VIVEK NARAYAN SHARMA v. UNION OF INDIA

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A Central Government may, by notification in the Gazette of India, declare that with effect from such date as specified in the notification, any series of bank notes of any denomination shall cease to be a legal tender,save at such office or agency of the Bank and to such extent as may be specified in the said notification.The Central Government B derives the power to issue a notification in the Gazette only on the recommendation of the Central Board of the Bank. The issuance of such a notification is an executive act which is backed by the recommendation of the Central Board of the Bank which has been accepted by the Central C Government. The notification has to indicate the date from which any series of bank notes of any denomination shall cease to be a legal tender, save at such office and to such extent as may be specified in the notification. 15.6 The essential ingredients of sub-section(2) of Section 26 of D the Act can be epitomised as under: i) on the recommendation of the Central Board of the Bank; ii) the Central Government by notification in the Gazette of India; E iii) may declare any series of bank notes of any denomination to cease to be legal tender; iv) with effect from such date as may be specified in the notification; F v) to such extent as may be specified in the notification; Therefore, under sub-section (2) of Section 26 of the Act, the Central Government would act only on the recommendation made by the Central Board of the Bank, which is the initiator of demonetisation of bank notes. G 15.7 Learned Attorney General made a pertinent submission that it is not necessary that only on a recommendation of the Central Board of the Bank, the Central Government can demonetise any currency. That the Central Government has the power or jurisdiction to demonetise any bank note by H the issuance of a gazette notification. He further contended

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that the powers of the Central Government cannot be A denuded to such an extent that unless and until a recommendation of the Central Board of the Bank is made to the Central Government, the latter cannot demonetise any currency. According to learned Attorney General, if such a strict interpretation is given to sub-section (2) of B Section 26, it would nullify the power of the Central Government to demonetise any bank note, having regard to the economic conditions of the country, the financial health of the economy and the monetary policy of the Government.It was submitted that the provision must be so interpreted so as to give a free play in the joints and empower the Central Government to issue a notification in the Gazette of India, in order to demonetise any bank note. He further contended that the requirement of recommendation of the Central Board of the Bank in order to enable the Central Government to issue a notification to demonetise any currency would imply that the initiation of demonetisation must only be from the Central Board of the Bank and that the Central Government has no power to initiate such an action of demonetisation. 15.8 I find considerable force in the contention of the learned Attorney General inasmuch as the Central Government E cannot be said to be without powers in initiating demonetisation of bank notes. This is on the strength of Entry 36 of List I of the Seventh Schedule of the Constitution. The Central Government is not just concerned with the financial health of the country as well as its economy, but it is also concerned with the sovereignty and integrity of India; the security of the State; the defence of the country; its friendly relations with foreign countries; internal and external security and various other aspects of governance. On the other hand, the Bank is only concerned with the regulation of currency notes, monetary policy framework, maintaining price stability and allied matters. Therefore, if the Central Government is of the considered opinion that in order to meet certain objectives such as the ones stated in the impugned notification, namely, to eradicate black money, fake currency, terror funding etc., it is necessary to H

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A demonetise the currency notes in circulation, then the Central Government may initiate a proposal for demonetisation. 15.9 The second prong of the Learned Attorney General’s contention qua the interpretation of sub-section (2) of B Section 26 of the Actwas that the Central Government has the power to demonetise not just any one series of currency of any one denomination but it has the power to demonetise all series of currencies of all denominations at a time. It was argued that the expression “any” in sub-section (2) of Section 26 of the Actmust mean “all”. C 15.10 Per contra, it was the submission of the learned senior counsel for the petitioners that, as the said provision stands, in the absence of there being any guidance vis-à-vis the power of the Central Government to issue a notification to demonetise the currency notes in circulation and in order to D save such measure from the vice of unconstitutionality, the expression “any series” and “any denomination” in sub- section (2) of Section 26 of the Act must be restricted to mean”one series” and “one denomination”, respectively. Otherwise, it could result in arbitrary exercise of power. E He further contended that if sub-section(2) of Section 26 of the Act is not read down in this context, it would confer unguided and arbitrary power on the executive Government and it would amount to impermissible delegation of legislative powers.

F 15.11 It was further contended by Shri Chidambaram that demonetisation is resorted to in rare and exceptional circumstances and there are two justifiable reasons for which demonetisation could be resorted to, namely, 1) to weed out denominations of currency that are in disuse or are practically unusable; 2) to get rid of currency which has become worthless in value because of hyperinflation. According to learned senior counsel for the petitioners, if any demonetisation of currency has to take place, and if the power of the Central Government is not channelised or

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restricted by reading down sub-section(2) of Section 26 of the Act, it would result in arbitrariness and unconstitutionality. Therefore, to save it from the vice of arbitrariness and unconstitutionality, it is necessary to read down the provision in the following two respects: a) the Central Government has no power to demonetise any currency note except on the recommendation of the Central Board of the Bank under sub-section (2) of Section 26 of the Act, and; b) the expression “any” in sub-section(2) of Section 26 of the Act must be restricted to be “any one”, that is, “one series” or “one denomination” of bank notes. C That the addition of the words “any series” before the words “of bank notes of any denomination” limits the power of the Government to declare only a specified series of notes as no longer being a legal tender. Thus, “any series” means any specified series D and not “all series” of notes of a given denomination. 15.12 Since I have accepted the contention of the learned Attorney General appearing for Union of India vis-à-vis the power of the Central Government for initiating the process of demonetisation, the next question would be, whether, the E Central Government can, on initiating the process of demonetisation, proceed to issue a gazette notification to demonetise any or all series of any or all denomination of bank notes, on the strength of sub-section (2) of Section 26 of the Act. Consideration of this issue would also answer the contention of learned senior counsel for the petitioners F regarding sub-section (2) of Section 26 of the Act being unguided and arbitrary in nature and hence, unconstitutional. To this end, the following aspects have to be examined: (a) Whether demonetisation can be initiated and carried but by the Central Government by issuing a G notification in the Gazette of India as per sub-section (2) of Section 26 of the Act? (b) Extent of the Central Government’s power to carry out demonetisation, i.e., whether “all series” of “all denominations” may be demonetised. H

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A 15.13 As held hereinabove, the proposal for demonetisation can emanate either from the Central Government or from the Central Board of the Bank.It is however necessary to contrast the proposal for demonetisation initiated by the Central Government, with that initiated by the Central Board of the Bank. When the Central Board of the Bank B recommends demonetisation, it is in my view, only for a particular series of bank notes of a particular denomination as specified in the recommendation made under sub-section (2) of Section 26 of the Act. The word “any” in sub-section (2) of Section 26 cannot be read to mean “all”. If read as C “specified” or “particular” as against all, in my view, it would not suffer from arbitrariness or suffer from unguided discretion being given to the Central Board of the Bank. On the other hand, in my view, the Central Government has the power to demonetise all series of bank notes of all D denominations, if the need for such a measure arises.It cannot be restricted in such powers in such manner as the Central Board of the Bank is, under the above provision. This is because such power is not exercised under sub- section (2) of Section 26 of the Act but is exercised notwithstanding the said provision by the Central E Government. Therefore, demonetisation of bank notes at the behest of the Central Government is a far more serious issue having wider ramificationson the economy and on the citizens,as compared to demonetisation of bank notes of a given series of a given denomination on the recommendation of the Central Board of the Bank by issuance of a gazette notification by the Central Government. Therefore, in my considered view,the powers of the Central Government being vast, the same have to be exercised only through a plenary legislation or a legislative process rather than by an executive act by the issuance of a notification in the Gazette of India. It is necessary that the Parliament which consists of the representatives of the People of this country, discusses the matter and thereafter approves and supports the implementation of the scheme of demonetisation. H

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15.14 The Central Government, as already noted above, could have several compulsions for initiating demonetisation of the bank notes already in circulation in the economy, and it could do so even in the absence of a recommendation, as per sub-section (2) of Section 26 of the Act, of the Central Board of the Bank.On its proposal to demonetise the bank notes,the advice/opinion of the Central Board of the Bank which has to be consulted may not alwaysbe in support of the proposal of the Central Government as in the year 1978.The Central Board of the Bank may give a negative opinion or a concurring opinion.In either of the situations, the Central Government mayproceed to demonetise the bank notes but only through a legislative process, either through an Ordinance followed by a legislation, if the Parliament is not in session; or by a plenary legislation before the Parliament and depending upon the passage of the Bill as an Act, carry out its proposal of demonetisation.Of course, depending upon the urgency of the situation and possibly to maintain secrecy, the option of issuance of an Ordinance by the President of India and the subsequent enactment of a law is always available to the Central Government by convening the Parliament. Such demonetisation of currency notes at the instance of the Central Government cannot be by the issuance of an executive notification. The reasons for stating so are not far to see – (i) Firstly, because the Central Government is not acting under sub-section (2) of Section 26 of the Act. When the Central Government initiates the process of demonetisation it is de hors sub-section (2) of Section 26 of the Act. (ii) Secondly, the Central Government has the power to demonetise all series of bank notes of all denominations unlike the narrower powers vested with the Central Board of the Bank under the aforesaid provision, if the situation so arises. (iii) Thirdly, the Parliament which is the fulcrum in our democratic system of governance,must be taken into confidence. This is because it is the representative of the people of the Country. It is the pivot of any democratic H

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A country and in it rest the interests of the citizens of the Country. The Parliament enables its citizens to participate in the decision-making process of the government. A Parliament is often referred to as a “nation in miniature”; it is the basis for democracy. A Parliament provides representation to the people of a country and makes their voices heard. Without a Parliament, a democracy cannot thrive; every democratic country needs a Parliament for the smooth conduct of its governance and to give meaning to democracy in the true sense. The Parliament which is at the centre of our democracy cannot be left aloof in a matter of such importance. Its views on the subject of demonetisation are critical and of utmost importance. Dr. Subhash C. Kashyap in his book, “Parliamentary Procedure: Law, Privileges, Practice and Precedents”, 3 rd Ed., (2014), while discussing the functions of the Parliament D has stated as follows: “Over the years, the functions of Parliament have no longer remained restricted merely to legislating. Parliament has, in fact emerged as a multi-functional institution encompassing in its ambit various roles viz. E developmental, financial and administrative surveillance, grievance ventilation and redressal, national integrational, conflict resolution, leadership recruitment and training, educational and so on. The multifarious functions of Parliament make it the cornerstone on which the edifice of Indian polity stands and evokes admiration from many F a quarter.” It is in the above context that it is observed that on a matter as critical as demonetisation, having a bearing on nearly 86% of the total currency in circulation, the same could not have been carried out by way of issuance of an G executive notification. A meaningful discussion and debate in the Parliament on the proposed measure, would have lent legitimacy to the exercise. When an Ordinance is issued or a Bill is introduced in the Parliament and enacted as a law, it would mean that it H

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has been done by taking into confidence the Members of A Parliament who are the representatives of the people of India, who would meaningfully discuss on the proposal for demonetisation made by the Central Government. In such an event, demonetisation would be by an Act of Parliament and not a measure carried out by the issuance of a gazette B notification by the Central Government in exercise of its executive power. Such demonetisation through an Ordinance or a legislationthrough the Parliament would be “notwithstanding what is contained in sub-section (2) of Section 26 of the Act”. This is because in such a situation, the Central C Government is not acting on the basis of a recommendation received from the Central Board of the Bank but it would be proposing the demonetisation. Precedent for the same may be found in the earlier demonetisations which were also through a legislative process and not through the D issuance of a gazette notification by the Executive/Central Government.When the process of demonetisation is carried out through a Parliamentary enactment and after being the subject of scrutiny by the Members of Parliament, any opinion sought by the Central Government from the Central Board of the Bank before initiating the promulgation of the E Ordinance or placing the Bill before the Parliament may also be additional material which could be considered by the Parliament. When the Central Government initiates the proposal for demonetisation and thereafter consults the Bank on such proposal, then it could be said that the necessary safeguards were taken, as the Central Government would be fortified in its proposal for demonetisation having taken the advice of not only an expert body but the highest financial authority in the country, which handles not only the monetary policy but is also the sole authority vested with the power of issuance of bank notes or currency notes in India. When the Central Government proposes to demonetise the currency notes, not only the view of the Central Board of the Bank is relevant and important but also that of the representatives of the people H

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A in the Parliament. The Members of the Parliament hold the sovereign powers of “We, the People of India” in trust. 15.15 Of course, by contrast, there would be no difficulty if the proposal for demonetisation is initiated by the Central Board of the Bank by making a recommendation under sub-section B (2) of Section 26 of the Act, which the Central Government in its wisdom may consider and either act upon the recommendation or for good reason, decline to act on the same. That is a matter left to the wisdom of the Central Government. However, as noted above such recommendation by the Bank cannot relate to “all” series of a denomination or “all” series of “all” denominations of bank notes. That is a prerogative of only the Central Government. 15.16 It is nobody’s case that the impugned gazette notification dated 8th November, 2016, of the Central Government was published on the initiation of the proposal ofdemonetisation by the Central Board of the Bank. The proposal for demonetisation was initiated by the Central Government by a letter dated 7 thNovember, 2016 addressed by the Finance Secretary to the Governor of the Bank.The Central E Government, having “obtained” the advice of the Bank on its proposal, proceeded to issue the impugnedgazette notification on the very next day, dated 8th November, 2016.The same was followed by an Ordinance and thereafter, an enactment was passed.

F 15.17 The contention of the petitioners could now be considered and answered.The words in sub-section(2) of Section 26 of the Act would have to be interpreted/construed in their normal parlance. It is already observed that issuance of such a notification under sub-section (2) of Section 26 of the Act must be preceded by a recommendation of the G Central Board of the Bank and such recommendation is a condition precedent. The Central Governmentin its wisdom may accept the recommendation of the Central Board of the Bank and issue a notification in the Gazette of India or it may decline to do so. This position is evident from the use of the word “may” in sub-section(2) to Section 26 of the H

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Act. However, what is significant is that if demonetisation A of any bank note is to take place under sub-section (2) of Section 26 of the Act, it is only by issuance of a notification in the Gazette of India and not by any other method or manner. In other words, the Central Board of the Bank must first initiate the process by recommending to the B Central Government to declare that any series of bank notes of any denomination shall cease to be a legal tender by the issuance of a notification.If the Central Government accepts the recommendation of the Central Board of the Bank, it issues a notification in the Gazette of India carrying out the same, which is in the nature of an executive functionand the publication of the notification in the Gazette of India is only a ministerial act. 15.18 Therefore, under sub-section (2) of Section 26 of the Act, the initiation of the process of demonetisation and the exercise of power originates from the Central Board of the Bank which has to recommend to the Central Government and the latter may accept the recommendation and in such event it would issue a gazette notification. In case the Central Government does not accept the recommendation, there will be no further action on the recommendation of the Central Board of the Bank.Thus, E sub-section (2) of the Section 26 of the Act has inherently a very restricted operation, and is limited only to the initiation of demonetisation by the Central Board of the Bank and making a recommendation in that regard. Issuance of the notification, in the Gazette of India, would imply that the F Central Government has accepted the recommendation of the Central Board of the Bank and therefore, has declared that the specified series of Bank notes of the specified denomination shall cease to be legal tender from the date to be specified in the notification. The operation of sub- section (2) of Section 26 of the Act is thus in a very narrow G compass and it is reiterated that the said power is exercised by the Central Government on acceptance of the recommendation of the Central Board of the Bank. 15.19 The reason as to why a wide interpretation as contended by the Union of India cannot be given to sub-section(2) of H

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A Section 26 of the Act is becausea plain reading of the provision as well as a contextual understanding, would suggest that it is only when the initiation of a proposal for demonetisation is by the Central Board of the Bank by making a recommendation to the Central Government that the provision would apply. B 15.20 This position, however, does not imply that the Central Government is bereft of any power or jurisdiction to declare any bank note of any denomination to have ceased to be a legal tender. As already observed while accepting the contention of learned Attorney General, the Central C Government in its wisdom may also initiate the process of demonetisation as has been done in the instant case.But what is importantand to be noted is that the said power cannot be exercised by the mere issuance of an executive notification in the Gazette of India. In other words, when the proposal to demonetise any currency note is initiated by the Central Government with or without the concurrence of the Central Board of the Bank, it is not an exercise of the executive power of the Central Government under sub- section (2) of Section 26 of the Act. In such a situation, as already held, the Central Government would have to resort to the legislative process by initiating a plenary legislation in the Parliament. 15.21 What is being emphasised is that the Central Government cannot act in isolation in such matters. The Central Government has to firstly, take the opinion of the Central F Board of the Bank for the proposed demonetisation. The Central Board of the Bank may not accept the proposal of the Central Government or may partially concur with the proposal on specific aspects. In fact, in 1978, when the then Governor of the Bank did not accept the proposal of G the Central Government to demonetise Rs.5,000/-and Rs.10,000/- bank notes, the Central Government initiated the said process through the Parliament and this culminated in the passing of the Act of 1978. In drafting the said legislation, the expert assistance of two officers of the Bank was taken so as to fortify the legislation.The said legislation H

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was also challenged before this Court in the case of A Jayantilal Ratanchand Shah, Devkumar Gopaldas Aggarwal vs. Reserve Bank of India (1996) 9 SCC 650 whereby the vires of the 1978 Act was ultimately, upheld by this Court vide judgement dated 9th August, 1996, after eighteen years of its enactment. B 15.22 The reasons as to why the Central Government cannot unilaterally issue a gazette notification but has to resort to a legislation when it initiates the proposal for demonetisation have already been discussed. The Central Government may have very valid objectives to do so, as in the instant case, i.e., in order to eradicate black money, fake currency and prevent currency from being utilized for terror funding. But, those objects would not be the objects with which the Central Board of the Bank may make a recommendation under sub-section (2) of Section 26 of the Act. The reason being, the Central Government would view the entire scheme of demonetisation in a larger perspective, having several objects in mind and in the interest of the sovereignty and integrity of the India, the security of the State, the financial health of the economy, etc. The Central Board of the Bank may not be in a position to visualize such objectives. Under such circumstances the Central Government must consult the Bank but need not mandatorilyobtain the imprimatur of the Central Board of the Bank to its proposal. What if the Central Board of the Bank, when consulted by the Central Government, gives a negative opinion? Would it mean that the Central Government would then not resort to demonetisation in deference to the opinion of the Central Board of the Bank? It may do so if it finds that the opinion tendered by the Bank is just and proper, but the Central Government may have its own reasons for not accepting the opinion of the Central Board of the Bank and therefore, in such a situation the Central Government will have to resort to initiate the proposal for demonetisation through a plenary legislation, by way of introduction of a Bill in the Parliament resulting in an Act of Parliament. 15.23 Therefore, the sum and substance of the discussion is that when the Central Board of the Bank initiates or originates H

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A the proposal for demonetisation of any series of bank notes of any denomination, it has to make a recommendation to the Central Government as per sub-section (2) of Section 26 of the Act. The Central Government may act on such recommendation by issuing a gazette notification. On the other hand, when the Central Government is the originator of the proposal for demonetisation of any currency note as in the instant case, it has to seek the advice of the Central Board of the Bank, for, it cannot afford to proceed in isolation and without bringing the said proposal to the notice of the Central Board of the Bank having regard to the important position the Bank holds in the Indian economy. Irrespective of the opinion of the Central Board of the Bank to the Central Government’s proposal, the legislative route would have to be taken by the Central Government for furthering its objective/s of demonetisation of bank notes.Thus, the same cannot be carried out by the issuance of a simple notification in the Gazette of India declaring that all bank notes or currency notes are demonetised. This is because when the Central Government is the originator of a proposal for demonetisation, it is acting de hors sub-section (2) of Section 26 of the Act. E 15.24 Such an interpretation is necessary as it is the contention of the Union of India that the Central Government has the power to demonetise “all” series of bank notes of “all” denominations which would mean that every Rs.1/-, Rs.5/-, Rs.10/-, Rs.20/-, Rs.50/-, Rs.100/-, Rs.500/-, F Rs.1,000/-, Rs.5,000/-, Rs.10,000/-, could be demonetised. Since the same is possible theoretically, in my view, such an extensive power cannot be exercised by issuance of a simple gazette notification in exercise of an executive power of the Central Government as if it is one under sub-section (2) of Section 26 of the Act. The same can only be through G a plenary legislation, by way of an enactment following a meaningful debate in Parliament, on the proposal of the Central Government.This would also answer the other contention of the learned senior counsel for the petitioners that sub-section (2) of Section 26 of the Act cannot be H interpreted to mean “all series” of bank notes of “all

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denominations” when the words used in the provision are A “any series” of “any denomination”. Deciphering the plain meaning of sub-section (2) of Section 26: 15.25 The reason why power is vested only with the Central Board of the Bank under sub-section (2) of Section 26 of the Act B to recommend to the Central Government to declare specified series of specific denomination of bank notes as having ceased to be legal tender, becomes clear when the plain meaning of the words of the said provision is recognised. When interpreted as such, no power to demonetise currency notes at the behest of the Central Government is envisaged under the said provision. This is because the power of the Central Government to do so is vast and has a wider spectrum. Such a power is not traceable to sub-section (2) of Section 26 of the Act which operates in a narrower compass. Hence, to save sub-section (2) of Section 26 from the vice of unconstitutionality, it must be given an interpretation appropriate to the object for which the provision is intended. In this context, the following principles become relevant. 15.26 When the words of a statute are clear, plain or unambiguous, E i.e., they are reasonably susceptible to only one meaning, the court is bound to give effect to that meaning and admit only one meaning and no question of construction of a statute arises, for, the provision/Act would speak for itself. The judicial dicta relevant to the above principle of interpretation are as follows: (i) In Kanailal Sur vs.Paramnidhi Sadhu Khan AIR 1957 SC 907 at Page 910 this Court observed that if the words used are capable of only one “construction” then it would not be open to the courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the purported object and policy of the Act. Reference was made to Section 162 of the Code of Criminal Procedure, 1898 and interpretation of the expression “any person” by Lord Atkin, H

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A speaking for the Privy Council who observed that the expression “any person” includes any person who may thereafter be an accused, and he observed that “when the meaning of the words is plain, it is not the duty of Courts to busy themselves with supposed intentions” vide Pakala B Narayanaswami vs. Emperor AIR 1939 PC 47. (ii) Similarly, while construing Sections 223 and 226 of the Indian Succession Act, 1925 which contain a prohibition in relation to grant of Probate or Letters of Administration “to any association of individuals C unless it is a company”, this Court in Illachi Devi vs. Jain Society Protection of Orphans India (2003) 8 SCC 413, applied the plain meaning rule and held that said expression would not include a society registered under the Societies Registration D Act as a society even after registration does not become distinct from its members and does not become a separate legal person like a company. (iii) For a proper application of the plain meaning rule to a given statute, it is necessary, to first determine, whether the language used is plain or ambiguous. “Any ambiguity”means that a phrase is fairly and equally open to diverse meanings. A provision is not ambiguous merely because it contains a word which in different contexts is capable of different meanings. It is only when a provision contains a word or phrase which in a particular context is capable of having more than one meaning that it would be ambiguous. (iv) Hence, in order to ascertain whether certain words are clear and unambiguous, they must be studied in their context. Context in this connection is used in a G wide sense as including not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in parimateria and the mischief which by those and other legitimate means can be discerned that the statute was intended H to remedy.

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[Source: Interpretation of Statutes by Justice G.P. A Singh, 15thEdition] 15.27 Applying the above rule, if sub-section (2) of Section 26 of the Act is read as per the plain meaning of the words of the provision, then it does not lead to any ambiguity. The plain meaning rule is the golden rule of construction of statutes and it does not lead to any absurdity in the instant case. On a plain reading of the provision, it is observed that the Central Government can issue a notification in the Gazette of India to demonetise any series of bank notesof any denomination but only on the recommendation of the Central Board of the Bank. In my view sub-section (2) of Section 26 is not vitiated by unconstitutionality. This is for two reasons: firstly, the plain meaning of the words “any” series of bank notes of “any denomination” would not imply “all series” of bank notes of “all denominations”. The word “any” means specified or particular and not “all” as contended by the respondents. If the contention of the Union of India is accepted and the word “any” is to be read as “all”, it would lead to disastrous consequences as the Central Board of the Bank cannot be vested with the power to recommend demonetisation of “all series of currency of all denominations”. The interpretation suggested by learned E Attorney General would lead to vesting of unguided power in the Central Board of the Bank whereas giving a wider power to the Central Government to initiate such a demonetisation wherein all series of a denomination could be demonetised is appropriate as it is expected to consider all pros and cons from various angles and then to initiate demonetisation on a large scale through a legislative process. Such a power is vested only in the Central Government by virtue of Entry 36 of List I of the Seventh Schedule of the Constitution which of course has to be exercised by means of a plenary legislation and not by issuance of a gazette notification under sub-section (2) of Section 26 of the Act. Hence, the word “any” cannot be interpreted to mean “all” having regard to the context in which it is used in the said provision. H

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A 15.28 Secondly, any recommendation of the Central Board of the Bank under sub-section (2) of Section 26 is not binding on the Central Government. If the Central Government does not accept the recommendation of the Bank then no notification would be published in the Gazette of India by it. In fact, the Central Government is not bound by the recommendation made by the Central Board of the Bank to demonetise any bank note, although, the Central Board of the Bank may comprise of experts in matters relating to finance, having knowledge and experience of economic affairs of the country and such knowledge may be reflected in the recommendation made to the Central Government. As already noted, the Central Government has the option to accept the said recommendation and accordingly issue a gazette notification or elect not to act on the same. However, the Central Government should consider the recommendation with all seriousness and in its wisdom take an appropriate decision in the matter.

16. In the instant case,on perusal of the records submitted by Union of India and the Bank, it is noted that the proposal for demonetisation had been initiated by the Central Government by writing a letter to the Bank on 7th November, 2016and not by the Central Board of the Bank. E On the very next evening i.e., on 8th November, 2016 at 05:30 p.m., there was a meeting of the Central Board of the Bank at New Delhi and a Resolution was passed and a little while thereafter on the same evening, the notification was issued invoking sub-section (2) of Section 26 of the Act by the Central Government. Such a procedure is not contemplated under sub-section (2) of Section 26 of the Act when the proposal for demonetisation is initiated by the Central Government. 16.1 Hence, it is held that in the instant case the Central Government could not have exercisedpower undersub- section (2) of Section 26 of the Act in the issuance of theimpugned gazette Notification dated 8th November,

2016. It is further held that in the present case, the object and the purpose of issuance of an Ordinance and thereafter, the enactment of the 2017 Act by the Parliamentwas, in my view, to give a semblance of legality to the exercise of power by issuance of the Notification on 8th November, H

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2016. In fact, Section 3 of the Ordinance as well as Section A 3 of the Act makes this explicit. The same is extracted as under for immediate reference: “3. On and from the appointed day, notwithstanding anything contained in the Reserve Bank of India Act, 1934 or any other law for the time being in force, the specified bank notes which have ceased to be legal tender, in view of the notification of the Government of India in the Ministry of Finance, number S.O. 3407(E), dated the 8th November, 2016, issued under sub-section (2) of section 26 of the Reserve Bank of India Act, 1934, shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act.” (Emphasis by me) D

The said Section has an inherent contradiction inasmuch as the Section has a non-obstante clause vis-à-vis the Act or any other law for the time being in force but at the same time, the said provision refers to Sections 26 as well as Section 34 of the Act. E A non-obstante clause such as “notwithstanding anything contained in the Act or in any law for the time being in force”, is sometimes appended to a section, with a view to give the enacting part of that section in case of conflict, an overriding effect over the provision or Act mentioned in the non obstante clause. The following are the judicial dicta on the point which bring out the use of a non-obstante clause: a) In T.R.Thandur vs. Union of India (1996) 3 SCC 690, this Court observed that a non-obstante clause may be used as a legislative device to modify the ambit of the provision or law mentioned in the non-obstante clause or to override it in specified circumstances. That while interpreting a non-obstante clause, the Court is required to find out the extent to which the legislature intended to give it an overriding effect. H

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A b) In Central Bank of India vs. State of Kerala (2009) 4 SCC 94, this Court held that while interpreting a non- obstante clause the court is required to find out the extent to which the legislature intended to give it an overriding effect. B c) Further, this Court in A.G. Varadarajulu and Anr. vs. State of Tamil Nadu (1998) 4 SCC 231, observed that it is well-settled that while dealing with a non-obstante clause under which the legislature wants to give overriding effect to a section, the court must try to find out the extent to which the legislature had intended to give one provision C overriding effect over another provision. The effect of insertion of a non-obstante clause into a provision in a legislation, is that the very consideration arising from the provisions sought to be excluded, shall be excluded, vide Madhav Rao Scindia vs. Union of India (1971) 1 SCC 85. D Applying the aforesaid principles to interpret Section 3 of the 2017 Act, it is observed that the non-obstante clause contained in the said provision has the effect of overriding the provisions of the Act as they are not applicable to the provisions and processes under the 2016 Ordinance and the 2017 Act. It is significant to note that the said Section contains a non-obstante clause which reads, “notwithstanding anything E contained in the Act or any other law for the time being in force”. This is rightly so as the demonetisation is not in exercise of the powers under sub-section (2) of Section 26 of the Act. However, Section 3 of the 2017 Act goes on to state that the specified bank notes which have ceased to be legal tender, in view of the notification dated 8th November, F 2016 issued under sub-section(2) of Section 26 of the Act, shall cease to impose liabilities on the Bank under Section 34 of the Act and shall cease to have the guarantee of the Central Government under sub- section(1) of Section 26 of the Act. Therefore, while the impugned gazette notification dated 8th November, 2016 hasbeen admittedly issued exercising powers under sub-section(2) of Section 26 of the Act, Section G 3 of the 2017 Act also states that it is notwithstanding anything contained in the Act. If it is so, then the impugned notification could not have been issued invoking sub-section (2) of Section 26 of the Act. The liability could have so ceased, if the power that had been exercised by the Central Government for the issuance of the notification dated 8th November, H 2016 impugned herein, under sub-section(2) of Section 26 of the Act on

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the recommendation made by the Central Board of the Bank. That is, when the initiation of demonetisation or the proposal came from the Central Board of the Bank, leading to the issuance of the notification by the Central Government. Had the measure of demonetisation been carried out by way of enactment of a plenary legislation, then the non- obstante clause could have been employed to exclude the applicability of the Act. However, having sought to rely on sub-section (2) of Section 26 of the Actto issue the Notification, not only is the non-obstante clause misplaced but it also gives rise to a contradiction as to on what basis the Notification dated 8th November, 2016 has been issued. Affidavits and Record of the Case:

17. It has been observed in the preceding paragraphs that when the proposal to carry out demonetisation originates from the Central Government, irrespective of whether or not the Bank concurs with or endorses such proposal, the Central Government would have to take the legislative route through a plenary legislation and cannot proceed with demonetisation by simply issuing a notification. D 17.1 Having observed so, it is necessary to examine the proposal to carry out demonetisation, in the present case, which originated from the Central Government. For this purpose, reference may be had to the recitals of the affidavits filed by the Union of India and the Bank, and to the extent E permissible, to the records submitted by the Union of India and the Bank in a sealed cover. 17.2 I have perused the following photocopies of the original records submitted on behalf of the Union of India and the Reserve Bank of India: F i) Letter by the Secretary, Department of Economic Affairs, Ministry of Finance, dated 7th November, 2016, bearing F. No. 10.03/2016 Cy.I, addressed to the Governor of the Bank; ii) Draft Memorandum of the Deputy Governor of the Bank, placed before the Central Board of the Bank G at its 561st Meeting; iii) Minutes of the 561st Meeting of the Central Board of the Bank, convened at New Delhi, on 8 th November, 2016, at 05:30 p.m., and signed on 15th November, 2016; H

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A iv) Letter addressed by the Deputy Governor of the Bank to the Central Government on 8th November, 2016. 17.3 On a reading of the records listed hereinabove, the following facts emerge: 1) A letter bearing F. No. 10.03/2016 Cy.I dated 7th B November, 2016 was addressed by the Secretary, Ministry of Finance, Department of Economic Affairs, Government of India, to the Governor of the Bank, referring to certain facts and figures to indicate the following two major threats to the security and financial integrity of the country: i) Fake Infusion of Currency Notes (FICN); ii) Generation of black money in the Indian economy. The desire of the Central Government to proceed with the measure of demonetisation was expressed in the said letter and a request was made to the Bank to consider recommending the such measure, in terms of the relevant clauses of the Act. 2) Further, the Draft Memorandum of the Deputy Governor of the Bank, placed before the Central E Board of the Bank, categorically states that the need for a meeting to deliberate on the proposed measure of demonetisation, had arisen pursuant to the letter addressed to the Bank from the Central Government dated 7th November, 2016. The Draft Memorandum F further records that the Government had “recommended” that the withdrawal of the tender character of existing Rs.500/- and Rs.1,000/- notes, is apposite. Further, the said document records that “as G desired” by the Central Government, a draft scheme for implementation of the scheme of demonetisation had also been enclosed. 3) In view of the contents of the Draft Memorandum, the Central Board of the Bank in its 561st Meeting H commended the Central Government’s proposal for

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demonetisation and directed that the same be forwarded to the Central Government. 4) Accordingly, a letter was addressed by the Deputy Governor of the Bank to the Central Government on 8th November, 2016, stating therein that the proposal of the Central Government pertaining to withdrawal of legal tender of bank notes of denominational values of Rs. 500/- and Rs. 1,000/- was placed before the Central Board of the Bank in its 561st meeting. It was also stated that necessary recommendation to proceed with the said proposal, had been “obtained” from the Central Board of the Bank. C 17.4 On a comparative reading of the records submitted by the Union of India as well as the Reserve Bank of India, it becomes crystal clear that the process of demonetisation of all series of bank notes of denominational values of Rs. 500/- and Rs. 1,000/-, commenced/originated from the D Central Government. The said fact is crystalised in the communication addressed by the Secretary, Department of Economic Affairs, Ministry of Finance, dated 7th November, 2016 to the Governor of the Bank. The phrases and words emphasized hereinabove clearly E indicate that the proposal for demonetisation was from the Central Government. In substance, the Central Government sought the opinion/advice of the Bank on such proposal. The use of the words/phrases such as, “as desired” by the Central Government; Government had “recommended” the withdrawal of the legal tender of F existingRs.500/- and Rs.1,000/- notes; recommendation has been “obtained”; etc., are self-explanatory. This demonstrates that there was no independent application of mind by the Bank. Neither was there any time for the Bank to apply its mind to such a serious issue. This observation is G being made having regard to the fact that the entire exercise of demonetisation of all series of bank notes of Rs.500/- and Rs.1,000/- was carried out in twenty four hours. A situation where an independent authority such as the Bank, based on its own appreciation of the economic climate H

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A of the country, recommends a measure to the Central Government, must be contrasted with another situation where a measure which originates from the Central Government is simply placed before such independent authority for seeking its advice or opinion on such proposed measure. A proposal of the Central Government on a certain scheme having serious economic ramifications has to be placed before the Bank to seek its expert opinion as to the viability of such a scheme. The Bank as an expert body may render advice on such a proposal and on some occasions may even concur withthe same. However, even such concurrenceto a proposal originating from the Central Government is not akin to an original recommendation of the Central Board of the Bank, within the meaning of Section 26 (2) of the Act. 17.5 The following points emerge on perusal of the affidavits submitted on behalf of the Union of India: 1) That the Central Board of the Bank made a specific recommendation to the Central Government on 8th November, 2016, for the withdrawal of legal tender character of the existing series of Rs.500/- and E Rs.1,000/- bank notes which could tackle black money, counterfeiting and illegal financing. That the Bank also proposed a draft scheme for the implementation of the recommendation. 2) That the consultations between the Central F Government and the Bank began in February, 2016; however, the process of consolidation and decision making were kept confidential. 3) That the Bank and the Central Government were together engaged in the finalization of new designs, G development of security inks and printing plates for the new designs, change in specifications of printing machines and other critical aspects. 17.6 The following points emerge upon perusal of the affidavits submitted on behalf of the Bank: H

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1) That a letter dated 7th November, 2016 was received A by the Bank, from the Ministry of Finance, Government of India, which contained a proposal to withdraw the character of legal tender of existing Rs.500/- and Rs.1,000/- bank notes. 2) The said proposal was considered, together with a B draft scheme for implementing the withdrawal of existing Rs.500/- and Rs.1,000/- bank notes, at the 561st meeting of the Central Board of Directors of the Bank, held on 8th November, 2016, at 05:30 p.m. at New Delhi. C 3) That the Central Board of Directors was assured that the matter had been the subject of discussion between the Central Government and the Bank for six months. The said Board was also assured that the Central Government would take adequate mitigating measures to contain the use of cash. D

4) That the Board, having observed that the proposed step presents a big opportunity to advance the objects of financial inclusion and incentivising use of electronic modes payment, recommended the withdrawal of legal tender of old bank notes in the E denomination of Rs.500/- and Rs.1,000/-. 17.7 On a conjoint reading of the affidavits submitted by the Union of India and the Bank, the following deductions may be drawn: F 1) That the Central Government in its letter addressed to the Bank, dated 7th November, 2016 proposed to withdraw the character of legal tender of existing Rs.500/- and Rs.1,000/- bank notes. 2) The Central Board of the Bank, at its 561st meeting G held on 8 th November, 2016 resolved that the withdrawal of legal tender of old bank notes in the denomination of Rs.500/- and Rs.1,000/- be made. 3) The objects guiding the Board’s opinion were two- fold: first, pertaining to financial inclusion, and H

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A second, being to incentivise the use of electronic modes of payment. 4) The object guiding the Government’s proposal to withdraw currency of the specified denominations, was to tackle black money, counterfeiting and B illegal financing. 17.8 In my view, there is contradiction as to the subject of demonetisation, as well the object thereof, as stated by the Bank vis-à-vis the Central Government as discernible from the affidavits. The same may be expressed as follows: C As stated in the affidavit of the As stated in the affidavit of

Bank the Central Government

Object of i) Financial inclusion To tackle:

Demonetisation ii) incentivising use of i) black money,

electronic modes of payment ii) counterfeiting, D iii) illegal financing.

Subject of Old bank notes in the Existing Rs.500/- and

Demonetisation denomination of Rs.500/- and Rs.1,000/- bank notes

E The object of the measure and the subject are of relevance, in assessing the resolution of the Bank dated 8th November, 2016 because,the said considerations would have a bearing on the question, whether, the Bank’s opinion was inconsonance with the object sought to be achieved F through demonetisation by the Central Government’s proposal. 17.9 On a close reading of the Notification dated 8th November, 2016, in juxtaposition with the records, the following aspects emerge: G i) One aspect of the matter which emerges with no ambiguity is that the proposal for demonetisation originated from the Central Government, by way of its letter addressed to the Bank, dated 7th November, 2016. This aspect forms the central plank of the controversy at hand. That the recommendation did not originate from the Bank under sub- H

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section (2) of Section 26 of the Act, but was “obtained” A from the Bank in the form of an opinion on the proposal for demonetisation submitted by the Central Government. Such an opinion, could not be considered to be a recommendation as required by the Central Government in order to proceed under sub-section (2) of Section 26 of the Act. B ii) Even if it is to be assumed for the sake of argument that the said opinion, was in fact a “recommendation” under sub-section (2) of Section 26 of the Act, in light of the interpretation given by me hereinabove to the phrase “any” series or “any” denomination, to mean a specified series/ specified denomination, the recommendation itself is void inasmuch as it pertained to demonetisation of “all” series of Bank notes of denominational values of Rs.500/- and Rs.1,000/-. As has already been observed, the term “any” as appearing in sub-section (2) of Section 26 of the Act could not be interpreted to mean “all” as such an interpretation would vest unguided and expansive discretion with the Central Board of the Bank. iii) The Notification expressly states that it is issued under sub- section (2) of Section 26 of the Act. Therefore Section 3 of the Ordinance and Act could not, in the non-obstante clause, state that sub-section (2) of Section 26 is not applicable to the Act. iv) Having observed that demonetisation could not have been carried out by issuing a Notification as contemplated under sub-section (2) of Section 26 of the Actand that the Parliament does indeed have the competence to carry out demonetisation, on the strength of Entry 36 of List I of the Seventh Schedule of the Constitution, the Central Government could not have exercised the power by issuance of an executive notification. Legal Principles applicable to the case: G

18. There are certain legal principles which are applicable in this case: one is expressed in the maxim “to do a thing a particular way or not at all”; this principle has also been expressed in terms of the latin maxim “expressio unius est exclusio alterius”, which means that when a manner is specified for doing a certain thing, then all other modes for H

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relevant statute and withdrawing the same in any other manner was necessarily forbidden. That withdrawal of the nomination, not carried out in accordance with the procedure established under the relevant statute, enabled the successful candidate to win unopposed. Hence, his election was declared as void. (iv) Similarly, in The Tahsildar, Taluk Office, Thanjore vs. G. Thambidurai AIR 2017 SC 2791, assignment of land was cancelled on the ground that statutory requirements were not followed in assigning the land. It was held that when a statute prescribes that a C certain Act is to be carried out in a given manner, the said Act could not be carried out through any mode other than the one statutorily prescribed. (v) It may also be apposite to refer to the decision of this Court in Union of India vs. Charanjit S. Gill (2000) D 5 SCC 742, wherein this Court held that any provisions introduced by way of “Notes” appended to the Sections of the Army Act, 1950, could not be read as a part of the Act and therefore such notes could not take away any right vested under the said Act. It was observed that issuance of an E administrative order or a “Note” pertaining to a special type of weapon to bring it within the ambit of the Army Act, which was hitherto not included therein, could not be said to have been included in the manner in which it was supposed to be included. That the F Army Act empowers the Central Government to make rules and regulations for carrying into effect the provisions of the Act; however, no power is conferred upon the Central Government of issuing “Notes” or “issuing orders” which could have the effect of the Rules made under the Act. That rules G and Regulations or administrative instructions can neither be supplemented nor substituted by “Notes”. That administrative instructions issued or the “Notes” attached to the Rules which are not referable to any statutory authority cannot be permitted to bring about H

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A a result, which is supposed to be achieved through enactment of Rules. What emerges from the above discussion is that when a statute contemplates a specific procedure to be adhered to in order to arrive at a desired end, such procedure cannot B be substituted by an alternative procedure which is not contemplated under the statute. Further, if an action is to be carried out by way of issuance of a particular statutory instrument on the basis of certain requirements, such action cannot be validly carried out by way of issuance of an instrument when the same is not contemplated under the C Act. This is particularly so when the instrument enacted stands on a different footing than the one meant to be enacted. Applying the said principle to the facts of the present case, it is observed that what ought to have been done through a Parliamentary enactment or plenary legislation, could not have been carried out by simply issuing a notification under sub-section (2) of Section 26 of the Act by the Central Government. As noted hereinabove, the said provision does not apply to cases where the proposal for demonetisation originates from the Central Government and the same is not envisaged under the Act. Hence, issuance a notification to give effect to the Central Government’s proposal for demonetisation, was clearly based on an incorrect understanding of sub-section (2) of Section 26 of the Act. The Central Government did not follow the procedure contemplated under law to give effect to its proposal for demonetisation. This is not a matter of form but one of substance as in law, the powers of the Central Board of the Bank and the Central Government are totally distinct in the matter of demonetisation of bank notes.

19. The other legal principle is concerning exercise of discretion in Administrative Law. Lords Halsbury in Sharp vs. Wakefield 1891 AC 173 described the concept of discretion in the following words: “When it is said that something is to be done within the discretion of the authorities that something is to be done according to the rules of reason and justice, not according to private opinion H

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...according to law and not humour. It is to be, not arbitrary, vague and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to the discharge of his office ought to confine himself.” 19.1 It is a well-established rule of administrative law that discretionary power is to be exercised and a decision has to be made, by the very authority to whom the discretion is entrusted by the statute in question. The situation of an authority not exercising its discretion arises when any authority does not itself consider a particular matter before it on merits but still takes a decision, as if it is directed to do so, by another authority, most often, by a higher authority.When an authority exercises the discretion vested in it by lawat the behest of another authority in a specific matter, this would in law amount to non-exercise of its discretionary power by the authority itself, and consequently, such action or decision is invalid. D 19.2 The petitioners have contended that it is implicit insub-section (2) of Section 26 of the Act that adequate time and attention must be devoted by both the Central Board of the Bank and the Central Government before proceeding with a measure of such magnitude and consequences, asdemonetisation. It was further submitted that the facts E and records of the present case would show that the procedure with such implicit obligations was abandoned and the process contemplated was not as per the said provision.That the proposal emanated from the Central Government and was not initiated by the Bank. The Central F Board of the Bank passed a resolution in a hurried manner. No adequate care and consideration were bestowed on such a crucial matter by the Central Board of the Bank having regard to the severe ramifications that the proposed demonetisation would have on almost every citizen of the country. Possibly, the Central Board of the Bank acted on G the “assurances” of the Central Government which is evident on a perusal of the records and not on an independent application of mind owing to lack of time. As noted from the records submitted by the Central Government as well as the Reserve Bank of India in the H

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A instant case, the Central Government wrote to the Central Board of the Reserve Bank of India on 7th of November, 2016 about its proposal to demonetise all series of bank notes of denominations of Rs.500/- and Rs.1,000/-, which were in circulation, and on the very next day i.e., 8th November, 2016, a meeting of the Central Board of the B Bank was held at New Delhi at 05:30 p.m. and shortly thereafter, the gazette notification was issued. Such a swift action would indicate that the Central Board of the Bank had hardly twenty-four hours to consider the proposal of the Central Government and hence, hardly any time to apply its mind independently to the proposal. It is clear from the records submitted that the Central Government “assured” the Central Board of the Bank that sufficient safeguards would be taken while embarking on the process of demonetisation and that it would also result in reducing bank notes in the economy and a switch over to the digitalisation of the economy. The Central Board of the Bank, in resolving to opine onthe measure of demonetisation to the Central Government, acted only on such “assurances”. 19.3 Further, the Central Government cannot in the guise of seeking an opinion on its proposal to demonetise bank notes, E “obtain” a “recommendation from the Central Board of the Bank” as if it is acting under sub-section (2) of Section 26 of the Act, and consequently, issue a gazette notification by which demonetisation of bank notes would be given effect to. Such a procedure, in my view, would be contrary to the import of sub-section (2) of Section 26 of the Act, inasmuch as the Central Government cannot act under the said provision by the issuance of a notification, as if a “recommendation” has been made by the Central Board of the Bank when in fact, what actually transpired in the instant case, was that the Central Government initiated the process of demonetisation by formulating a proposal in this regard and subsequently secured the imprimatur of the Bank on such proposal. In fact, the Central Board of the Bank has no jurisdiction to “recommend” demonetisation of bank notes of “all series” of “all denomination” to the Central Government, as already held above. H

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19.4 The powers of the Central Board of the Bank are restrictive A in nature inasmuch as it can only recommend that a particular series of a particular denomination would cease to be legal tender. Hence, the Central Government cannot rely on the semblance of a “recommendation made to it by the Central Board of the Bankunder sub-section (2) of Section 26 of the Act” when it initiates the process of demonetisation. B The Central Government also cannot “obtain” any recommendation to that effect, and if it has done so, it would imply that the Central Board of the Bank is acting at the behest of the Central Government, only to concur with what the Central Government intends to do. Such an opinion would not be on the basis of any independent application of mind of the experts who form the Central Board of the Bank. Moreover, when the Central Government seeks the opinion of the Central Board of the Bank to its proposal for demonetisation, the latter would have to be given some time to consider the pros and cons and the impact that it would have on the citizens of India, as bank notes are a species of negotiable instruments and a medium through which goods and services are traded andtherefore, they are the lifeline of the economy. The Central Government also failed to indicate that the demonetised currency had lost the guarantee provided vide sub-section (1) of Section 26 of the Act in the impugned notification. Hence, an Ordinance had to be issued on 30th December, 2016. Moreover, it is not known whether the Bank had made arrangements for printing sufficient new notes for exchange of demonetised currency. It is also not known whether the Department of F Legal Affairs was consulted in the matter as the procedure of demonetisation involves legal implications. 19.5 Hence, in my considered view, the action of demonetisation initiated by the Central Government by issuance of the impugned notification dated 8th November, 2016 was an G exercise of power contrary to law and therefore unlawful. Consequently, the 2016 Ordinance and 2017 Act are also unlawful. But, having regard to the fact that the demonetisation process was given effect to from 8 th November, 2016 onwards, the status quo ante cannot be restored at this point of time. H

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A What relief may be awarded in the present case?

20. In view of the above conclusion, the question of moulding the relief shall now be considered. According to the petitioners, around 86 per cent of the volume of currency notes of the total currency in circulation in the Indian economy was demonetised. They also stated that the people B of India were exposed to undue hardships owing to the lack of financial resources and had to undergo not only a severe financial crunch but were also exposed to other socio-economic and psychological hardships.The problems associated with the measure of demonetisation would make one wonder whether the Central Board of the Bank had visualised the consequences that would follow. Whether the Central C Board of the Bank had attempted to take note of the adverse effects of demonetisation of such a large volume of bank notes in circulation? The objective of the Central Government may have been sound, just and proper, but the manner in which the said objectives were achieved and the procedure followed for the same, in my view was not in accordance D with law having regard to the interpretation given above. It has also been brought on record thataround 98% of the value of the demonetised currency have been exchanged for bank notes which continues to be legal tender. Also, a new series of bank notes of Rs.2,000/ - was released by the Bank. This would suggest that the measure itself may not have proved to be as effective as it was hoped to be. However, E this Court does not base its decision on the legality of a legislation, qua the effectiveness of such action in achieving the stated objectives. Therefore, it is clarified that any relief moulded in the present cases is de hors considerations of success of the measure. 20.1 I have borne in mind the submissions of learned Attorney F General appearing on behalf of the Union of India to the effect that the objectives of the Central Government have been sound, just and proper, but in my view, the manner in which the said objectives were achieved and the procedure followed for the same was not in accordance with law having regard to the interpretation given above. G Learned Attorney General appearing on behalf of the Union of India also contended that the issues raised in these petitions have become infructuous and wholly academic as the action of demonetisation has been acted upon and therefore, the present cases are only of academic H

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significance. It is necessary to examine the nature of relief that could be moulded by the Court in this matter. 20.2 There are several judgments which could be relied upon in this context: (i) This Court acknowledged in S.R. Bommai vs. Union of India AIR 1994 SC 1918, that although substantive relief may be granted only if the issue remains live in cases which are justiciable, this Court may prospectively declare a law, for posterity. Notwithstanding the fact that no substantive relief could be granted in the said case for the reason that following the Presidential proclamation, fresh elections had been held and new Houses had been constituted, this Court went on to declare the law, for posterity, as to the federal character of the Constitution, the nature of the power conferred on the President under Article 356 of the Constitution D and the manner in which such power is to be exercised for imposing President’s Rule in a State by dissolution of the Legislative Assembly. (ii) In Golak Nath vs. State of Punjab (1967) 2 SCR 762, this Court declared that it is open to the Court, E to find and declare the law, but restrict the operation of such law to the future. (iii) Further, the observations made by this Court in Orissa Cement Ltd. vs. State of Orissa 1991 Supp (1) SCC 430, while determining what relief that could be granted following a declaration of a provision of F an enactment as invalid, are also relevant. This Court held that declaration of invalidity of a provision, and determination of the relief to be granted as a consequence of such invalidity, are two distinct things. That in respect of the relief to be granted as a G consequence of declaration of invalidity, the Court has discretion which could be exercised to grant, mould or restrict the relief. 20.3 In the instant case, the elementary question that requires determination is,whether the challenge to the validity of the H

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A Central Government’s decision dated 8th November, 2016 to demonetise all Rs.500/- and Rs.1,000/- bank notes, having been adjudicated upon, at this juncture, i.e., after a lapse of over six years since the impugned action was carried out, the nature of relief that could be granted by this Court at this juncture is to be considered. B 20.4 Stated very patently, the controversy in the present cases relates to the true meaning and interpretation of sub-section (2) of Section 26 of the Act. Therefore, the question that arises for consideration is, whether, this Court can declare the law as to the validity of an action, even after such action C has been given effect to in toto. That is to say, once the action has been completely carried out, and there is no element of such action which is left to be carried out, can there still be a subsequent declaration by this Court as to the validity of such act, having regard to the interpretation accorded to the provisions of the relevant statute. D 20.5 As discussed hereinabove, this Court has acknowledged on several occasions that it has the competence to declare the law on a subject for posterity, even though no substantive relief may be given under the circumstances of a given case, vide S.R. Bommai. The effect of such declaration would apply prospectively. That is, in the present case if a declaration is made to the effect that the impugned action was unlawful, such declaration would only have the effect of deterring future measures from being carried out in a like manner, in order to save such measures, from the vice of unlawfulness. Such declarations as to validity or invalidity of a measure, may be made by this Court in exercise of its power under Article 141 of the Constitution, and the effect of such declaration may be moulded or restricted by exercising the power vested with this Court under Article 142. G 20.6 Reference may also be had to the decision of this Court in JayantilalRatanchand Shah, Devkumar Gopaldas Aggarwal vs. Reserve Bank of IndiaAIR 1997 SC 370. The said case pertains to the challenge to the Constitutional validity of the High Denomination Bank Notes (Demonetisation) Act, 1978. Although the enactment related H

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to the year 1978 and its effects were immediate, as in the A present case, the validity of the same was conclusively declared by this Court only in the year 1997. This Court, while upholding the validity of the legislation impugned therein, authoritatively clarified and declared the law on the Parliamentary power to enact such a legislation. A B declaration of a similar nature, i.e., as to the validity or invalidity of the impugned actions and Notification, is what is sought for in the present petitions. Conclusions:

21. In view of the aforesaid discussion, the following conclusions are arrived at: C (i) According to sub-section(1) of Section 26 of the Act, every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein and shall be guaranteed by the Central Government. This provision is subject to sub-section(2) of Section 26 of the D Act. (ii) Sub-section (2) of Section 26 of the Act applies only when a proposal for demonetisation is initiated by the Central Board of the Bank by way of a recommendation being made to the Central Government. The said recommendation can be in respect of any series of bank notes of any denomination which is interpreted to mean any specified series of bank notesof any specified denomination. (iii) The expression any series of bank notes of any denomination has been givenits plain, grammatical meaning, having regard to the context of the provision and not a broad meaning. Thus, the word “any” will mean a specified series or a particular series of bank notes. Similarly, “any” denomination will mean any particular or specified denomination of bank notes. (iv) If the word “any” is not given a plain grammatical meaning and interpreted to mean “all series of bank notes” of “all denominations”, it would vest with the Central Board of the Bank unguided and unlimited powers which would be ex-facie arbitrary and suffer from the vice of unconstitutionality as this wouldamount to excessive vesting H

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A of powers with the Bank. In order to save the provision from being declared unconstitutional, the meaning of the provision is read downto the context of the Central Board of the Bank initiating a proposal for demonetisation by making a recommendation to the Central Government under sub-section (2) of Section 26 of the Act of a particular series B of bank note of any denomination. (v) On receipt of the said recommendation made by the Central Board of the bank under sub-section (2) of Section 26 of the Act, the Central Government may accept the said recommendation or may not do so. If the Central C Government accepts the recommendation, it may issue a notification in the Gazette of India specifying the date w.e.f. which any specified series of bank notes of any specified denomination shall cease to be legal tender and shall cease to have the guarantee of the Central Government. D (vi) The provisions of the Act do not bar the Central Government from proposing or initiating demonetisation. It could do so having regard to its plenary powers under Entry 36 of List I of the Seventh Schedule of the Constitution of India. However, it has to be done only by an Ordinance being issued by the President of India followed by an Act of E Parliament or by plenary legislation through the Parliament. The Central Government cannot demonetise bank notesby issuance of a gazette notification as if it is exercising power under sub-section(2) of Section 26 of the Act. In such circumstances when the Central Government is initiating F the process of demonetisation, it would not be acting under sub-section (2) of Section 26 of the Act but notwithstanding the said provision through a legislative process. (vii) When such power is exercised by the Central Government by means of a legislation, it is by virtue of Entry 36, List I of the Seventh Schedule of the Constitution of India G which deals with currency, coinage and legal tender; foreign exchange which is a field of legislation.Hence, the power of the Central Government to demonetise any currency is notwithstanding anything contained in Section 26 of the Act. H

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[B. V. NAGARATHNA, J.]

(viii) When the Central Government proposes demonetisation of any bank note, it must seek the opinion of the Central Board of the Bank having regard to the fact that theBank is the sole authority to regulate circulation of bank notes and secure monetary stability and generally to operate the currency and credit system of the country and to maintain price stability. (ix) The opinion of the Central Board of the Bankought to be an independent and frank opinion after a meaningful discussion by the Central Board of the Bankwhich ought to be given its due weightage having regard to the ramifications it may have on the Indian economy and the citizens of India C although it may not be binding on the Central Government. On receipt of a negative opinion from the Central Board of the Bank, the Central Government which has initiated the demonetisation process may still intend to go ahead with the said process after weighing the pros and cons only by D means of an Ordinance and/or Parliamentarylegislation butnot by issuance of a gazette notification.In other words, the Central Government in such circumstances cannot resort to exercise of power under sub-section(2) of Section 26 of the Act by issuing a notification in the Gazette of India as if it were exercising executive powers. Even if the E Central Board of the Bank concurs with the proposal of the Central Government, the Central Government would have to undertake a legislative process and not carry out the measure by simply issuing a gazette notification. (x) In view of the aforesaid conclusions, I am of the considered F view that the impugned notification dated 8th November, 2016 issued under sub-section(2) of Section 26 of the Act is unlawful. In the circumstances, the action of demonetisation of all currency notes of Rs.500/- and Rs.1,000/- is vitiated. G (xi) Further, the subsequent Ordinance of 2016 and Act of 2017 incorporating the terms of the impugnednotification are also unlawful. (xii) However, having regard to the fact that the impugned notification dated 8th November, 2016 and the Act have H

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A been acted upon, the declaration of law made herein would apply prospectively and would not affect any action taken by the Central Government or the Bank pursuant to the issuance of the Notification dated 8th November, 2016. This direction isbeing issued having regard to Article 142 of the Constitution of India. Hence, no relief is being granted in the individual matters. (xiii) In view of the above conclusions, I do not think it is necessary to answer the other questions raised in the reference order.

22. Before parting, I wish to observe that demonetisation was an initiative of the Central Government, targeted to address disparate evils, plaguing the Nation’s economy, including, practices of hoarding “black” money, counterfeiting, which in turn enable even greater evils, including terror funding, drug trafficking, emergence of a parallel economy, money laundering including Havala transactions. It is beyond the pale of doubt that the said measure, which was aimed at eliminating these depraved practices, was well-intentioned. The measure is reflective of concern for the economic health and security of the country and demonstrates foresight. At no point has any suggestion been made that the measure was motivated by anything but the best intentions and noble objects for the betterment of the Nation. The measure has been regarded as unlawful only on a purely legalistic analysis of the relevant provisions of the Act E and not on the objects of demonetisation.

23. In view of the answer given by me to question no.1 of the reference order, I do not deem it necessary to answer all other questions of the reference order or even the questions reframed by His Lordship B.R.Gavai, J. during the course of the judgment except to the extent discussed above. F

24. In the result, the writ petitions, special leave petitions and transfer petitions are directed to be posted before the appropriate Bench after seeking orders from Hon’ble the Chief Justice of India. I would like to acknowledge and place on record my appreciation for the learned Attorney General for India, all learned senior counsel, G learned instructing counsel as well as the learned counsel, for their assistance in the matter. Parties to bear their respective costs. Bibhuti Bhushan Bose Referred questions answered. (Assisted by : Vaibhav Garg, LCRA and H Shriya Chakravarthy, LCRA)