rule-making power conferred under Section 186 of the Finance Act, 2017. D Status of the RBI

194Copy pinpoint194. Having adverted to the various judgments on the issue of delegated legislation, we find it necessary to refer to certain judgments of this Court outlining the status of the RBI. E

195Copy pinpoint195. The Constitution Bench of this Court in the case of Joseph Kuruvilla Velukunnel (supra) was considering a challenge to Section 38(1) and (3)(b)(iii) of the Banking Companies Act, 1949 being violative of Articles 14, 19 and 301 of the Constitution of India, and was, therefore, ultra vires the Constitution of India. Though this Court held that Section 38 is an unreasonable restriction on the right of the Palai Bank to carry on its business and, therefore, unconstitutional, it will be relevant to refer to paragraph 46 of the said judgment, which is as follows: “46. In the present case, in view of the history of the establishment of the Reserve Bank as a central bank for India, its position as a Bankers’ Bank, its control over banking companies and banking in India, its position as the issuing bank, its power to license banking companies and cancel their licences and the numerous other powers, it is unanswerable that between the court and the Reserve Bank, the momentous decision to wind up a tottering or unsafe banking company in the interests of the depositors, may reasonably H

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A be left to the Reserve Bank. No doubt, the court can also, given the time, perform this task. But the decision has to be taken without delay, and the Reserve Bank already knows intimately the affairs of banking companies and has had access to their books and accounts. If the court were called upon to take immediate action, it would almost always be guided by the opinion of the Reserve B Bank. It would be impossible for the court to reach a conclusion unguided by the Reserve Bank if immediate action was demanded. But the law which gives the same position to the opinion of the Reserve Bank is challenged as unreasonable. In our opinion, such a challenge has no force.….” C [emphasis supplied]

196Copy pinpoint196. The Court has referred to the pivotal role that the RBI plays as a Central Bank, as a bankers’ bank and numerous other powers that it exercises. The Court held that the law which gives an important position to the opinion of the Reserve Bank was challenged unreasonably and D such challenge had no force.

197Copy pinpoint197. It may also be relevant to refer to the following observations of this Court in the case of Peerless General Finance and Investment Co. Limited and another (supra):

E “30. Before examining the scope and effect of the impugned paragraphs (6) and (12) of the directions of 1987, it is also important to note that Reserve Bank of India which is bankers’ bank is a creature of statute. It has large contingent of expert advice relating to matters affecting the economy of the entire country and nobody can doubt the bona fides of the Reserve Bank in issuing the impugned directions of 1987. The Reserve Bank plays an important role in the economy and financial affairs of India and one of its important functions is to regulate the banking system in the country. It is the duty of the Reserve Bank to safeguard the economy and financial stability of the country….” [emphasis supplied]

198Copy pinpoint198. It can thus be seen that this Court has noted that the RBI, which is a bankers’ bank, is a creature of statute. It has large contingent of expert advice relating to matters affecting the economy of the entire country. It has been held that the RBI plays an important role in the

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economy and financial affairs of India and one of its important functions A is to regulate the banking system in the country. It has been held that it is the duty of the RBI to safeguard the economy and financial stability of the country.

199Copy pinpoint199. It will also further be relevant to refer to the following observations of this Court in the case of Peerless General Finance B and Investment Co. Limited and another (supra): “The function of the Court is not to advise in matters relating to financial and economic policies for which bodies like Reserve Bank are fully competent. The Court can only strike down some or entire directions issued by the Reserve Bank in C case the Court is satisfied that the directions were wholly unreasonable or violative of any provisions of the Constitution or any statute. It would be hazardous and risky for the courts to tread an unknown path and should leave such task to the expert bodies. This Court has repeatedly said that matters of economic policy ought to be left to the government.” D

[emphasis supplied]

200Copy pinpoint200. The Court has held that it is not permissible for a Court to advise in matters relating to financial and economic policies for which bodies like Reserve Bank are fully competent. It has been held that it E would be risky and hazardous for the courts to tread an unknown path and should leave such task to the expert bodies.

201Copy pinpoint201. Recently a three-Judge Bench of this Court, speaking through one of us (V. Ramasubramanian, J.), in the case of Internet and Mobile Association of India (supra) observed thus: F “141. But as pointed out elsewhere, RBI is the sole repository of power for the management of the currency, under Section 3 of the RBI Act. RBI is also vested with the sole right to issue bank notes under Section 22(1) and to issue currency notes supplied to it by the Government of India and has an important role to play in evolving the monetary policy of the country, by G participation in the Monetary Policy Committee which is empowered to determine the policy rate required to achieve the inflation target, in terms of the consumer price index. Therefore, anything that may pose a threat to or have an impact on the financial system of the country, can be H

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A regulated or prohibited by RBI, despite the said activity not forming part of the credit system or payment system. The expression “management of the currency” appearing in Section 3(1) need not necessarily be confined to the management of what is recognised in law to be currency but would also include what is capable of faking or playing the role of a currency.” B [emphasis supplied]

202Copy pinpoint202. It can thus be seen that this Court has held that the RBI is the sole repository of power for the management of currency. It is also vested with the sole right to issue bank notes and to issue currency notes supplied to it by the Government of India. It has been held that the RBI C has an important role to play in evolving the monetary policy of the country. Application of the aforesaid principles to the present case

203Copy pinpoint203. It is thus clear that this Court has consistently recognised the role assigned to the RBI in management and issuance of currency notes, D so also in evolving monetary policy of the country. We have referred to the aforesaid judgments with regard to the primary status of RBI in dealing with the management and regulation of currency and in evolving the monetary policy of the country. Insofar as the decision to be taken by the Central Government under sub-section (2) of Section 26 of the E RBI Act is concerned, it is to be taken on the recommendation of the Central Board. We, therefore, find that there is an inbuilt safeguard in sub-section (2) of Section 26 of the RBI Act inasmuch as the Central Government is required to take a decision on the recommendation of the RBI.

204Copy pinpoint204. As already discussed hereinabove, the RBI has large F contingent of expert advice available to it. It has a pivotal role in issuance and management of and all other matters relating to currency and also in evolving monetary policy of the country. We may gainfully refer to the Constitution Bench Judgment of this Court in the case of Harakchand Ratanchand Banthia and others (supra)wherein, though the G Constitution Bench found clause (b) sub-section (2) of Section 5 of the Gold (Control) Act, 1968 to be unconstitutional on the ground of vice of excessive delegation, it upheld the provisions of clause (a) sub-section (2) of Section 5 of the Gold (Control) Act, 1968, finding that there was an inbuilt safeguard inasmuch as the Administrator was required to take a decision after consultation with the RBI. H

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205Copy pinpoint205. For considering the question as to whether the RBI Act A provides guidance to the delegatee or not, the entire scheme, object and the purpose of the Act has to be taken into consideration. The guidance could be sought from the express provision empowering delegation or the other provisions of the statute, the preamble, the scheme or even the very subject-matter of the statute. If the guidance could be found in whatever part of the Act, the delegation has to be held to be valid. A great amount of latitude has to be given in such matters. It has been consistently held that Parliament and the State Legislatures are not bodies of expert or specialists. They are skilled in the art of discovering the aspirations, the expectations and the needs of the people whom they represent. It has been held that they function best when they concern themselves with general principles, broad objectives and fundamental issues instead of technical and situational intricacies which are better left to better equipped full time expert executive bodies and specialist public servants.

206Copy pinpoint206. As already discussed herein above, the RBI has been constituted to regulate the issue of bank notes. The RBI is an expert body entrusted with various functions with regard to monetary and economic policies. Perusal of the scheme of the RBI Act would reveal that it has a primary role in the matters pertaining to the management and regulation of currency. We, therefore, find that there is sufficient guidance to the delegatee when it exercises its powers under sub-section E (2) of Section 26 of the RBI Act, from the subject matter of the statute, and the other provisions of the Act. In any case, as already discussed herein above, Parliament has provided an inbuilt safeguard i.e. recommendation of the RBI. It is equally settled that insofar as the economic, monetary and fiscal policies are concerned, the same are best left to the experts possessing requisite knowledge. The RBI as well as the Central Government are bodies having contingent of experts in the field. It will, therefore, not be proper for the Court to enter into an area which should be best left to the experts.

207Copy pinpoint207. We are of the considered view that there is sufficient guidance in the preamble as well as the scheme and the object of the RBI Act. As already discussed herein above, there cannot be a straitjacket formula, and the question whether excessive delegation has been conferred or not has to be decided on the basis of the scheme, the object and the purpose of the statute under consideration. H

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208Copy pinpoint208. One another aspect that needs to be taken into consideration is the nature of the body to which the delegation is to be made. In the present case, the delegation is made to the Central Government and not to any ordinary body.

209Copy pinpoint209. In the case of Birla Cotton, Spinning and Weaving Mills B Delhi (supra), the seven-Judge Bench of this Court held that the delegation was made to an elected body, responsible to the people including those who pay taxes. It observed that the councillors have to go for election every four years. It was also observed that if the councillors behave unreasonably, and the inhabitants of the area so consider it, they can be thrown out at the ensuing elections. This Court found that this was a C great check on the elected councillors acting unreasonably and fixing unreasonable rates of taxation. It has been held that this was a democratic method of bringing to book the elected representatives who act unreasonably in such matters.

210Copy pinpoint210. In the present case also, the delegation is to the Central D Government, i.e. the highest executive body of the country. We have a Parliamentary system in which the Government is responsible to the Parliament. In case the Executive does not act reasonably while exercising its power of delegated legislation, it is responsible to Parliament who are elected representatives of the citizens for whom there exists a democratic E method of bringing to book the elected representatives who act unreasonably in such matters.

211Copy pinpoint211. Taking into consideration all these factors, we are of the considered view that sub-section (2) of Section 26 of the RBI Act does not suffer from the vice of excessive delegation. F ISSUE NO. (iii) : AS TO WHETHER THE IMPUGNED NOTIFICATION DATED 8 TH NOVEMBER 2016 IS LIABLE TO BE STRUCK DOWN ON THE GROUND THAT THE DECISION-MAKING PROCESS IS FLAWED IN LAW?

212Copy pinpoint212. It is sought to be urged on behalf of the petitioners that the G decision-making process both at the stage of making recommendations by the Central Board and at the stage of taking decision by the Central Government is flawed inasmuch as the same had been done without considering the relevant factors and eschewing the irrelevant ones. It is also sought to be urged that, as per the scheme of sub-section (2) of Section 26 of the RBI Act, it is incumbent that the procedure should H

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emanate from the Central Board and not from the Central Government. A According to the petitioners, in the present case, the procedure has emanated from the Central Government vide its letter dated 7th November 2016 advising the Board to convene a meeting and make a recommendation, which was hurriedly convened on the next day, i.e., 8 th November 2016, in which the Board decided to recommend demonetization and, within hours, the decision was announced by the Hon’ble Prime Minister.

213Copy pinpoint213. It is submitted that, taking into consideration the hasty manner in which the recommendation was sought by the Central Government, and was then made by the Central Board and the decision was taken thereupon by the Cabinet, there was no scope for the Central Board or the Cabinet to take into consideration the relevant factors and eschew the irrelevant factors. It is, therefore, submitted that the decision was taken in a patently arbitrary manner and as such, the impugned Notification is liable to be set aside on the ground of patent arbitrariness. It is also the contention of the petitioners that, in the meeting of the Central Board, D there was no quorum as required in the 1949 Regulations.

214Copy pinpoint214. On the contrary, it is the submission of the respondents that there are twin requirements in sub-section (2) of Section 26 of the RBI Act, viz., (i) recommendation of the Central Board; and (ii) the decision of the Central Government. It is submitted that both these requirements are satisfied in the present case. It is submitted that, in an action like the present one, confidentiality and speed are of utmost importance. Scope of Judicial Review

215Copy pinpoint215. The law with regard to scope of judicial review has been very well crystalized in the case of Tata Cellular (supra). In the said case, it has been held by this Court that the duty of the court is to confine itself to the question of legality.Its concern should be whether a decision- making authority exceeded its powers, committed an error of law, committed a breach of the rules of natural justice, reached a decision which no reasonable tribunal would have reached or abused its powers. The Court held that it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken.

216Copy pinpoint216. After referring to various pronouncements on the scope of judicial review, the Court has summed-up thus: H

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A “94. The principles deducible from the above are: (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. B (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.

C (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. D (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. Based on these principles we will examine the facts of this case since they commend to us as the correct principles.”

217Copy pinpoint217. Though various authorities are cited at the Bar with regard to scope of judicial review, we do not find it necessary to refer to various judgments. We may gainfully refer to the judgment of this Court in the case of Rashmi Metaliks Limited and Another v. Kolkata Metropolitan Development Authority and Others62, wherein this Court has deprecated the practice of citing several decisionswhen the law on 62 H (2013) 10 SCC 95

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the issue is still covered by what has been held in the case of Tata A Cellular (supra).

218Copy pinpoint218. Our enquiry, therefore, will have to be restricted to examining the decision-making process on the limited grounds as have been laid down in the case of Tata Cellular (supra). Scope of Judicial Interference in matters pertaining to B economic policy

219Copy pinpoint219. Since the issue involved is also related to monetary and economic policy of the country, we would also be guided by certain other pronouncements of this Court. C

220Copy pinpoint220. We may gainfully refer to the following observations of the Seven-Judge Bench in the case of M/s. Prag Ice & Oil Mills and Another v. Union of India63: “24. We have listened to long arguments directed at showing us that producers and sellers of oil in various parts of the country will suffer so that they would give up producing or dealing in mustard oil. It was urged that this would, quite naturally, have its repercussions on consumers for whom mustard oil will become even more scarce than ever ultimately. We do not think that it is the function of this Court or of any Court to sit in judgment over such matters of economic policy as must necessarily be left to the Government of the day to decide. Many of them, as a measure of price fixation must necessarily be, are matters of prediction of ultimate results on which even experts can seriously err and doubtlessly differ. Courts can certainly not be expected to decide them without even the aid of experts.” F [emphasis supplied]

221Copy pinpoint221. In the case of R.K. Garg v. Union of India and Others64, another Constitution Bench of this Court observed thus: “8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than G laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because 63 (1978) 3 SCC 459 64 (1981) 4 SCC 675 H

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A it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more B inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. ……….” [emphasis supplied]

222Copy pinpoint222. Again, the Constitution Bench of this Court in the case of Shri Sitaram Sugar Company Limited and Another v. Union of India and Others65, observed thus: “57. Judicial review is not concerned with matters of economic policy. The court does not substitute its judgment for that of the legislature or its agents as to matters within the province D of either. The court does not supplant the “feel of the expert” by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In E all such cases, judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land. As stated by Jagannatha Shetty, J. in Gupta Sugar Works [1987 Supp SCC 476, 481] : (SCC p. 479, para 4) F “... the court does not act like a chartered accountant nor acts like an income tax officer. The court is not concerned with any individual case or any particular problem. The court only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from G determination.”” [emphasis supplied]

223Copy pinpoint223. Recently, this Court in the case of Small Scale Industrial Manufactures Association (Registered) v. Union of India and 65 H (1990) 3 SCC 223

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Others66 had an occasion to consider the issue with regard to scope of A judicial review of economic and fiscal regulatory measures. This Court observed thus: “69. What is best in the national economy and in what manner and to what extent the financial reliefs/packages be formulated, offered and implemented is ultimately to be decided by the B Government and RBI on the aid and advice of the experts. The same is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review. Merely because some class/sector may not be agreeable and/or satisfied with such packages/policy decisions, the courts, in exercise of the power of judicial review, do not ordinarily interfere with the policy decisions, unless such policy could be faulted on the ground of mala fides, arbitrariness, unfairness, etc.

70. There are matters regarding which the Judges and the lawyers of the courts can hardly be expected to have much knowledge by reasons of their training and expertise. Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters.

71. The correctness of the reasons which prompted the Government in decision taking one course of action instead of another is not a matter of concern in judicial review and the court is not the appropriate forum for such investigation. The policy decision must be left to the Government as it alone can adopt which policy should be adopted after considering of the points from different angles. In assessing the propriety of the decision of the Government the court cannot interfere even if a second view is possible from that of the Government.

72. Legality of the policy, and not the wisdom or soundness of the policy, is the subject of judicial review. The scope of judicial review of the governmental policy is now well defined. The courts do not and cannot act as an appellate authority examining the correctness, stability and appropriateness of a policy, nor are the courts advisers to the executives on matters of policy which the executives are entitled to formulate.” 66 (2021) 8 SCC 511 H

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224Copy pinpoint224. This Court observed that the Court would not interfere with any opinion formed by the government if it is based on the relevant facts and circumstances or based on expert’s advice. The Court would be entitled to interfere only when it is found that the action of the executive is arbitrary and violative of any constitutional, statutory or other provisions of law. It has been held that when the government forms its policy, it is B based on a number of circumstances and it is also based on expert’s opinion, which must not be interfered with, except on the ground of palpable arbitrariness. It is more than settled that the Court gives a large leeway to the executive and the legislature in matters of economic policy. A reference in this respect could be made to the judgments of this Court C in the cases of P.T.R. Exports (Madras) Pvt. Ltd. v. Union of India and others67 and Bajaj Hindustan Limited v. Sir Shadi Lal Enterprises Limited and another (supra).

225Copy pinpoint225. It is not the function of this Court or of any other Court to sit in judgment over such matters of economic policy and they must D 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. The Courts can certainly not be expected to decide them without even the aid of experts. Application of the aforesaid principles to the present case

226Copy pinpoint226. Therefore, while exercising the power of judicial review in a matter like the present one, the scope of interference would be still narrower. Applying the principles laid down in the aforesaid judgments, we will have to examine as to whether the decision-making process in the present case is flawed or not. Our inquiry has to be limited only to find out as to whether there is an illegality in the decision-making process, i.e. whether the decision makers have understood the law correctly which regulates the decision-making power and as to whether the decision- making process is vitiated by irrationality, i.e. the Wednesbury principles. The test that would have to be applied is that the decision is such that no authority properly conducting itself on the relevant law and acting reasonably could have reached thereat, and as to whether there has been a procedural impropriety.

227Copy pinpoint227. The learned Senior Counsel for the petitioners vehemently submitted that unless the letter dated 7th November 2016, Minutes of the 67 H (1996) 5 SCC 268

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Meeting of the Central Board dated 8th November 2016 and the Note A for the Cabinet Meeting dated 8th November 2016 are perused by this Court, it will not be possible for the Court to satisfy itself as to whether the Central Board while deciding to recommend demonetization and the Central Government while deciding to take the decision in favour of demonetization have taken into consideration the relevant factors and B eschewed the irrelevant factors. While closing the matters for judgment/ order, we had directed the Union of India and the RBI to produce the relevant records for our perusal. Accordingly, the records were produced by the respondents.

228Copy pinpoint228. We have scrutinized the entire record, i.e., the communication dated 7th November 2016 addressed by the Secretary, Department of C Economic Affairs, Ministry of Finance to the Governor, RBI, the Minutes of the Meeting of the Central Board dated 8th November 2016, the recommendations by the RBI dated 8th November 2016 and the Note for the Cabinet Meeting held on 8th November 2016.

229Copy pinpoint229. A perusal of the communication dated 7th November 2016 D addressed by the Secretary, Department of Economic Affairs, Ministry of Finance, Government of India to the Governor, RBI would reveal that the Government of India has shared its concern with regard to infusion of Fake Indian Currency Notes (FICN) and generation of black money. It has been pointed out that FICN infusion is concentrated in the two highest denominations of Indian banknotes of Rs.500/- and Rs.1000/-. It has also been pointed out that the impact on the economy in the high denomination notes is very adverse. The said communication mentions the White Paper on Black Money by the Department of Revenue in the year 2012, wherein it is mentioned that cash has always been a facilitator of black money since transactions made in cash do not leave any audit trail. The White Paper also refers to the growth in the size of the shadow economy of the country, and that a parallel shadow economy corrodes and eats into the vitals of the country’s economy.

230Copy pinpoint230. The said communication thereafter refers to the constitution of a Special Investigation Team (SIT) headed by two former Judges of this Court, which has made strong observations against the cash economy. It further refers to the steps taken by the Government to reduce black money in the economy. After pointing out the aforesaid factors, the communication advises the Central Board to take note of the above and consider making necessary recommendations. It also requests the RBI H

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A to prepare a draft scheme to implement the above in a non-disruptive manner with as little inconvenience to the public and business entities as possible.

231Copy pinpoint231. We have also perused the Minutes of the Five Hundred and Sixty First (561st) Meeting of the Central Board of Directors of the RBI B held on 8th November 2016. The said Minutes would show that the communication dated 7th November 2016 was placed before the Central Board by the Deputy Governor. There was an elaborate discussion on the said proposal. The Central Board has considered the pros and cons of the measure. The Central Board has also considered that the proposed step presents a big opportunity to take the process of financial inclusion further by incentivizing the use of electronic modes of payment, so that people see the benefits of bank accounts and electronic means of payment over use of cash. The Central Board has taken into consideration that the matter had been under discussion between the Central Government and the RBI for the last six months during which most of the issues raised in the meeting were considered.

232Copy pinpoint232. After detailed deliberations, the Central Board resolved to recommend withdrawal of legal tender of bank notes in the denomination of Rs.500/- and Rs.1000/- of existing and any older series in circulation. Thereafter, the Deputy Governor, vide communication dated 8 th E November 2016, informed the Secretary, Department of Economic Affairs, Ministry of Finance, Government of India about the above recommendations of the Central Board. Not only that, but a draft scheme for implementation of the same was also enclosed along with the said recommendations.

233Copy pinpoint233. We have also perused the Note for the Cabinet for consideration of the Cabinet Meeting dated 8th November 2016. The Note for the Cabinet contains details about the relevant data available as per Economic Survey for 2014-15 and 2015-16 and the report of the Intelligence Bureau with regard to infusion of FICN and generation of black money. It also contains the details with regard to the 2012 White G Paper on Black Money. It contains the details with regard to the report of the SIT headed by two former Judges of this Court and their recommendations. It considers the recommendation of the RBI.

234Copy pinpoint234. Upon perusal of the material on record, we are of the considered view that the Central Board had taken into consideration the H

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relevant factors while recommending withdrawal of legal tender of bank notes in the denomination of Rs.500/- and Rs.1000/- of existing and any older series in circulation. Similarly, all the relevant factors were placed for consideration before the Cabinet when it took the decision to demonetize. It is to be noted that a draft scheme to implement the proposal for demonetization in a non-disruptive manner with as little inconvenience to the public and business entities as possible was also prepared by the RBI along with the recommendation for demonetization. The same was also taken into consideration by the Cabinet. As such, we are of the considered view that the contention that the decision-making process suffers from non-consideration of relevant factors and eschewing of the irrelevant factors, is without substance. C

235Copy pinpoint235. Insofar as the contention of the petitioners that there was no quorum as required under the 1949 Regulations is concerned, in both the affidavits of the RBI dated 15th November 2022 and 19th December 2018, a categorical statement has been made that the requisite procedure as laid down under sub-section (2) of Section 26 of the RBI Act read D with Regulations 8 and 10 of the 1949 Regulations was duly followed.

236Copy pinpoint236. A perusal of the Minutes of the Meeting of the Central Board would also show that eight Directors were present in the Meeting whereas the quorum for the meeting is four Directors of whom not less than three shall be Directors nominated under Section 8(1)(b) or Section E 8(1)(c) or Section 12 (4) of the RBI Act. In the affidavit filed before this Court on 6th December 2022, it is specifically averred as under: “6. That the 561st meeting of the Central Board of the answering respondent was held on 08.11.2016 at New Delhi and business was transacted therein with the requisite quorum. During the said F meeting, apart from the then Governor and two Deputy Governors, one director nominated under Section 8(1)(b) of RBI Act, two directors nominated under section 8(1)(c) of RBI Act and two directors nominated under section 8(1)(d) of RBI Act were present. Thus, the requisite quorum of four directors of whom not less than three directors nominated under Section 8(1)(b) or 8(1)(c) G were present for the meeting.”

237Copy pinpoint237. In that view of the matter, the contention that the Meeting of the Central Board dated 8th November 2016 is not validly held for want of quorum is concerned, is without substance. H

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A Recommendation of the RBI

238Copy pinpoint238. The next submission in this regard is that the procedure prescribed under sub-section (2) of Section 26 of the RBI Act is breached inasmuch as the proposal has emanated from the Central Government whereas the requirement under sub-section (2) of Section 26 of the RBI B Act is that the proposal should emanate from the Central Board. The contention is that, since the Central Government is required to act on the recommendation of the Central Board, the proposal should emanate from the Central Board.

239Copy pinpoint239. As already discussed hereinabove, the RBI has a pivotal role insofar as monetary and economic policies are concerned and, particularly, in all the matters pertaining to management and regulation of currency. Moreover, perusal of Sections 22, 24 and 26 of the RBI Act would reveal that in various matters pertaining to currency, the course of action is to be taken by the Central Government on the recommendation of the Central Board. It cannot be disputed that the final say with regard to economic and monetary policies of the country will be with the Central Government. However, in such matters, it has to rely on the expert advice of the RBI. In a matter like the present one, it cannot be expected that the RBI and the Central Government will act in two isolated boxes. An element of interaction/consultation in such important matters pertaining to economic and monetary policies cannot be denied to the RBI and the Central Government.

240Copy pinpoint240. As already discussed hereinabove, the record would reveal that the matter was under active consideration for a period of six months between the RBI and the Central Government. As such, merely because the Central Government has advised the Central Board to consider recommending demonetization and that the Central Board, on the advice of the Central Government, has considered the proposal for demonetization and recommended it and, thereafter, the Central Government has taken a decision, in our view, cannot be a ground to hold that the procedure prescribed under Section 26 of the RBI Act was breached. The two requirements of sub-section (2) of Section 26 of the RBI Act are (i) recommendation by the Central Board; and (ii) the decision by the Central Government. As already discussed hereinabove, both the Central Board while making recommendation and the Central Government while taking the decision, have taken into consideration all the relevant factors.

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241Copy pinpoint241. The dictionary meaning of the word “recommend” is “to advise as to a course of action”, or “to praise or commend”. In P. Ramanatha Aiyar ’s Law Lexicon, the meaning of the word “recommendation” is “a statement expressing commendation or a message of this nature”. The word “recommendation”, therefore, will have to be construed in the context in which it is used. Reference in this respect would be made to the judgments of this Court in the cases of V.M. Kurian v. State of Kerala and others 68 and Manohar s/o Manikrao Anchule v. State of Maharashtra and another69.

242Copy pinpoint242. The power to be exercised by the Central Government under sub-section (2) of Section 26 of the RBI Act is for effecting demonetization. The said power has to be exercised on the recommendation of the Central Board. As already discussed hereinabove, the RBI has a pivotal role in the matters of monetary policy and issuance of currency. The scheme mandates that before the Central Government takes a decision with regard to demonetization, it would be required to consider the recommendation of the Central Board. We find that, in the context in which it is used, the word “recommendation” would mean a consultative process between the Central Board and the Central Government.

243Copy pinpoint243. In our view, therefore, the enquiry would be limited as to whether there was an effective consultation between the Central E Government and the Central Board before the decision was taken. Reference in this respect would be made to the following observations of this Court in the case of State of Gujarat and another v. Justice R.A. Mehta (Retired) and others (supra): “25. In State of Gujarat v. Gujarat Revenue Tribunal Bar F Assn. [(2012) 10 SCC 353 : (2012) 4 SCC (Civ) 1229 : (2013) 1 SCC (Cri) 35 : (2013) 1 SCC (L&S) 56 : JT (2012) 10 SC 422] (SCC p. 372, para 34), this Court held that the object of consultation is to render its process meaningful so that it may serve its intended purpose. Consultation requires the meeting of minds between the parties that are involved in the consultative G process on the basis of material facts and points in order to arrive at a correct or at least a satisfactory solution. If a certain power can be exercised only after consultation such consultation must 68 (2001) 4 SCC 215 69 (2012) 13 SCC 14 H

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A be conscious, effective, meaningful and purposeful. To ensure this, each party must disclose to the other all relevant facts for due deliberation. The consultee must express his opinion only after complete consideration of the matter on the basis of all the relevant facts and quintessence. Consultation may have different meanings in different situations depending upon the nature and purpose of B the statute. (See also Union of India v. Sankalchand Himatlal Sheth [(1977) 4 SCC 193 : 1977 SCC (L&S) 435 : AIR 1977 SC 2328] , State of Kerala v. A. Lakshmikutty [(1986) 4 SCC 632 : (1986) 1 ATC 735 : AIR 1987 SC 331] , High Court of Judicature of Rajasthan v. P.P. Singh [(2003) 4 SCC 239 : 2003 SCC (L&S) C 424 : AIR 2003 SC 1029] , Union of India v. Kali Dass Batish [(2006) 1 SCC 779 : 2006 SCC (L&S) 225 : AIR 2006 SC 789] , Andhra Bank v. Andhra Bank Officers [(2008) 7 SCC 203 : (2008) 2 SCC (L&S) 403 : AIR 2008 SC 2936] and Union of India v. Madras Bar Assn. [(2010) 11 SCC 1]

D 26. In Chandramouleshwar Prasad v. Patna High Court [(1969) 3 SCC 56 : AIR 1970 SC 370] (SCC p. 63, para 7), this Court held that consultation or deliberation can neither be complete nor effective before the parties thereto make their respective points of view known to the other or others and discuss and examine the relative merits of their views. If one party makes E a proposal to the other, who has a counter-proposal in mind which is not communicated to the proposer, a direction issued to give effect to the counter-proposal without any further discussion with respect to such counter-proposal with the proposer cannot be said to have been issued after consultation.” F

244Copy pinpoint244. As such, the enquiry would be limited to find out whether both the Central Board and the Central Government had made their respective points of view known to each other and discussed and examined the relative merits of their views. It will have to be considered whether each of the party had disclosed to the other all relevant facts and factors for due deliberation, or not. The limited enquiry would be whether the recommendation by the Central Board was made after complete consideration of the matter on the basis of all the relevant facts and material before it, or not.

245Copy pinpoint245. As already discussed herein above, the record itself reveals that the RBI and the Central Government were in consultation with

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each other for a period of six months before the impugned notification A was issued. The record would also reveal that all the relevant information was shared by both the Central Board as well as the Central Government with each other. As such, it cannot be said that there was no conscious, effective, meaningful and purposeful consultation. Relevancy of attainment of objectives B

246Copy pinpoint246. Another submission that is being made is that the objective with which the impugned Notification was issued, i.e., to combat fake currency, black money and parallel financing are concerned, the same has utterly failed. It is submitted that immediately after demonetization was effected, currency notes of new series have been seized. It is also C submitted that the fake currency is also in vogue. New series of notes have been seized from terrorists. Per contra, it is submitted that the long-term benefits of demonetization have been enormous, direct and indirect. The learned Attorney General has placed on record an elaborate list of the same to which we have already referred to in earlier paragraphs. D

247Copy pinpoint247. However, we do not wish to go into the question as to whether the object with which demonetization was effected is served or not or as to whether it has resulted in huge direct and indirect benefits or not. We do not possess the expertise to go into that question and it is best that it should remain in the domain of the experts. E

248Copy pinpoint248. The question is succinctly answered by the Supreme Court of United States in the case of Metropolis Theater Company et al., Plffs. In Err., v. City of Chicago and Ernest J. Magerstadt. (supra), which reads thus: “2. The attack of complainants (we so call plaintiffs in error) is upon the classification of the ordinance. It is contended that the purpose of the ordinance is to raise revenue, and that its classification has no relation to such purpose, and therefore is arbitrarily discriminatory, and thereby offends the 14th Amendment of the Constitution of the United States. The character ascribed to the ordinance by the supreme court of the state is not without uncertainty. But we may assume, as complainants assert, that the court considered the ordinance as a revenue measure only. The court said: ‘The ordinance may be sustainable under the taxing power alone, without reference to its reasonableness as a regulatory measure.’ And, regarding it as a revenue measure, H

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A complainants attack it as unreasonable in basing its classification upon the price of admission of a particular theater, and not upon the revenue derived therefrom; and to exhibit the discrimination which is asserted to result, a comparison is made between the seating capacity of complainants’ theaters and the number of their performances within given periods, and the theaters of others in the same respects, and the resulting revenues. But these are accidental circumstances and dependent, as the supreme court of the state said, upon the advantages of the particular theater or choice of its owner, and not determined by the ordinance, It will immediately occur upon the most casual reflection that the distinction the theater itself makes is not artificial, and must have some relation to the success and ultimate profit of its business. In other words, there is natural relation between the price of admission and revenue, some advantage, certainly, that determines the choice. The distinction obtains in every large city of the country. The reason for it must therefore be substantial; and if it be so universal in the practice of the business, it would seem not unreasonable if it be adopted as the basis of governmental action. If the action of government have such a basis it cannot be declared to be so palpably arbitrary as to be repugnant to the 14th Amendment. This is the test of its validity, as we have so many times said. E We need not cite the cases. It is enough to say that we have tried, so far as that Amendment is concerned, to declare in words, and the cases illustrate by examples, the wide range which legislation has in classifying its objects. To be able to find fault with a law is not to demonstrate its invalidity. It may seem unjust and oppressive, yet be free from judicial interference. The problems of government are practical ones and may justify, if they do not require, rough accommodations,—illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not always discernible; the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void under the 14 Amendment; and such judgment cannot be pronounced of the ordinance in controversy. Quong Wing v. Kirkendall, 223 U. S. 59, 56 L. ed. 350, 32 Sup. Ct. Rep. 192.” H [emphasis supplied]

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249Copy pinpoint249. It has been held that if the action of the government has a A basis with the objectives to be achieved, it cannot be declared as palpably arbitrary. It has been held that, to be able to find fault with a law is not to demonstrate its invalidity. It has been held that the result of the act may seem unjust and oppressive, yet be free from judicial interference. The problems of government are practical ones and may justify, if they do B not require, rough accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. It has been held that what is best is not always discernible, and the wisdom of any choice may be disputed or condemned. It has been held that mere errors of government are not subject to judicial review. It is only the palpably arbitrary exercises which can be declared void. C

250Copy pinpoint250. We may gainfully refer to the following observations of this Court in the case of R.K. Garg (supra), wherein this Court observed that it should constantly remind itself of what the Supreme Court of the United States said in the case of Metropolis Theater Company (supra): “19. ……The Court would not have the necessary competence and expertise to adjudicate upon such an economic issue. The Court cannot possibly assess or evaluate what would be the impact of a particular immunity or exemption and whether it would serve the purpose in view or not. There are so many imponderables that would enter into the determination that it would be wise for the Court not to hazard an opinion where even economists may differ. The Court must while examining the constitutional validity of a legislation of this kind, “be resilient, not rigid, forward looking, not static, liberal, not verbal” and the Court must always bear in mind the constitutional proposition enunciated by the Supreme Court of the United States F in Munn v. Illinois [94 US 13], namely, “that courts do not substitute their social and economic beliefs for the judgment of legislative bodies”. The Court must defer to legislative judgment in matters relating to social and economic policies and must not interfere, unless the exercise of legislative judgment G appears to be palpably arbitrary……” [emphasis supplied]

251Copy pinpoint251. The Constitution Bench holds that the Court would not have the necessary competence and expertise to adjudicate upon such an H

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A economic issue. The Court cannot possibly assess or evaluate what would be the impact of a particular immunity or exemption and whether it would serve the purpose in view or not. It has been held that it would be wise for the Court not to hazard an opinion where even economists may differ. It has been held that while examining the constitutional validity of such a legislation, the Court must “be resilient, not rigid, forward looking, not static, liberal, not verbal”.

252Copy pinpoint252. We are, therefore, of the considered view that the 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. The Court does not have necessary competence and expertise to adjudicate upon such economic issues. It is also not possible for the Court to assess or evaluate what would be the impact of a particular action and it is best left to the wisdom of the experts. In such matters, it will not be possible for the Court to assess or evaluate what would be the impact of the impugned action of demonetization. The Court does not possess the expertise to do so. As already discussed hereinabove, on one hand, the petitioners urged that there has been an adverse effect upon the economy and on the other hand, the learned Attorney General had given a long list of direct and indirect advantages of demonetization. In any case, mere errors of judgment by the government seen in retrospect is not subject to judicial review. In such matters, legislative and quasi-legislative authorities are entitled to a free play, and unless the action suffers from patent illegality, manifest or palpable arbitrariness, the Court should be slow in interfering with the same.

253Copy pinpoint253. Another contention in this regard is that, on account of a F hasty decision by the Central Government, citizens had to suffer at large, that many people were required to stand in the queues for hours, that many citizens were deprived of their meals, and that many citizens lost their jobs.

254Copy pinpoint254. As already discussed hereinabove, the Central Government G had advised the Central Board to draft a scheme to implement demonetization in a non-disruptive manner with as little inconvenience to the public and business entities as possible. Accordingly, a draft scheme was also submitted by the Central Board along with its recommendations for demonetization. It is stated in the affidavit that the RBI has H subsequently issued relaxations from time to time taking into consideration

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the difficulties of the people and availability of the new notes. No doubt that on account of demonetization, the citizens were faced with various hardships. However, we may again gainfully refer to the following observations of this Court in the case of R.K. Garg (supra): “8. ……The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.” C

[emphasis supplied]

255Copy pinpoint255. Therefore, while adjudging the illegality of the impugned Notification, we would have to examine on the basis as to whether the objectives for which it was enacted has nexus with the decision taken or not. If the impugned Notification had a nexus with the objectives to be achieved, then, merely because some citizens have suffered through hardships would not be a ground to hold the impugned Notification to be bad in law.

256Copy pinpoint256. In this respect, we may gainfully refer to the following observations of this Court in the case of Km. Sonia Bhatia v. State of U.P. and Others70: “29. Lastly, it was urged by Mr Kacker that this is an extremely hard case where the grandfather of the donee wanted to make a beneficial provision for his granddaughter after having lost his two sons in the prime of their life due to air crash accidents while serving in the Air Force. It is true that the District Judge has come to a clear finding that the gift in question is bona fide and has been executed in good faith but as the gift does not fulfil the other ingredients of the section, namely, that it is not for adequate consideration, we are afraid, however laudable the object of the donor may have been, the gift has to fail because the genuine attempt of the donor to benefit his granddaughter seems to have been thwarted by the intervention of sub-section (6) of Section 5 of the Act. This is undoubtedly a serious hardship but it cannot 70 (1981) 2 SCC 585 H

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A be helped. We must remember that the Act is a valuable piece of social legislation with the avowed object of ensuring equitable distribution of the land by taking away land from large tenure-holders and distributing the same among landless tenants or using the same for public utility schemes which is in the larger interest of the community at large. The B Act seems to implement one of the most important constitutional directives contained in Part IV of the Constitution of India.If in this process a few individuals suffer severe hardship that cannot be helped, for individual interests must yield to the larger interests of the community or the country as indeed every noble cause claims its martyr.” [emphasis supplied]

257Copy pinpoint257. Though, the Court found that the Act caused a serious hardship, it held that the Act is a valuable piece of social legislation. It held that the Act was enacted to implement one of the most important constitutional directives contained in Part IV of the Constitution of India. It further observed that, if in this process, a few individuals suffer severe hardship, that cannot be helped. It further held that individual interests must yield to the larger interests of the community or the country as indeed every noble cause claims its martyr.

258Copy pinpoint258. In any case now, the action which was taken by the Central E Government by the impugned Notification, has been validated by the 2016 Ordinance and which has fructified in the 2017 Act. The Central Government is answerable to the Parliament and the Parliament, in turn, represents the will of the citizens of the country. The Parliament has therefore put its imprimatur on the executive action. This is apart from the fact that we have not found any flaw in the decision-making process as required under sub-section (2) of Section 26 of the RBI Act.

259Copy pinpoint259. The decision-making process is also sought to be attacked on the ground that the decision was taken in a hasty manner. We find that the ‘hasty’ argument would be destructive of the very purpose of demonetization. Such measures undisputedly are required to be taken with utmost confidentiality and speed. If the news of such a measure is leaked out, it is difficult to imagine how disastrous the consequences would be.

260Copy pinpoint260. It will be interesting to note again from Volume III of the “History of the Reserve Bank of India” that, on 14th January 1978, one H

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R. Janakiraman, a senior official in the RBI was asked by some officers of the Government of India to come immediately to Delhi for some urgent work. When he asked for what purpose he was called, he was told that the matters relating to exchange control need to be discussed. He, however, took along with him one M. Subramaniam, a senior official of the Exchange Control Department. On reaching Delhi, he was informed that the Government had decided to demonetize the high denomination notes and was required to draft the necessary Ordinance within twenty- four hours. During the said period, no communication was allowed with anyone including the Bank’s central office at Bombay. R. Janakiraman and M. Subramaniam made a request for the 1946 Ordinance on demonetization to get an idea how it was to be drafted, which request was acceded to by the Finance Ministry. The draft Ordinance was completed on schedule. It was finalized and sent for signature of the President of India in the early hours of 16th January 1978 and on the same day, the announcement to that effect was made on All India Radio’s news bulletin at 09.00 a.m. D

261Copy pinpoint261. It can thus be seen that confidentiality and secrecy in such sort of measures is of paramount importance. When demonetization was being done in the year 1978, R. Janakiraman, who had drafted the Ordinance, was not permitted to communicate with anyone including the Bank’s central office at Bombay. It would thus show as to what great degree of confidentiality was maintained. In any case, the material placed on record would show that the RBI and the Central Government were in consultation with each other for at least a period of six months preceding the action.

262Copy pinpoint262. We, therefore, find that the impugned notification dated 8th November 2016 does not suffer from any flaws in the decision-making process. ISSUE NO. (iv): AS TO WHETHER THE IMPUGNED NOTIFICATION DATED 8 TH NOVEMBER 2016 IS LIABLE TO BE STRUCK DOWN APPLYING THE TEST OF PROPORTIONALITY? G

263Copy pinpoint263. It is sought to be urged on behalf of the petitioners that before taking such a drastic measure, which caused enormous hardship to a number of citizens, the government ought to have found out as to whether there was an alternate course of action which could have resulted in lesser hardship to the citizens. In this respect, reliance is placed on the H

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A judgment of this Court in the case of Internet and Mobile Association of India (supra) and K.S. Puttaswamy (Retired) and another (Aadhaar) (supra).

264Copy pinpoint264. In the case of Internet and Mobile Association of India (supra), the RBI had issued a directive to the entities regulated by RBI B (i) not to deal with or provide services to any individual or business entities dealing with or settling virtual currencies and (ii) to exit the relationship, if they already have one, with such individuals/business entities, dealing with or settling virtual currencies.

265Copy pinpoint265. The said action came to be challenged by writ petition filed under Article 32 of the Constitution of India. The challenge was on several grounds, including the ground of proportionality. Though the Court did not find favour with the other grounds raised on behalf of the petitioners therein, it held that the concern of the RBI is and ought to be about the entities regulated by it. It found that, till date, RBI had not come out with a stand that any of the entities regulated by it, namely, the nationalized banks/scheduled commercial banks/cooperative banks/NBFCs had suffered any loss or adverse effect directly or indirectly, on account of the interface that the virtual currency exchanges had with any of them. The Court held that there must have been at least some empirical data about the degree of harm suffered by the regulated entities. The Court, E therefore, while upholding the power of the RBI to take pre-emptive action,upon testing the proportionality of the measure, found that in the absence of RBI pointing out at least some semblance of any damage suffered by its regulated entities, the impugned measure was disproportionate.

F Four-pronged test of proportionality

266Copy pinpoint266. The Constitution Bench of this Court in the case of Modern Dental College and Research Centre (supra), while considering a balance between the right under Article 19(1)(g) and the reasonable restrictions under clause (6) of Article 19 of the Constitution of India, G observed thus: “60. ……Thus, while examining as to whether the impugned provisions of the statute and rules amount to reasonable restrictions and are brought out in the interest of the general public, the exercise that is required to be undertaken is the balancing of fundamental right to carry on occupation on the one hand and the restrictions H

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imposed on the other hand. This is what is known as “doctrine of proportionality”. Jurisprudentially, “proportionality” can be defined as the set of rules determining the necessary and sufficient conditions for limitation of a constitutionally protected right by a law to be constitutionally permissible. According to Aharon Barak (former Chief Justice, Supreme Court of Israel), there are four sub-components of proportionality which need to be satisfied [ Aharon Barak, Proportionality: Constitutional Rights and Their Limitation (Cambridge University Press 2012).], a limitation of a constitutional right will be constitutionally permissible if: (i) it is designated for a proper purpose; C (ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose; (iii) the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation; and finally (iv) there needs to be a proper relation (“proportionality stricto sensu” or “balancing”) between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right.”

267Copy pinpoint267. The Constitution Bench held that while examining as to whether the impugned provisions of the statute and rules amount to reasonable restrictions and are brought out in the interest of the general public, the exercise that is required to be undertaken is balancing of the fundamental right to carry on occupation on the one hand and the restrictions imposed on the other hand. The Court refers to four tests of proportionality which need to be satisfied. The first one is that it should be designated for a proper purpose. The second one is that the measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose. The third one is that the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation. Finally, the fourth one is that there needs to be a proper relation between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right. The Court held H

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A that there has to be a balance between a constitutional right and public interest. It held that a constitutional licence to limit those rights is granted where such a limitation will be justified to protect public interest or the rights of others. It will also be relevant to refer to the following observations of the Constitution Bench: B “65. …..At the same time, reasonableness of a restriction has to be determined in an objective manner and from the standpoint of the interests of the general public and not from the point of view of the persons upon whom the restrictions are imposed or upon abstract considerations (see Mohd. Hanif Quareshi v. State of Bihar [Mohd. Hanif Quareshi v. State of Bihar, AIR 1958 SC C 731 : 1959 SCR 629] ). In M.R.F. Ltd. v. State of Kerala [M.R.F. Ltd. v. State of Kerala, (1998) 8 SCC 227 : 1999 SCC (L&S) 1], this Court held that in examining the reasonableness of a statutory provision one has to keep in mind the following factors: (1) The directive principles of State policy. D (2) Restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public. (3) In order to judge the reasonableness of the restrictions, E no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances. F (4) A just balance has to be struck between the restrictions imposed and the social control envisaged by Article 19(6). (5) Prevailing social values as also social needs which are intended to be satisfied by the restrictions. G (6) There must be a direct and proximate nexus or reasonable connection between the restrictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions, and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise.” H

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268Copy pinpoint268. It is pertinent to note that in the case of Modern Dental A College and Research Centre (supra), the Court was considering the validity of the Act and the Rules which regulated primarily the admission of the students in post-graduate courses in private educational institutions and the provisions made thereunder. Applying the test of proportionality, the Court held that the larger public interest warrants such a measure. It B held that, having regard to the malpracticeswhich are noticed in the Common Entrance Test (CET) conducted by such private institutions themselves, it is, undoubtedly, in the larger interest and welfare of the student community to promote merit and excellence and to curb malpractices. The Court held that the impugned provisions which may amount to “restrictions” on the right of the appellants therein to carry C on their “occupation”, are clearly “reasonable” and satisfy the test of proportionality.

269Copy pinpoint269. The proportionality doctrine is sought to be placed in service on the ground that in the case of Jayantilal Ratanchand Shah (supra), the Court held the bank notes to be property and as such, impugned D Notification imposed unreasonable restrictions, violative of Article 300- A of the Constitution of India.

270Copy pinpoint270. Let us test the four-pronged test culled out by Aharon Barak, former Chief Justice, Supreme Court of Israel which have been reproduced in the case of Modern Dental College and Research E Centre (supra).

271Copy pinpoint271. The impugned Notification has been issued with an objective to meet the following three concerns: (i) Fake currency notes of the SBNs have been largely in circulation and it has been found to be difficult to easily F identify genuine bank notes from the fake ones; (ii) It has been found that high denomination bank notes were used for storage of unaccounted wealth which was evident from the large cash recoveries made by law enforcement agencies; and G (iii) It has also been found that fake currency is being used for financing subversive activities such as drug trafficking and terrorism, causing damage to the economy and security of the country. H

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272Copy pinpoint272. For the purpose of achieving these objectives, the Central Government, on the recommendations of the Central Board, took a decision to demonetize the bank notes of denominational value of Rs.500/ - and Rs.1000/-. Assuming that holding bank notes is a right under Article 300-A of the Constitution of India, the limitation that is imposed is designated for a proper purpose. By no stretch of imagination could it be said that the aforesaid three purposes, i.e., elimination of fake currency, black money and terror financing are not proper purposes. As such, the first test is satisfied.

273Copy pinpoint273. The second test is as to whether the measure undertaken to effectuate such a limitation is rationally connected to the fulfilment of that purpose - that would be the nexus test. The question, therefore, is, as to whether the measures taken in the present case have a reasonable nexus with the purpose to be achieved? As already discussed hereinabove, the purpose of demonetization was to eliminate the fake currency notes, black money, drug trafficking & terror financing. Can it be said that demonetizing high denomination bank notes of Rs.500/- and Rs.1000/- does not have a reasonable nexus with the three purposes sought to be achieved? We find that there is a reasonable nexus between the measure of demonetization with the aforesaid purposes of addressing issues of fake currency bank notes, black money, drug trafficking & terror financing. As such, the second test stands satisfied. E

274Copy pinpoint274. Insofar as the third test is concerned, it is required to be examined as to whether the measure undertaken is necessary in that there are no alternative measures that may similarly achieve the same purpose with the lesser degree of limitation. As held in the case of M.R.F. Ltd.v. Inspector Kerala Govt. and Others71, to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will vary from case to case. As to what measure is required to meet the aforesaid objectives is exclusively within the domain of the experts. The RBI, as already held, plays a material role in economic and monetary policy and issues relating to management and regulation of currency. The Central Government is the best judge since it has all the inputs with regard to fake currency, black money, terror financing & drug trafficking. As such, what measure is required to be taken to curb the menace of fake currency, black money and terror financing would be best left to the discretion of 71 H (1998) 8 SCC 227

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the Central Government, in consultation with the RBI. Unless the said discretion has been exercised in a palpably arbitrary and unreasonable manner, it will not be possible for the Court to interfere with the same.

275Copy pinpoint275. In any case, what alternate measure could have been undertaken with a lesser degree of limitation is very difficult to define. Whether the Courts possess an expertise to decide as to whether demonetization of only Rs.500/- denomination notes ought to have been done or the denomination of only the notes of Rs.1000/- ought to have been done or as to whether particular series of the bank notes ought to have been demonetized. These are all the areas which are purely within the domain of the experts and beyond the arena of judicial review. C

276Copy pinpoint276. Insofar as the fourth test, that is the proper relation between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right is concerned, can it really be said that there is no proper relation between the importance of curbing the menace of fake currency, black money, drug trafficking & terror financing on one hand and demonetizing the Rs.500/- and Rs.1000/ D - notes, thereby imposing restriction on the use of demonetized currency?

277Copy pinpoint277. In any case, by demonetization, the right vested in the notes was not taken away. The only restrictions were with regard to exchange of old notes with the new notes, which were also gradually relaxed from time to time. Insofar as deposit of the demonetized notes in banks is concerned, there was no limitation. If a citizen had a ‘Know Your Customer (KYC) compliant bank account’, he could deposit any amount and get to his credit the full value of legitimate currency. As such, the right to property in bank notes was not taken away. A full value of legitimate currency was entitled to be deposited in the bank account, however, up to a particular date. In any case, there was no restriction on non-cash transactions like debit card, credit card, net banking, online transactions etc.

278Copy pinpoint278. We find that the argument that the right to property was sought to be taken away is without substance. In any case, even if there were reasonable restrictions on the said right, the said restrictions were in the public interest of curbing evils of fake currency, black money, drug trafficking & terror financing. As such, we find that applying the four- pronged test, the doctrine of proportionality is fully satisfied.

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279Copy pinpoint279. Insofar as reliance on the judgment of the Constitution Bench of this Court in the case of K.S. Puttaswamy (Retired) and another (Aadhaar) (supra) is concerned, in the facts of the said case, the Constitution Bench found that, on account of various measures taken by the Government to give a boost to digital economy, millions of persons, who are otherwise poor, had opened their bank accounts. They were also becoming habitual to the good practice of entering into transactions through their banks and even by using digital modes for operation of their bank accounts. The Court, in this background, found that making the requirement of Aadhaar compulsory for all such and other persons in the name of checking money laundering or black money was grossly disproportionate. The observations made therein were in the context of the factual background that fell for consideration in the said case. In our view, the said observations would not be applicable to the facts of the present case. We have already considered in detail as to how, upon application of the four-pronged test of proportionality, the impugned notification cannot be struck down. D

280Copy pinpoint280. In any case, in our view, there is a direct and proximate nexus between the restrictions imposed and the objectives sought to be achieved. As held by this Court in the case of M.R.F. Ltd. (supra), if there is a direct nexus between the restrictions and the object of the action, then a strong presumption in favour of the constitutionality of the E action naturally arises.

281Copy pinpoint281. We, therefore, hold that the impugned notification dated 8th November 2016 does not violate the principle of proportionality and as such, is not liable to be struck down on the said ground.

F ISSUE NO. (v): AS TO WHETHER THE PERIOD PROVIDED FOR EXCHANGE OF NOTES VIDE THE IMPUGNED NOTIFICATION DATED 8 TH NOVEMBER 2016 CAN BE SAID TO BE UNREASONABLE?

282Copy pinpoint282. It is sought to be urged that the period provided for exchange G of old notes with the new notes under the impugned Notification is unreasonable.

283Copy pinpoint283. Under the 1978 Act, the Ordinance was notified on 16th January 1978, which transformed into the Act on 30th March 1978. Under Section 3 of the 1978 Act, all high denomination bank notes, notwithstanding anything contained in Section 26 of the RBI Act, ceased H

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to be legal tender in payment or on account at any place. Under Section A 7 of the 1978 Act, every person desiring to tender for exchange demonetized notes was required to submit a declaration giving the particulars not later than 19th January 1978.

284Copy pinpoint284. Under Section 8 of the 1978 Act, a person who failed to apply for exchange of any demonetized notes within the time provided under Section 7 thereof, was entitled to tender the notes together with a declaration required under Section 7 thereof along with the statement explaining the reasons for his or her failure to apply within the specified time limit. Under sub-section (2) of Section 8 of the 1978 Act, if the RBI was satisfied with the reasons for the failure to submit the notes prior to 19th January 1978 being genuine, it could pay the value of the notes in the manner specified in sub-section (4) of Section 7 thereof. Under sub- section (3) of Section 8 thereof, an appeal was provided before the Central Government against the refusal of the RBI to pay the value of the notes.

285Copy pinpoint285. It could thus be seen that under the 1978 Act, three days’ D period was provided for exchanging the demonetized notes. If a person could not avail of the said period, five days’ grace period was made available during which period the money could be exchanged subject to the RBI being satisfied with the genuineness of the reasons for not submitting the same within three days. As such, the period available to E everyone was three days which could be further extended by five days. A challenge was raised on the ground that the period was unreasonable and violative of the fundamental rights. Rejecting the said contention, the Constitution Bench in the case of Jayantilal Ratanchand Shah (supra) observed thus: F “10. It was, however, contended on behalf of the petitioners that even if it was assumed that Article 31 had not been violated, the time prescribed for exchange of the high denomination banknotes under Sections 7 and 8 of the Demonetisation Act was unreasonable and violative of their fundamental rights. When the above provisions of the Act are considered in the context of G the purpose the Demonetisation Act sought to achieve, namely, to stop circulation of high denomination banknotes as early as possible, the above contention of the petitioners cannot be accepted. Consequent upon the high denomination banknotes ceasing to be legal tender on the expiry of 16-1-1978 and in H

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A view of the prohibition in the transfer of possession of such notes from one person to another thereafter as envisaged under Section 4, it was absolutely necessary to ensure that no opportunity was available to the holders of high denomination banknotes to transfer the same to the possession of others. At the same time it was necessary to afford a reasonable opportunity to the holders of such notes to get the same exchanged. However, if the time for such exchange was not limited the high denomination banknotes could be circulated and transferred without the knowledge of the authorities concerned from one person to another and any such transferee could walk into the Bank on any day thereafter and demand exchange of his notes. In that case it would have been wellnigh impossible for the Bank to prove that such a person was not the owner or holder of the notes on 16-1-1978. Needless to say in such an eventuality the very object which the Demonetisation Act sought to achieve would have been defeated. Obviously, D to strike a balance between these competing and disparate considerations Section 7(2) of the Demonetisation Act limited the time to exchange the notes till 19-1-1978. However, even thereafter, in view of Section 8, the high denomination banknotes could be exchanged from the Bank till 24-1-1978 E provided the tenderer was able to explain the reasons for his failure to apply for such exchange within the time stipulated under Section 7(2) of the Demonetisation Act. Apart from the above provisions regarding exchange of high denomination banknotes by the Bank within the time stipulated therein, provision has been made in sub-section (7) of Section 7, F permitting the Central Government, for reasons to be recorded in writing, to extend in any case or class of cases the period during which high denomination banknotes may be tendered for exchange. From a combined reading of Sections 7 and 8 it is evidently clear that on furnishing a declaration complete in all G particulars in accordance with sub-section (2) of Section 7 by 19- 1-1978, the holder was entitled to get the exchange value of his notes from the Bank without any let or hindrance; thereafter, till 24-1-1978, he was also entitled to such exchange from the Bank if he could satisfactorily explain the reasons for his inability to apply by 19-1-1978 and after that date the Central Government H