Holding

The power under Section 26(2) of the Reserve Bank of India Act, 1934 can be exercised for all series of bank notes, and the impugned notification is valid; the minority held that the notification is unlawful because the Central Government cannot initiate demonetisation under that provision without a recommendation from the Central Board.

Summary

The Supreme Court, by a 4:1 majority, upheld the constitutional validity of the Central Government's notification dated 8th November 2016 demonetising all series of Rs.500 and Rs.1,000 bank notes under Section 26(2) of the Reserve Bank of India Act, 1934. The majority held that the word 'any' in Section 26(2) includes 'all' series of bank notes, and the power is not restricted to only one or some series. It further ruled that the provision does not suffer from excessive delegation as it contains the inbuilt safeguard of a recommendation by the Central Board of the Reserve Bank of India. The decision-making process was found to be proper, with adequate consultation between the Central Government and the RBI over six months. The notification satisfied the proportionality test, and the 52-day period for exchanging notes was reasonable. The RBI does not have independent power under Section 4(2) of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 to accept demonetised notes beyond the specified period. In a dissenting opinion, Justice B.V. Nagarathna held that the notification was unlawful because the Central Government cannot initiate demonetisation under Section 26(2) without a recommendation from the Central Board; the proper course was legislation. However, she applied the declaration prospectively and granted no relief, given that the demonetisation process had been fully implemented.

Issues considered

Whether the power under Section 26(2) of the RBI Act can be exercised for all series of bank notes or only for one or some series?
Whether Section 26(2) suffers from excessive delegation of legislative power?
Whether the impugned notification dated 8th November 2016 is flawed in its decision-making process?
Whether the notification violates the principle of proportionality?
Whether the period provided for exchange of notes was unreasonable?
Whether the RBI has independent power under Section 4(2) of the 2017 Act to accept demonetised notes beyond the specified period?

Legislation cited

Constitution of Indias. 14, s. 19, s. 21, s. 300A, s. Entry 36 List I
Reserve Bank of India Act, 1934s. 17, s. 22, s. 23, s. 24, s. 26, s. 29, s. 34, s. 42, s. 7
Specified Bank Notes (Cessation of Liabilities) Act, 2017s. 3, s. 4

Subjects

demonetisationReserve Bank of India Act, 1934Section 26legal tenderexcessive delegationjudicial reviewproportionalityeconomic policyinterpretation of statutespurposive interpretationSpecified Bank Notes (Cessation of Liabilities) Act, 2017Constitution of IndiaEntry 36 List I

Judgment

[2023] 1 S.C.R. 1 1

VIVEK NARAYAN SHARMA A
v.
UNION OF INDIA
(Writ Petition (Civil) No.906 of 2016)
JANUARY 02, 2023 B
[S. ABDUL NAZEER, B.R. GAVAI, A.S. BOPANNA,
V. RAMASUBRAMANIAN AND B. V. NAGARATHNA, JJ.]
Demonetisation – Notification No. 3407(E) dated 8th
November 2016 by which Central Government declared that the
bank notes of denominations of the existing series of the value of C
five hundred rupees and one thousand rupees shall cease to be
legal tender with effect from 9th November 2016 – Act or policy of
‘demonetisation’ – Interpretation of sub-section (2) of s.26 of the
Reserve Bank of India Act, 1934 – Meaning of “any” series of
“any” denomination – Power of the Central Government to initiate
D
and carry out demonetisation in absence of recommendation to this
effect by the Central Board of the Reserve Bank of India – Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.) (majority judgment)]: The power available
to the Central Government under sub-section (2) of s.26 of the RBI
Act cannot be restricted to mean that it can be exercised only for E
‘one’ or ‘some’ series of bank notes and not for ‘all’ series of bank
notes – The power can be exercised for all series of bank notes –
Merely because on two earlier occasions, the demonetization
exercise was by plenary legislation, it cannot be held that such a
power would not be available to the Central Government under
F
sub-section (2) of s.26 of the RBI Act – Sub-section (2) of s.26 of
the RBI Act does not provide for excessive delegation inasmuch as
there is an inbuilt safeguard that such a power has to be exercised
on the recommendation of the Central Board – As such, sub-section
(2) of Section 26 of the RBI Act is not liable to be struck down on
the said ground – The impugned Notification dated 8th November G
2016 does not suffer from any flaws in the decision-making process;
and satisfies the test of proportionality and, as such, cannot be
struck down – The period provided for exchange of notes vide the
impugned Notification dated 8th November 2016 cannot be said to
be unreasonable – The RBI does not possess independent power
H
1
2 SUPREME COURT REPORTS [2023] 1 S.C.R.

A under sub-section (2) of s.4 of the 2017 Act in isolation of the
provisions of ss.3 and 4(1) thereof to accept the demonetized notes
beyond the period specified in notifications issued under sub-section
(1) of s.4 of the 2017 Act – Held [per B.V. Nagarathna, J. (minority
judgment)]: Sub-section (2) of s.26 of RBI Act applies only when a
proposal for demonetisation is initiated by the Central Board of
B
RBI by way of a recommendation being made to the Central
Government – The Central Government cannot demonetise bank
notes by issuance of a gazette notification as if it is exercising power
under sub-section (2) of s.26 of the RBI Act – In such circumstances
when the Central Government is initiating the process of
C demonetisation, it would not be acting under sub-section (2) of s.26
of the RBI Act but notwithstanding the said provision through a
legislative process – 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 which
deals with currency, coinage and legal tender; foreign exchange
D
which is a field of legislation – When the Central Government
proposes demonetisation of any bank note, it must seek the opinion
of the Central Board of the RBI – The opinion of the Central Board
of RBI ought to be an independent and frank opinion – On receipt
of a negative opinion from the Central Board of the Bank, the Central
E 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 means of an Ordinance and/or Parliamentary
legislation but not by issuance of a gazette notification – The Central
Government in such circumstances cannot resort to exercise of power
under sub-section (2) of s.26 of the RBI Act by issuing a notification
F
in the Gazette of India as if it were exercising executive powers –
Even if the Central Board of RBI 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 – The action of demonetisation
G initiated by the Central Government by issuance of the impugned
notification dated 8th November, 2016 was an 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
8th November, 2016 onwards, the status quo ante cannot be restored
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 3

at this point of time – Reserve Bank of India Act, 1934 – s.26 – A
Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 –
Specified Bank Notes (Cessation of Liabilities) Act, 2017 – –
Constitution of India – Entry 36 of List I of the Seventh Schedule.
Interpretation of Statutes – Words of a statute – Word “any”
– Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. B
Bopanna, and V. Ramasubramanian, JJ.)]: Word “any” will have to be
construed in its context, taking into consideration the scheme and
the purpose of the enactment – What is the meaning which the
legislature intended to give to a particular statutory provision has
to be decided by the Court on a consideration of the context in
which the word(s) appear(s) and in particular, the scheme and object C
of the legislation.
Interpretation of Statutes – Textual interpretation v/ contextual
interpretation – Held [per B.R. Gavai, J. (for himself and for S. Abdul
Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: An
interpretation which makes the textual interpretation match the D
contextual has to be preferred – No part of a statute and no word of
a statute can be construed in isolation.
Interpretation of Statutes – Construction having regard to
legislative intent – Held [per B.R. Gavai, J. (for himself and for S.
Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: A statute
E
must be construed having regard to the legislative intent – It has to
be meaningful – A construction which leads to manifest absurdity
must not be preferred to a construction which would fulfil the object
and purport of the legislative intent.
Interpretation of Statutes – Modern approach of interpretation
– Is pragmatic, and not pedantic – Held [per B.R. Gavai, J. (for himself F
and for S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]:
An interpretation which advances the purpose of the Act and which
ensures its smooth and harmonious working must be chosen and
the other which leads to absurdity, or confusion, or friction, or
contradiction and conflict between its various provisions, or G
undermines, or tends to defeat or destroy the basic scheme and
purpose of the enactment must be eschewed.
Interpretation of Statutes – Purposive Interpretation – Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.)]: An interpretation which, in effect,
H
4 SUPREME COURT REPORTS [2023] 1 S.C.R.

A nullifies the purpose for which a power is to be exercised, would be
opposed to the principle of purposive interpretation – Such an
interpretation rather than advancing the object of the enactment,
would defeat the same.
Interpretation of Statutes – Purposive Interpretation in respect
B of intention of Legislature in governing the relation between Central
Government and RBI – Held [per B.R. Gavai, J. (for himself and for S.
Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: When
the legislature itself has provided that the Central Government would
take a decision after considering the recommendation of the Central
C Board of the RBI, which has been assigned a primary role in matters
with regard to monetary policy and management and regulation of
currency, the legislature could not have intended to give a restricted
power under sub-section (2) of s.26 of the RBI Act – Reserve Bank
of India Act, 1934 – s.26.
D Demonetisation – Reserve Bank of India Act, 1934 – s.26 –
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: The Policy of s.26 of RBI
Act is to enable the Central Government on the recommendation of
the Central Board, to effect demonetization – The legislative policy
is with regard to management and regulation of currency –
E
Demonetization of notes would certainly be a part of management
and regulation of currency – Such demonetization can be done in
respect of any series of bank notes of any denomination.
Reserve Bank of India – Pivotal Role/Primary Status of RBI –
F Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: RBI, which is a bankers’
bank, is a creature of statute – RBI 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 RBI to safeguard the economy and financial stability of
G the country – RBI is the sole repository of power for the management
of currency – It has the sole right to issue bank notes and to issue
currency notes supplied to it by the Government of India – RBI has
an important role to play in evolving the monetary policy of the
country.
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 5

Reserve Bank of India Act, 1934 – s.26 – Held [per B.R. Gavai, A
J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The word “any” would mean “all” under
sub-section (2) of s.26 of the RBI Act taking into consideration the
overall scheme, purpose and the object of the RBI Act and also the
context in which the power is to be exercised.
B
Reserve Bank of India Act, 1934 – s.26 – Held [per B.R. Gavai,
J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: Decision u/s.26(2) has to be taken on the
recommendation of the Central Board – There is an inbuilt safeguard
in sub-section (2) of s.26 of the RBI Act inasmuch as the Central
Government is required to take a decision on the recommendation C
of the RBI.
Reserve Bank of India Act, 1934 – s.26 – Power to be
exercised by the Central Government under sub-section (2) of s.26
of the RBI Act is for effecting demonetization – The power has to be
exercised on the recommendation of the Central Board – Word D
“recommendation” – Meaning of – Held [per B.R. Gavai, J. (for
himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The word “recommendation” will have to
be construed in the context in which it is used – The word
“recommendation” would mean a consultative process between the E
Central Board of RBI and the Central Government – RBI has a
pivotal role in 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 – Consultation
with the RBI is an inbuilt safeguard – Insofar as s.26(2) is concerned, F
the Parliament has provided an inbuilt safeguard i.e. recommendation
of the RBI - The RBI as well as the Central Government are bodies
having contingent of experts in the field of economic, monetary
and fiscal policies, thus, there is sufficient guidance to the delegatee
when it exercises its powers under sub-section (2) of s.26 of the RBI G
Act, from the subject matter of the statute, and the other provisions
of the Act.
Words and Phrases – Word “any” in sub-section (2) of s.26
of the RBI Act – Factors which cannot be considered to give
restricted meaning – Held [per B.R. Gavai, J. (for himself and for S. H
6 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: Merely
because on earlier two occasions the Government decided to take
recourse to plenary power of legislation, this, by itself, cannot be a
ground to give a restricted meaning to the word “any” in sub-section
(2) of s.26 of the RBI Act – The legislative intent could not have
been to give a restricted meaning to the word “any” in sub-section
B
(2) of s.26 of the RBI Act – Reserve Bank of India Act, 1934 – s.26.
Delegated Legislation – Excessive Delegation – “policy and
guideline” test – Held [per B.R. Gavai, J. (for himself and for S. Abdul
Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: A mere
possibility or eventuality of abuse of delegated powers in the absence
C of any evidence supporting such claim, cannot be a ground for
striking down such a provision – If a challenge is made to the
delegated legislation framed by the executive, the same can be
examined by the constitutional court – Applying the “policy and
guideline” test, if it is found that the delegated legislation does not
D satisfy the said test, the legislation can be struck down without
affecting the constitutionality of the rule-making power.
Reserve Bank of India Act, 1934 – Guiding Factors – Whether
the RBI Act provides guidance to the delegatee or not – Held [per
B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and
E V. Ramasubramanian, JJ.)]: The entire scheme, object and the purpose
of the Act has to be taken into consideration – Guidance could be
sought from the express provision empowering delegation or other
provisions of the statute, the preamble, the scheme or even the very
subject-matter of the Statute – If guidance could be found in
whatever part of the Act, the delegation has to be held to be valid –
F A great amount of latitude has to be given in such matters – 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.
G Demonetisation – Democratic check upon excessive delegation
– Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: Insofar as Demonetization
is concerned, the delegation is made to the Central Government i.e.
the highest executive body of the country – India has a Parliamentary
H system in which the Government is responsible to the Parliament –
VIVEK NARAYAN SHARMA v. UNION OF INDIA 7

In case the Executive does not act reasonably while exercising its A
power of delegated legislation, it is responsible to Parliament who
are elected representatives of the citizens for whom there exists a
democratic method of bringing to book the elected representatives
who act unreasonably in such matters.
Judicial Review – Scope of – Held [per B.R. Gavai, J. (for B
himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The duty of the court is to confine itself to
the question of legality – 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. C

Judicial Review – Scope of – Inquiry in economic matters –
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
Bopanna, and V. Ramasubramanian, JJ.)]: Is limited only to find out
as to whether there is an illegality in the decision-making process.
D
Demonetisation – Procedural Propriety of – Held [per B.R.
Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: The final say with regard to economic and
monetary policies of the country will be with the Central Government
– It cannot be expected that the RBI and the Central Government
will act in two isolated boxes – An element of interaction/consultation E
in such important matters pertaining to economic and monetary
policies cannot be denied to the RBI and the Central Government –
The matter was under active consideration for a period of six months
between the RBI and the Central Government – RBI and the Central
Government were in consultation with each other for a period of F
six months before the impugned notification 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, 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, G
has considered the proposal for demonetization and recommended
it and, thereafter, the Central Government has taken a decision,
cannot be a ground to hold that the procedure prescribed under
s.26 of the RBI Act was breached – The two requirements of sub-
section (2) of s.26 of the RBI Act are (i) recommendation by the H
8 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Central Board; and (ii) the decision by the Central Government –
Both the Central Board while making recommendation and the
Central Government while taking the decision, have taken into
consideration all the relevant factors.
Demonetisation – Interference by Court – Scope – Held [per
B B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and
V. Ramasubramanian, JJ.)]: The court does not have the expertise to
determine 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 – It would be wise for the Court not to hazard
an opinion where even economists may differ.
C
Administrative Law – Government action – Scope of judicial
review – Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer,
A.S. Bopanna, and V. Ramasubramanian, JJ.)]: If the action of the
government has a basis with the objectives to be achieved, it cannot
be declared as palpably arbitrary – The result of the act may seem
D 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, and the wisdom of any
E choice may be disputed or condemned – Mere errors of government
are not subject to judicial review – It is only the palpably arbitrary
exercises which can be declared void.
Government Notification – Legality of – Adjudication of –
Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S.
F Bopanna, and V. Ramasubramanian, JJ.)]: While adjudging the
illegality of the impugned Notification, one has 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
G to hold the impugned Notification to be bad in law.
Demonetisation – Argument of “haste” in taking the decision
to demonetise – Tenability – Held [per B.R. Gavai, J. (for himself and
for S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]:
The Central Government had advised the Central Board to draft a
H scheme to implement demonetization in a non-disruptive manner
VIVEK NARAYAN SHARMA v. UNION OF INDIA 9

with as little inconvenience to the public and business entities as A
possible – Accordingly, a draft scheme was also submitted by the
Central Board along with its recommendations for demonetization
– RBI subsequently issued relaxations from time to time taking into
consideration the difficulties of the people and availability of the
new notes – No doubt that on account of demonetization, the citizens
B
were faced with various hardships – But 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. C
Specified Bank Notes (Cessation of Liabilities) Act, 2017 –
s.4 – Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer,
A.S. Bopanna, and V. Ramasubramanian, JJ.)]: sub-section (2) of s.4
of the 2017 Act cannot be read independently to provide power to
the RBI in isolation of sub-sections (3) and (4) thereof – It is to be D
read as a part of the scheme of s.4 of the 2017 Act – Because s.4 of
2017 Act provides an integrated scheme – It is a complete code in
itself.
Judicial Review – Limits of – Held [per B.R. Gavai, J. (for himself
and for S. Abdul Nazeer, A.S. Bopanna, and V. Ramasubramanian, JJ.)]: E
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 would be risky and hazardous for the courts
to tread an unknown path and should leave such task to the expert
bodies.
F
Government policy – Interference with – Held [per B.R. Gavai,
J. (for himself and for S. Abdul Nazeer, A.S. Bopanna, and V.
Ramasubramanian, JJ.)]: 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 – When the
government forms its policy, it is based on a number of circumstances G
and it is also based on expert’s opinion, which must not be interfered
with.
Policy matters – Economic policy – Judicial review by the
Court – Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer,
A.S. Bopanna, and V. Ramasubramanian, JJ.)]: It is not the function H
10 SUPREME COURT REPORTS [2023] 1 S.C.R.

A of this Court or of any other Court to sit in judgment over matters
of economic policy – These must be left to the government of the
day to decide – Even experts can seriously err and doubtlessly differ
– Courts can certainly not be expected to decide – The Court must
defer to legislative judgment in matters relating to social and
economic policies and must not interfere unless the exercise of
B
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 – Mere errors of judgment
C by the government seen in retrospect is not subject to judicial review
– 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.
D Demonetisation – Proportionality- the four-pronged test – Held
[per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. Bopanna,
and V. Ramasubramanian, JJ.)]: 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
E fundamental right to carry on occupation on the one hand and the
restrictions imposed on the other hand – 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
F 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
G preventing the limitation on the constitutional right – There has to
be a balance between a constitutional right and public interest – 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 – By demonetization, the right vested in the notes was not
H taken away – The only restrictions were with regard to exchange of
VIVEK NARAYAN SHARMA v. UNION OF INDIA 11

old notes with the new notes, which were also gradually relaxed A
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
B
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. – The
argument that the right to property was sought to be taken away is
without substance – In any case, even if there were reasonable C
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, applying the four-pronged
test, the doctrine of proportionality was fully satisfied.
Demonetisation – Reserve Bank of India Act, 1934 – s.26 – D
Held [per B.V. Nagarathna, J.]: The Act does not envisage initiation
of demonetisation of bank notes by the Central Government – Sub-
section (2) of s.26 of the Act, contemplates demonetisation of bank
notes at the instance of the Central Board of the Reserve Bank of
India – Hence, if demonetisation is to be initiated by the Central
Government, such power is derived from Entry 36 of List I of the E
Seventh Schedule to the Constitution which speaks of currency,
coinage and legal tender; foreign exchange – Constitution of India
– Entry 36 of List I of the Seventh Schedule.
Economic/Fiscal Policies – Interference by Courts – Limited
scope of judicial review permissible in matters concerning economic F
policy decisions – Held [per B.V. Nagarathna, J.]: The court is not to
sit in judgment over the merits of economic or financial policy –
The scope of interference by a court is limited to instances where
the impugned scheme or legislation in the economic arena has been
enacted in violation of any Constitutional or statutory provisions –
The court may not undertake a foray into the merits, demerits, G
sufficiency or lack thereof, success in realising the objectives etc.,
of an economic policy, as such an analysis is the prerogative of the
Government in consultation with experts in the field.
Reserve Bank of India Act, 1934 – s.26 – Interpretation of
sub-section (2) of s.26 of the Act – Initiation of recommendation to H
12 SUPREME COURT REPORTS [2023] 1 S.C.R.

A carry out demonetisation – Held [per B.V. Nagarathna, J.]: Under
sub-section (2) of s.26 of the Act, the Central Government would
act only on the recommendation made by the Central Board of the
RBI, which is the initiator of demonetisation of bank notes.
Reserve Bank of India Act, 1934 – s.26 – Interpretation of
B sub-section (2) of Section 26 of the Act – Meaning of “any” series
of “any” denomination – Held [per B.V. Nagarathna, J.]: The proposal
for demonetisation can emanate either from the Central Government
or from the Central Board of the RBI – It is however necessary to
contrast the proposal for demonetisation initiated by the Central
Government, with that initiated by the Central Board of the RBI –
C When the Central Board of the RBI recommends demonetisation, it
is only for a particular series of bank notes of a particular
denomination as specified in the recommendation made under
sub-section (2) of s.26 of the Act – The word “any” in sub-section
(2) of s.26 cannot be read to mean “all” – If read as “specified” or
D “particular” as against all, it would not suffer from arbitrariness
or suffer from unguided discretion being given to the Central Board
of the RBI.
Demonetisation – Reserve Bank of India Act, 1934 – s.26 –
Demonetisation initiated by Central Government ought to have been
E carried out by way of a plenary legislation – Non-applicability of
sub-section (2) of s.26 of the Act – Held [per B.V. Nagarathna, J.]:
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
F 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.
Demonetisation – Principle, “to do a thing a particular way
or not at all” – “expression unius est exclusion alterius” – Held
G [per B.V. Nagarathna, J.]: Where a power is given to do a certain
thing in a certain way, the thing must be done in that way or not at
all and other methods of performance are necessarily forbidden –
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 s.26 of the RBI Act
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 13

by the Central Government – The said provision does not apply to A
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 s.26 of the RBI Act
B
– 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 RBI and the Central Government are totally
distinct in the matter of demonetisation of bank notes.
Administrative Law – Exercise of discretion, when invalid – C
Held [per B.V. Nagarathna, J.]: When an authority exercises the
discretion vested in it by law at 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
Answering the referred questions, the Court
HELD:
PER B.R. GAVAI, J. (FOR HIMSELF AND FOR S. ABDUL
NAZEER, A.S. BOPANNA, AND V. RAMASUBRAMANIAN, E
JJ.) (MAJORITY JUDGMENT):
1. The power available to the Central Government under
sub-section (2) of Section 26 of the RBI Act cannot be restricted
to mean that it can be exercised only for ‘one’ or ‘some’ series of
bank notes and not for ‘all’ series of bank notes. The power can F
be exercised for all series of bank notes. Merely because on two
earlier occasions, the demonetization exercise was by plenary
legislation, it cannot be held that such a power would not be
available to the Central Government under sub-section (2) of
Section 26 of the RBI Act. [Para 304 (i)][143-G-H; 144-G]
G
2. Sub-section (2) of Section 26 of the RBI Act does not
provide for excessive delegation inasmuch as there is an inbuilt
safeguard that such a power has to be exercised on the
recommendation of the Central Board. As such, sub-section (2)
of Section 26 of the RBI Act is not liable to be struck down on
the said ground. [Para 304 (ii)][144-B-C] H
14 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 3. The impugned Notification dated 8th November 2016
does not suffer from any flaws in the decision-making process.
[Para 304 (iii)][144-C]
4. The impugned Notification dated 8th November 2016
satisfies the test of proportionality and, as such, cannot be struck
B down on the said ground. [Para 304 (iv)][144-C-D]
5. The period provided for exchange of notes vide the
impugned Notification dated 8th November 2016 cannot be said
to unreasonable. [Para 304 (v)][144-D]
6. The RBI does not possess independent power under
C sub-section (2) of Section 4 of the 2017 Act in isolation of the
provisions of Sections 3 and 4(1) thereof to accept the
demonetized notes beyond the period specified in notifications
issued under sub-section (1) of Section 4 of the 2017 Act. [Para
304 (vi)][144-E-F]
D Harakchand Ratanchand Banthia and others v. Union
of India and others (1969) 2 SCC 166 : [1970] 1 SCR
479; Internet and Mobile Association of India v. Reserve
Bank of India (2020) 10 SCC 274 : [2020] 2 SCR 297;
Tata Cellular v. Union of India (1994) 6 SCC 651:
E [1994] 2 Suppl. SCR 122; Jayantilal Ratanchand Shah
v. Reserve Bank of India and others (1996) 9 SCC 650
: [1996] 4 Suppl. SCR 443; The Chief Inspector of
Mines and another v. Lala Karam Chand Thapar etc.
[1962] 1 SCR 9; Banwarilal Agarawalla v. The State
of Bihar and others [1962] 1 SCR 33; Tej Kiran Jain
F and others v. N. Sanjiva Reddy and others (1970) 2
SCC 272 : [1971] 1 SCR 612; Lucknow Development
Authority v. M.K. Gupta (1994) 1 SCC 243: [1993] 3
Suppl. SCR 615; K.P. Mohammed Salim v.
Commissioner of Income Tax, Cochin (2008) 11 SCC
G 573 : [2008] 6 SCR 949; Raj Kumar Shivhare v.
Assistant Director, Directorate of Enforcement and
another (2010) 4 SCC 772 : [2010] 4 SCR 608;
Municipal Corporation of Delhi v. Birla Cotton,
Spinning and Weaving Mills, Delhi and another AIR
1968 SC 1232 : [1968] 3 SCR 251; Gwalior Rayon
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 15

Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt. Commissioner of A
Sales Tax and others (1974) 4 SCC 98 : [1974]
2 SCR 879; The Registrar of Co-operative Societies,
Trivandrum and another v. K. Kunjabmu and others
(1980) 1 SCC 340 : [1980] 2 SCR 260; Peerless
General Finance and Investment Co. Limited and
B
another v. Reserve Bank of India (1992) 2 SCC 343 :
[1992] 1 SCR 406; Joseph Kuruvilla Velukunnel v.
Reserve Bank of India and others [1962] Supp 3 SCR
632; Modern Dental College and Research Centre and
Others v. State of Madhya Pradesh and Others (2016)
7 SCC 353 : [2016] 3 SCR 579; State of Gujarat and C
another v. Justice R.A. Mehta (Retired) and others (2013)
13 SCC 1 : [2013] 1 SCR 1; Rashmi Metaliks Limited
and Another v. Kolkata Metropolitan Development
Authority and Others (2013) 10 SCC 95: [2013]
17 SCR 345; M/s. Prag Ice & Oil Mills and Another v.
D
Union of India (1978) 3 SCC 459: [1978] 3 SCR 293;
R.K. Garg v. Union of India and Others (1981) 4 SCC
675 : [1982] 1 SCR 947; Shri Sitaram Sugar Company
Limited and Another v. Union of India and Others
(1990) 3 SCC 223 : [1990] 1 SCR 909; V.M. Kurian v.
State of Kerala and others (2001) 4 SCC 215 : [2001]2 E
SCR 818; Manohar s/o Manikrao Anchule v. State of
Maharashtra and another (2012) 13 SCC 14 : [2012]
12 SCR 850; Km. Sonia Bhatia v. State of U.P. and
Others (1981) 2 SCC 585 : [1981] 3 SCR 239; M.R.F.
Ltd.v. Inspector Kerala Govt. and Others (1998) 8 SCC
F
227: [1998] 2 Suppl. SCR 632 and Popatlal Shah v.
The State of Madras [1953] 4 SCR 677 – relied on.
Hamdard Dawakhana (Wakf) Lal Kuan, Delhi and
another v. Union of India and others [1960] 2 SCR
671; K.S. Puttaswamy (Retired) and another (Aadhaar)
v. Union of India and another (2019) 1 SCC 1 : [2018] G
8 SCR 1; Uttamrao Shivdas Jankar v. Ranjitsinh
Vijaysinh Mohite Patil (2009) 13 SCC 131 : [2009] 9
SCR 538; Centre for Public Interest litigation and others
v. Union of India and others (2012) 3 SCC 1:[2012] 3
SCR 147; Lt. General Manomoy Ganguly VSM v. Union H
16 SUPREME COURT REPORTS [2023] 1 S.C.R.

A of India and others (2018) 18 SCC 83 : [2018] 13
SCR 703; Somaiya Organics (India) Ltd. and another
v. State of U.P. and another (2001) 5 SCC 519 : [2001]
3 SCR 33; Orissa Cement Ltd. v. State of Orissa and
others 1991 Supp (1) SCC 430 : [1991] 2 SCR 105;
I.C. Golak Nath & Others v. State of Punjab & Another
B
[1967] 2 SCR 762; Maneka Gandhi v. Union of India
[1978] 2 SCR 621; C.I.T. v. S. Teja Singh, AIR 1959
SC 352 : [1959] 1 Suppl. SCR 394; Maharaj Singh
v. State of Uttar Pradesh and others (1977) 1 SCC 155
: [1977] 1 SCR 1072; Delhi Laws Act, In Re AIR 1951
C SC 332: [1951] SCR 747:1951 SCC 568; M.P. High
Court Bar Association v. Union of India and others
(2004) 11 SCC 766 : [2004 ] 4 Suppl. SCR 520; Kerala
State Electricity Board v. The Indian Aluminium Co. Ltd.
(1976) 1 SCC 466 : [1976] 1 SCR 552; Ajoy Kumar
Banerjee and others v. Union of India and others (1984)
D
3 SCC 127 : [1984] 3 SCR 252; Ramesh Birch and
others v. Union of India and others 1989 Supp. (1) SCC
430 : [1989] 2 SCR 629; M/s Gammon India Limited
Etc. v. Union of India & Others (1974) 1 SCC 596 :
[1974] 3 SCR 665; Rojer Mathew v. South Indian Bank
E Ltd. represented by its Chief Manager and Ors. (2020)
6 SCC 1 : [2019] 16 SCR 1; Darshan Lal Mehra and
others v. Union of India and others (1992) 4 SCC 28
:[ 1992] 3 SCR 704; State of Tamil Nadu and another
v. National South Indian River Interlinking Agriculturist
Association (2021) SCC OnLine SC 1114; Rajbir Singh
F
Dalal (Dr.) v. Chaudhari Devi Lal University, Sirsa and
another (2008) 9 SCC 284 : [2008] 11 SCR 992;
Secretary and Curator, Victoria Memorial Hall v.
Howrah Ganatantrik Nagrik Samity and others (2010)
3 SCC 732 : [2010] 3 SCR 190; Bajaj Hindustan
G Limited v. Sir Shadi Lal Enterprises Limited and another
(2011)1 SCC 640: [2010] 15 SCR 156; Shrimanth
Balasaheb Patil v. Speaker, Karnataka Legislative
Assembly and others (2020) 2 SCC 595 : [2019]
16 SCR 886; Central Areca Nut & Cocoa Marketing
& Processing Cooperative Ltd. v. State of Karnataka
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 17

and others (1997) 8 SCC 31; R.S. Nayak v. A.R. Antulay A
(1984) 2 SCC 183: [1984] 2 SCR 495; Ram Kishore
Sen and others v. Union of India and others [1966] 1
SCR 430; Small Scale Industrial Manufactures
Association (Registered) v. Union of India and others
(2021) 8 SCC 511; Bholanath Mukherjee and others
B
v. Ramakrishna Mission Vivekananda Centenary
College and others (2011) 5 SCC 464 : [2011] 5
SCR 416; Union of India v. A.B. Shah and others (1996)
8 SCC 540 : [1996] 2 Suppl. SCR 620; R.K. Jain v.
Union of India (1993) 4 SCC 119 : [1993] 3 SCR 802;
S.R. Bommai and others v. Union of India and others C
(1994) 3 SCC 1 : [1994] 2 SCR 644; M. Pentiah and
others v. Muddala Veeramallappa and others [1961] 2
SCR 295; Chief Justice of Andhra Pradesh and others
v. L.V.A. Dixitulu and others (1979) 2 SCC 34 : [1979]
1 SCR 26; M/s Girdhari Lal and Sons v. Balbir Nath
D
Mathur and others (1986) 2 SCC 237 : [1986] 1 SCR
383; Tinsukhia Electric Supply Co. Ltd. v. State of Assam
and others (1989) 3 SCC 709 : [1989] 2 SCR 544;
Small Scale Industrial Manufactures Association
(Registered) v. Union of India and Others (2021) 8 SCC
511 and P.T.R. Exports (Madras) Pvt. Ltd. v. Union of E
India and others (1996) 5 SCC 268 : [1996] 2 Suppl.
SCR 662 – referred to.
Yakus v. U.S. 321 U.S. 414 (1944) Federal Energy
Administration v. Algonquin SNG. Inc. 426 U.S. 548
(1976); Metropolis Theater Company et al v. City of F
Chicago and Ernest J. Magerstadt 228 US 61 (1913);
North Carolina v. Wayne Claude RICE 404 U.S. 244
(1971) Mills v. Green 159 U.S. 651 (1895) People ex
rel. Kingsland v. Clark 25 Sickels 518 (1877) (Court
of Appeals of New York) – referred to.
Prabhudas Swami and Another v. State of Rajasthan G
and Others AIR 2003 RAJ 190 – referred to.
PER B.V. NAGARATHNA, J. (MINORITY JUDGMENT):
1.1. On a close reading of the Notification dated 8th
November, 2016, in juxtaposition with the records, the following
aspects emerge: H
18 SUPREME COURT REPORTS [2023] 1 S.C.R.

A i) The proposal for demonetisation originated from the
Central Government,thby way of its letter addressed
to the Bank, dated 7 November, 2016. This aspect
forms the central plank of the controversy at hand.
That the recommendation did not originate from the
Bank under sub- section (2) of Section 26 of the RBI
B
Act, but was “obtained” 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
C Government in order to proceed under sub-section
(2) of Section 26 of the Act.
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
D of the interpretation given 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/-. The term “any” as
E 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 RBI.
iii) The Notification expressly states that it is issued
F 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
G been carried out by issuing a Notification as
contemplated under sub-section (2) of Section 26 of
the Act and 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
H of the Constitution, the Central Government could
VIVEK NARAYAN SHARMA v. UNION OF INDIA 19

not have exercised the power by issuance of an A
executive notification. [Paragraph 17.9]
1.2. As noted from the records submitted by the Central
Government as well as the Reserve Bank of India in the instant
case, the Central Government wrote to the Central Board of the
Reserve Bank of India on 7 th of November, 2016 about its B
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., 8thNovember, 2016, a meeting of the Central
Board of the 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 C
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 D
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 on the measure of demonetisation
to the Central Government, acted only on such “assurances”.
[Para 19.2][221-H; 222-A-D] E

1.3. The powers of the Central Board of RBI are restrictive
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 Bank F
under sub-section (2) of Section 26 of the Act” when it initiates
the process of demonetisation. 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 G
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

H
20 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 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 and therefore, they
are the lifeline of the economy. The Central Government also
B
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 30 th December, 2016. Moreover, it is not known
whether the Bank had made arrangements for printing sufficient
C new notes for exchange of demonetised currency. It is also not
known whether the Department of Legal Affairs was consulted in
the matter as the procedure of demonetisation involves legal
implications. [Para 19.4][223-A-F]
2. (i) According to sub-section (1) of Section 26 of the RBI
D 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 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 RBI
E 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 notes of any specified
denomination. (iii) The expression any series of bank notes of
F any denomination has been given its 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
G and interpreted to mean “all series of bank notes” of “all
denominations”, it would vest with the Central Board of the RBI
unguided and unlimited powers which would be ex-facie arbitrary
and suffer from the vice of unconstitutionality as this would amount
to excessive vesting of powers with the Bank. In order to save
H the provision from being declared unconstitutional, the meaning
VIVEK NARAYAN SHARMA v. UNION OF INDIA 21

of the provision is read down to the context of the Central Board A
of the RBI initiating a proposal for demonetisation by making a
recommendation to the Central Government under subsection
(2) of Section 26 of the Act of a particular series 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
B
Section 26 of the Act, the Central Government may accept the
said recommendation or may not do so. If the Central 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 C
Government. (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
D
President of India followed by an Act of Parliament or by plenary
legislation through the Parliament. The Central Government
cannot demonetise bank notes by 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 the process of demonetisation, it would not be acting E
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 which deals with currency,
F
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. (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 G
fact that the Bank 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 Bank
ought to be an independent and frank opinion after a meaningful
H
22 SUPREME COURT REPORTS [2023] 1 S.C.R.

A discussion by the Central Board of the Bank which ought to be
given its due weightage having regard to the ramifications it may
have on the Indian economy and the citizens of India 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
B
still intend to go ahead with the said process after weighing the
pros and cons only by means of an Ordinance and/or Parliamentary
legislation but not by issuance of a gazette notification. In other
words, the Central Government in such circumstances cannot
resort to exercise of power under subsection (2) of Section 26 of
C the Act by issuing a notification in the Gazette of India as if it
were exercising executive powers. Even if the 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, the impugned
D
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. (xi) Further, the subsequent Ordinance of
2016 and Act of 2017 incorporating the terms of the impugned
E notification are also unlawful. (xii) However, having regard to the
fact that the impugned notification dated 8th November, 2016
and the Act have 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
F
direction is being issued having regard to Article 142 of the
Constitution of India. Hence, no relief is being granted in the
individual matters. [Para 21][227-C-H; 228-A-H; 229-A-H;
230-A-B]
Internet & Mobile Assn. of India v. RBI (2020) 10 SCC
G 274 : [2020] 2 SCR 297; Parbhani Transport Co-
operative Society Ltd. v. The Regional Transport
Authority, Aurangabad [1960] 3 S.C.R. 177: AIR 1960
SC 801; Dipak Babaria v. State of Gujarat AIR 2014
SC 1972 : [2014] 2 SCR 71; Kameng Dolo v. Atum
H Welly AIR 2017 SC 2859 : [2017] 5 SCR 114; The
VIVEK NARAYAN SHARMA v. UNION OF INDIA 23

Tahsildar, Taluk Office, Thanjore v. G. Thambidurai AIR A
2017 SC 2791 : [2017] 4 SCR 1; Union of India v.
Charanjit S. Gill (2000) 5 SCC 742 : [2000] 3 SCR
245; S.R. Bommai v. Union of India AIR 1994 SC 1918:
[1994] 2 SCR 644; Golak Nath v. State of Punjab
[1967] 2 SCR 762; Orissa Cement Ltd. v. State of Orissa,
B
1991 Supp (1) SCC 430 : [1991] 2 SCR 105 and
Jayantilal Ratanchand Shah, Devkumar Gopaldas
Aggarwal v. Reserve Bank of India AIR 1997 SC 370 :
[1996] 4 Suppl. SCR 443 – relied on.
K.S. Puttaswamy (Retired) (Aadhaar) v. Union of India
(2019) 1 SCC 1 : [2018] 8 SCR 1; Maharaj Singh v. C
State of Uttar Pradesh (1977) 1 SCC 155 : [1977] 1
SCR 1072; Bajaj Hindustan Limited v. Sir Lal
Enterprises Limited (2011) 1 SCC 640 : [2010] 15
SCR 156; Rajbir Singh Dalal (Dr.) v. Chaudhari Devi
Lal University, Sirsa (2008) 9 SCC 284 : [2008] D
11 SCR 992; Secretary and Curator, Victoria Memorial
Hall v. Howrah Ganatantrik Nagrik Samity (2010) 3
SCC 640 : [2010] 3 SCR 190; Peerless General
Finance and Investment Co. Ltd. v. Reserve Bank of
India (1992) 2 SCC 343 : [1992] 1 SCR 406; BALCO
Employees’ Union (Regd.) v. Union of India (2002) 2 E
SCC 333 : [2001] 5 Suppl. SCR 511; Jayantilal
Ratanchand Shah v. Reserve Bank of India (1996) 9
SCC 650 : [1996] 4 Suppl. SCR 443; Joseph Kuruvilla
Vellukunnel v. The Reserve Bank of India AIR 1962 SC
1371 : [ 1962] 3 Suppl. SCR 632; State of Tamil Nadu F
v. National South Indian River Interlinking Agriculturist
Association 2021 SCC OnLine SC 1114; Rustom
Cavasjee Cooper v. Union of India AIR 1970 SC 565 :
[1970] 3 SCR 530; State of M.P. v. Nandlal Jaiswal
(1986) 4 SCC 566 : [1987] 1 SCR 1; Delhi Science
Forum v. Union of India AIR 1996 SC 1356: [1996] 2 G
SCR 767; Bhavesh D. Parish v. Union and India
(2000) 5 SCC 471: [2000] 1 Suppl. SCR 291; Balco
Employees’ Union (Regd) v. Union of India AIR 2002
SC 350 : [2001] 5 Suppl. SCR 511; Directorate of Film
Festivals v. Gaurav Ashwin Jain AIR 2007 SC 1640 : H
24 SUPREME COURT REPORTS [2023] 1 S.C.R.

A [2007] 5 SCR 7; DDA v. Joint Action Committee, Allottee
of SFS Flats AIR 2008 SC 1343 : [ 2007] 1 SCR 811;
Small Scale Industrial Manufacturers Association
(Regd.) v. Union of India (2021) 8 SCC 511; Jayantilal
Ratanchand Shah, Devkumar Gopaldas Aggarwal v.
Reserve Bank of India (1996) 9 SCC 650: [1996]
B
4 Suppl. SCR 443; Kanailal Sur v. Paramnidhi Sadhu
Khan AIR 1957 SC 907: [1958] SCR 360; Illachi Devi
v. Jain Society Protection of Orphans India (2003) 8
SCC 413 : [2003] 4 Suppl. SCR 62; T.R. Thandur v.
Union of India (1996) 3 SCC 690 : [1996] 1 Suppl.
C SCR 26; Central Bank of India v. State of Kerala (2009)
4 SCC 94 : [2009] 3 SCR 735; A.G. Varadarajulu and
Anr. v. State of Tamil Nadu (1998) 4 SCC 231 : [1998]
2 SCR 390 and Madhav Rao Scindia v. Union of India
(1971) 1 SCC 85 : [1971] 3 SCR 9– referred to.
D Permian Basin Area Rate Cases, 20 L Ed (2d) 312;
Pakala Narayanaswami v. Emperor AIR 1939 PC 47;
Taylor v. Taylor (1875) 1 Ch D 426; Nazir Ahmed v.
King Emperor (1936) L.R. 63 I.A. 372 and Sharp v.
Wakefield 1891 AC 173 – referred to.
E Case Law Reference
In the judgment of B.R. GAVAI, J. (for himself and
for S. ABDUL NAZEER, A.S. BOPANNA, and
V. RAMASUBRAMANIAN, JJ.)
[1960] 2 SCR 671 referred to Para 22
F [1970] 1 SCR 479 relied on Para 22
[2018] 8 SCR 1 referred to Para 39
[2020] 2 SCR 297 relied on Para 39
[1994] 2 Suppl. SCR 122 relied on Para 40
G [2009] 9 SCR 538 referred to Para 40
[2001] 3 SCR 33 referred to Para 41
[1991] 2 SCR 105 referred to Para 41
[1967] 2 SCR 762 referred to Para 41
[1996] 4 Suppl. SCR 443 relied on Para 42
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 25

[1978] 2 SCR 621 referred to Para 51 A
[1962] 1 SCR 9 relied on Para 53(i)
[1962] 1 SCR 33 relied on Para 53(ii)
[1971] 1 SCR 612 relied on Para 53(iii)
[1993] 3 Suppl. SCR 615 relied on Para 53(iv)
B
[2008] 6 SCR 949 relied on Para 53(v)
[2010] 4 SCR 608 relied on Para 53(vi)
[1959] 1 Suppl. SCR 394 referred to Para 56
[1977] 1 SCR 1072 referred to Para 58
[1968] 3 SCR 251 relied on Para 60 C
[1951] SCR 747 referred to Para 62(i)
[2004 ] 4 Suppl. SCR 520 referred to Para 62(ii)
[1976] 1 SCR 552 referred to Para 62(iii)
[1984] 3 SCR 252 referred to Para 62(iv) D
[1974] 2 SCR 879 relied on Para 62(v)
[1989] 2 SCR 629 referred to Para 62(vi)
[1974] 3 SCR 665 referred to Para 62(vii)
[2019] 16 SCR 1 referred to Para 62(ix)
E
[1980] 2 SCR 260 relied on Para 62(x)
[1992] 3 SCR 704 referred to Para 62(xi)
[2008] 11 SCR 992 referred to Para 66
[2010] 3 SCR 190 referred to Para 66
[2010] 15 SCR 156 referred to Para 67 F
[2019] 16 SCR 886 referred to Para 78
(1997) 8 SCC 31 referred to Para 78
[1984] 2 SCR 495 referred to Para 78
[1992] 1 SCR 406 relied on Para 80 G
[1962] Supp 3 SCR 632 relied on Para 80
[1966] 1 SCR 430 referred to Para 81
[2016] 3 SCR 579 relied on Para 82
(2021) 8 SCC 511 referred to Para 83
H
26 SUPREME COURT REPORTS [2023] 1 S.C.R.

A [2011] 5 SCR 416 referred to Para 86
[1996] 2 Suppl. SCR 620 referred to Para 87
[1993] 3 SCR 802 referred to Para 89
[1994] 2 SCR 644 referred to Para 90
[1961] 2 SCR 295 referred to Para 135
B
[1979] 1 SCR 26 referred to Para 137
[1986] 1 SCR 383 referred to Para 138
[1989] 2 SCR 544 referred to Para 140
[2013] 1 SCR 1 relied on Para 141
C [2013] 17 SCR 345 relied on Para 217
[1978] 3 SCR 293 relied on Para 220
[1982] 1 SCR 947 relied on Para 221
[1990] 1 SCR 909 relied on Para 222
D (2021) 8 SCC 511 referred to Para 223
[1996] 2 Suppl. SCR 662 referred to Para 224
[2001] 2 SCR 818 relied on Para 241
[2012] 12 SCR 850 relied on Para 242
[1981] 3 SCR 239 relied on Para 256
E
[1998] 2 Suppl. SCR 632 relied on Para 274
[1953] 4 SCR 677 relied on Para 295
In the judgment of B.V. NAGARATHNA, J.
[2018] 8 SCR 1 referred to Para 8.9
F [1977] 1 SCR 1072 referred to Para 9.5
[2010] 15 SCR 156 referred to Para 9.7
[2008] 11 SCR 992 referred to Para 9.7
[2010] 3 SCR 190 referred to Para 9.7
[1992] 1 SCR 406 referred to Para 9.10
G
[2001] 5 Suppl. SCR 511 referred to Para 9.10
[1996] 4 Suppl. SCR 443 referred to Para 9.12
[2020] 2 SCR 297 relied on Para 13.1
[1962] 3 Suppl. SCR 632 referred to Para 13.2
H [1970] 3 SCR 530 referred to Para 13.2 b
VIVEK NARAYAN SHARMA v. UNION OF INDIA 27

[1987] 1 SCR 1 referred to Para 13.3(a) A
[ 1996] 2 SCR 767 referred to Para 13.3(e)
[2000] 1 Suppl. SCR 291 referred to Para 13.3(f)
[2001] 5 Suppl. SCR 511 referred to Para 13.3(g)
[2007] 5 SCR 7 referred to Para 13.3(h)
B
[ 2007] 1 SCR 811 referred to Para 13.3(i)
(2021) 8 SCC 511 referred to Para 13.3(j)
[1996] 4 Suppl. SCR 443 referred to Para 15.21
[1958] SCR 360 referred to Para 15.26(i)
[ 2003] 4 Suppl. SCR 62 referred to Para 15.26(ii) C
[1996] 1 Suppl. SCR 26 referred to Para 16.1(a)
[2009] 3 SCR 735 referred to Para 16.1(b)
[1998] 2 SCR 390 referred to Para 16.1(c)
[1971] 3 SCR 9 referred to Para 16.1(c)
D
[1960] 3 S.C.R. 177 relied on Para 18.2
[2014] 2 SCR 71 relied on Para 18.2 (ii)
[2017] 5 SCR 114 relied on Para18.2 (iii)
[2017] 4 SCR 1 relied on Para 18.2 (iv)
[2000] 3 SCR 245 relied on Para 18.2 (v) E
[1994] 2 SCR 644 relied on Para 20.2(i)
[1967] 2 SCR 762 relied on Para 20.2(ii)
[1991] 2 SCR 105 relied on Para 20.2(iii)
[1996] 4 Suppl. SCR 443 relied on Para 20.6 F
Civil/Criminal Appellate/Original Jurisdiction : WRIT PETITION
(CIVIL) NO.906 OF 2016.
(Under Article 32 of the Constitution of India)
With
G
T.P.(C) No. 1958-1967/2016, W.P.(C) No. 1011/2016, SLP(C)
No. 36757/2016, W.P.(C) No. 40/2017, W.P.(C) No. 47/2017, W.P.(C)
No. 41/2017, W.P.(C) No. 260/2017, T.P.(C) No. 607/2017, T.P.(C) No.
588/2017, T.P.(C) No. 626/2017, T.P.(C) No. 585/2017, T.P.(C) No. 582/
2017, T.P.(C) No. 638/2017, W.P.(C) No. 568/2018, W.P.(C) No. 1018/
H
28 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 2019, W.P.(C) No. 683/2020, T.C.(C) No. 9/2017, W.P.(C) No. 908/
2016, W.P.(C) No. 913/2016, W.P.(C) No. 916/2016, W.P.(C) No. 1026/
2016, W.P.(C) No. 943/2016, W.P.(Crl.) No. 162/2016, W.P.(C) No.
951/2016, W.P.(C) No. 929/2016, W.P.(C) No. 930/2016, W.P.(C) No.
944/2016, T.P.(C) No. 1982-1996/2016, W.P.(C) No. 952/2016, W.P.(C)
No. 953/2016, W.P.(C) No. 958/2016, W.P.(C) No. 957/2016, SLP(C)
B No. 35356/2016, T.P.(C) No. 2030- 2038/2016, W.P.(C) No. 978/2016,
W.P.(C) No. 1025/2016, SLP(C) No. 35805/2016, W.P.(C) No. 997/
2016, W.P.(C) No. 1008/2016, W.P.(C) No. 1010/2016, W.P.(C) No.
1009/2016, W.P.(C) No. 996/2016, W.P.(C) No. 1006/2016, T.P.(C) No.
47- 67/2017, T.P.(C) No. 659/2017, W.P.(C) No. 223/2017, SLP(C) No.
14272/2017, SLP(C) No. 14131/2017, SLP(C) No. 14216/2017, W.P.(C)
C No. 341/2018, W.P.(C) No. 193/2018, W.P.(C) No. 316/2018, MA 1552/
2018 in W.P.(C) No. 626/2017, W.P.(C) No. 971/2016, T.P.(C) No. 2018-
2022/2016, W.P.(C) No. 972/2016, W.P.(C) No. 389/2018.
R. Venkataramani, AG, Tushar Mehta, SG, N. Venkataraman, K.
M. Nataraj, ASGs, P. Chidambaram, Shyam Divan, Surendra Kumar,
D Jaideep Gupta, Deepak Nargolkar, P. V. Surendranath, Avishkar Singhvi,
Suryanarayana Singh, B. K. Mishra, Dr. G. V. Rao, Sr. Advs., Ms. Kamini
Jaiswal, Talha A. Rahman, Prateek Chadha, Vrishank Singhania, Ms.
Rani Mishra, Gaurav Ghosh, Harsh Vardhan Kediya, M. Shaz Khan,
Ms. Radhika, Pranav Sachdeva, Jatin Bhardwaj, Ms. Sanam Tripathi,
E Ms. Anshula Laroiya, Adith Deshmukh, Ms. Ria Singh Sawhney, Ms.
Neha Rathi, M. T. George, Mrs. Susy Abrahm, Johns George, Ms.
Priyadarshini Dewan, Ms. Shankari Mishra, Ms. Swechcha Mishra,
Vaibhav Verma, Sahil Tagotra, Abhishek Pandey, Ms. Abhivyakti
Banerjee, Ms. Sakshi Garg, Anant Bhushan, Ms. Shailja Sinha Saraswat,
Arjav Jain, Yadav Narender Singh, Ms. Vijayalakshmi Venkataramani,
F Anandh Venkataramani, Vinayak Mehrotra, M. K. Maroria, Shailesh
Madiyal, Ankur Talwar, Ms. Chinmayee Chandra, Rajat Nair, Devashish
Bharuka, Pratyush Shrivastava, Shantanu Sharma, Parantap Singh, Rohit
Khare, Gaurang Bhushan, Abhijeet Singh, Ms. Suhasini Sen, Kanu
Agarwal, Ms. Shradha Deshmukh, Adit Khorana, Udai Khanna, Chitvan
G Singhal, Praveen Vignesh, Ms. Sonali Jain, Ms. Mansi Sood, Abhishek
Kumar Pandey, Raman Yadav, Akshay Amritanshu, Sandeep
K.Mahapatra, Madhav Singhal, Mayank Pandey, Nakul Changappa K.
K., Ms. Akriti A. Manubarwala, Mrs. Anil Katiyar, Raj Bahadur Yadav,
H. S. Parihar, Kuldeep S. Parihar, Ms. Ikshita Parihar, Riddhi Bose,
Ms. Manicka Priya S., Ms. Aastha Mehta, Ms. Vishakha, Ananvay
H Anandvardhan, Ms. Poorna Chanra R., Ms. Sivani K., Ms. Prerana
VIVEK NARAYAN SHARMA v. UNION OF INDIA 29

Mohapatra, Atul Kumar, Vivek Narayan Sharma, Ajay Singh, Ms. A
Mahima Bhardwaj, Laksha Bhavnani, Pranshu Kaushal, Ram Kumar,
Adhiraj Wadhera, Sudhanshu Khandelwal, Ms. Priyambica MK Jha,
Ms. Suman, Thampan Thomas, K. V. Mohan, Ms. Tessy Varghese, K.
V. Balakrishnan, K. Vinosh, Saju Jacob, Ms. Satwinder Kaur, Arjun Garg,
Ms. Sagun Srivastava, Mareesh Pravir Sahay, Ms. Awantika, Sachin B
Kharb, Braj Kishore Mishra, G. Ananda Selvam, Mayil Samy K., S. J.
Amith, Dr. A. S. Gayathiri, Sanchit Maheshwari, T. R. B. Sivakumar,
A. Santhakumaran, K. Kumaran, C. R. Jaya Sukin, Ms. Anjali Gupta,
C. M. Jha, Anubhav Gupta, Manoj Kumar Sharma, Akhileshwar Jha,
Ravish Kumar Goel, Nitin Sharma, Chaman Sharma, Gautam Das,
Narender Kumar Verma, Sitesh Kumar Singh, Varun Punia, Kamal C
Kant Jha, Chandan Mishra, Vijay K. Jain, Ms. Manjula Gupta, Prem
Sunder Jha, Pranav Raina, Manashwy Jha, Ms. Riya Kumari, V. K.
Biju, Ms. Ria Sachthey, Chetanya Singh, Dr. Ranjeet Bharti, Ms. Rubina
Jawed, Ms. Jyoti Zongluju, Sudhir Singh, Sarbendra Kumar, Ms. Divya
Mishra, Ms. Saloni Sharan, Ms. Manju Jetley, Sumit R. Sharma, Arjun D
Singh Bhati, Ms. Tasmiya Taleha, Ms. Liz Mathew, Assad Alvi, D.
Vidyanandam, Ms. Saba A. K. Patel, Ms. Sadia Rohman Khan, Ms.
Komal Vashistha, Yogesh Sharma, Abhishek Gaur, Satya Mitra, Amit
Kheemka, Manish Sharma, Neeraj Sharma, Sanchit Vashishiste, Rishi
Sehgal, Sandeep Dash, Dhaval Deshpande, Ms. Aparna Jha, Ankur
Prakash, Jatinder Pal Singh, Ms. Reema Chauhan, Shariq Ahmed, D. E
K. Thakur, Tariq Ahmed, Sunil Kumar Verma, Ms. Pragati Neekhra,
Ajit Sharma, Ajay Vikram Singh, Ms. Priyanka Singh, Ms. Pranjali Goel,
Sharjeet Ahamad, Shubham Singh, Rajesh Ranjan, Joel, Attin Shankar
Rastogi, Shivkant Arora, Ashwani Kumar Dubey, Syed Ahmed Saud,
Daanish Ahmed Syed, Mohd. Parvez Dabas, Uzmi Jameel Husain, Aqib F
Baig, Mohd.Shahib, Mujeebuddin Khan, for M/s. Shakil Ahmad Syed,
P. V. Dinesh, Rahul Raj Mishra, Ashwini Kumar Singh, Bineesh K.,
Arvind Kumar Shukla, Ms. Reetu Sharma, Nihal Ahmed, Vasu
Chaudhary, Ravindra Keshavrao Adsure, Gopal Balwant Sathe, Yash
Prashant Sonavane, Sakshi Ajit Kale, Rohan Darade, Siddharth Dutta,
G
Kumar Dushyant Singh, Ms. Gunjan Malhotra, Ms. Subasri Jaganathan,
Nishe Rajen Shonker, Sawan Kumar Shukla, Subhash Chandran K. R.,
Vivek Kumar, Miss Pratiksha Sharma, Ankit Acharya, Mueed Mueed
Shah, Dilip Annasaheb Taur, Mrs. Niranjana Singh, Purvish Jitendra
Malkan, Ms. Dharita Purvish Malkan, Alok Kumar, Yashasvi Virendra,
H
30 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Narayan Laxman Rao, Ms. Deepa Gorasia, Ms. Nandini Chhabra, Ms.
Bhavna Sarkar, Shariq Ahmed, D. K. Thakur, Tariq Ahmed, Sunil
Kumar Verma, Neeraj Shekhar, Ashutosh Thakur, Dr. Sumit Kumar,
Keshav Baheti, Ms. Mrigna Shekhar, Ms. Aarushi singh, Ramesh Babu
M. R., Ms. Manisha Singh, Ms. Tanya Chowdhary, Rohit K. Singh,
B Nishant Ramakantrao Katneshwarkar, Guntur Prabhakar, M. P. Vinod,
Atul Shankar Vinod, Dileep Pillai, Ajay Kumar Jain, Shreyansh Agrawal,
P. A. Noor Muhamed, Satish Kumar, Sudhanshu S. Choudhari, Satyajeet
A. Desai, Sidharth Gautam, Abhinav K.Mutyalwar, Gajanan N.Tirthakar,
Satya Kam Sharma, Ms. Anagha S. Desai, M/s. S. M. Jadhav and
Company, S. Gowthaman, V. K. Sidharthan, Harshad V. Hameed,
C Dileep Poolakkot, Ms. Ashly Harshad, Romy Chacko, M. Y. Deshmukh,
Ms. Manjeet Kirpal, Adweetiya Sharma, C. K. Sasi, Abdulla Naseeh V.
T., Ms. Meena K. Poulose, Nischal Kumar Neeraj, Ajay Mehrotra,
Ms. Banisha Verma, Ms. S. Rani, M. Qayam Ud Din, Shakti N., Ms.
Drishty Maan, Puneet Bhola, Ms. Pallavi Pratap, Ms. Prachi Pratap,
D Namit Saxena, Dr. Prashant Pratap, Akshay Singh, Ms. Avadhi Jain,
Rishi Matoliya, H. D. Thanvi, Nikhil Kumar Singh, Achal Singh Bule,
Mahendra Singh Inda, Harsh Vardhan, Abhinav Shrivastava, Anurag
Gupta, Gagan Gupta, Ujjwal Tandon, Rahul Gupta, Shivang Rawat, Ms.
Radhika Jalan, Adnan Siddiqui, Ms. Aparna Satya Narayan, Ravi Kishan
Chandna, Santosh Mishra, Dhruv Gautam, Ms. Manisha Ambwani,
E Anindo Mukherjee, S. Ranjan Das, Rameshwar Prasad Goyal, Hitesh
Kumar Sharma, S. K. Rajora, Ms. Niharika Dwivedi, Ms. Shweta Sand,
Ms. Yamini Sharma, Narendra Pal Sharma, Amit Kumar Chawla, Satya
S. Saini, Ms. Mridula Singh, Sanjay Singh, Anil Kumar, Mahfooz A.
Nazki, Polanki Gowtham, Shaik Mohamad Haneef, T. Vijaya Bhaskar
F Reddy, Ms. Rajeswari Mukherjee, K. V. Girish Chowdary, Ms. Niti
Richhariya, Naveen Sharma (Bhardwaj), Siddharth Dharmadhikari,
Aaditya A. Pande, Bharat Bagla, Ms. Kirti Dadheech, A. K. Upadhyay,
Ms. Namrata Mohapatra, K. J. John & Co., Prashant Bhushan, Sudiep
Shrivastava, Asutosh Sharma, Ms. Gunjan Sharma, S. L. Gupta, Neeraj
Srivastav, Ms. Shefali Mitra, Varinder Kumar Sharma, Varun Thakur,
G
Shashank Ratnoo, Brajesh Pandey, Mahesh Agarwal, Ankur Saigal,
Nishant Rao, Ms. Kajal Dalal, E. C. Agrawala, Ritesh Khare, Ms.
Nikita Anand, Ms. Namrata Chandorkar, Deepak Goel, Ajay Marwah,
Tapan Masta, Ayush Gupta, Shashikant Chaudhari, Ashish Kumar
Chaurasiya, Ganga Sagar Singh, Advs. for the appearing parties.
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 31
[B. R. GAVAI, J.]

The Judgments of the Court were delivered by A
INDEX

B

C

D

E

F
B. R. GAVAI, J.
I. INTRODUCTION
1. This reference to the larger bench of Five-Judges arises out of
the writ petitions filed challenging the Notification No. 3407(E) dated 8th
November 2016 (hereinafter referred to as “the impugned Notification”), G
issued by the Central Government in exercise of the powers conferred
by sub-section (2) of Section 26 of the Reserve Bank of India Act, 1934
(hereinafter referred to as “the RBI Act”), vide which the Central
Government declared that the bank notes of denominations of the existing
series of the value of five hundred rupees and one thousand rupees shall
H
32 SUPREME COURT REPORTS [2023] 1 S.C.R.

A cease to be legal tender with effect from 9th November 2016, to the
extent specified in the impugned Notification. This is popularly known
as an act/policy of ‘demonetization’.
2. Immediately after the impugned Notification was issued, several
writ petitions challenging the policy of demonetization came to be filed
B before this Court as also before various High Courts. Transfer Petitions
were filed by the Union, seeking transfer of all such matters pending
before the High Courts to this Court.
3. A bench of learned three Judges of this Court passed an order
dated 16th December 2016 in Writ Petition (Civil) No.906 of 2016 and
C other connected petitions, observing therein that, in their opinion, following
important questions fall for consideration:
“(i) Whether the notification dated 8th November 2016 is ultra
vires Section 26(2) and Sections 7, 17, 23, 24, 29 and 42 of
the Reserve Bank of India Act, 1934;
D (ii) Does the notification contravene the provisions of Article
300A of the Constitution;
(iii) Assuming that the notification has been validly issued under
the Reserve Bank of India Act, 1934 whether it is ultra
vires Articles 14 and 19 of the Constitution;
E (iv) Whether the limit on withdrawal of cash from the funds
deposited in bank accounts has no basis in law and violates
Articles 14, 19 and 21;
(v) Whether the implementation of the impugned notification(s)
suffers from procedural and/or substantive
F unreasonableness and thereby violates Articles 14 and 19
and, if so, to what effect?
(vi) In the event that Section 26(2) is held to permit
demonetization, does it suffer from excessive delegation of
legislative power thereby rendering it ultra vires the
Constitution;
G
(vii) What is the scope of judicial review in matters relating to
fiscal and economic policy of the Government;
(viii) Whether a petition by a political party on the issues raised
is maintainable under Article 32; and
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 33
[B. R. GAVAI, J.]

(ix) Whether District Co-operative Banks have been A
discriminated against by excluding them from accepting
deposits and exchanging demonetized notes.”
4. Vide the said order dated 16th December 2016, this Court also
directed that, if any other writ petitions/proceedings were pending in any
High Court, further hearing of those matters should also remain stayed. B
This Court further directed that no other Court should entertain, hear or
decide any writ petition/proceeding on the issue of or in relation to or
arising from the decision of the Government of India to demonetize the
notes of Rs.500/- and Rs.1,000/-, since the entire issue in relation thereto
was pending consideration before this Court.
C
II. BACKGROUND
5. Before we consider the matter, it will be necessary to refer to
certain facts.
6. On 8th November 2016, vide the impugned notification, the
Central Government, in exercise of the powers conferred by sub-section D
(2) of Section 26 of the RBI Act, notified that the specified bank notes
(hereinafter referred to as “SBNs”) shall cease to be legal tender with
effect from 9 th November 2016. The SBNs were bank notes of
denominations of the existing series of the value of Rs.500/- and Rs.1000/
-. Under clause 1 of the said notification, every banking company and E
every Government Treasury was required to complete and forward a
return along with the details of SBNs held by it at the close of business
as on the 8th November 2016, not later than 13:00 hours on the 10th
November 2016 to the designated Regional Office of the Reserve Bank
of India (hereinafter referred to as “RBI”). Insofar as the individual
persons were concerned, under clause 2 of the impugned notification, F
they were entitled to exchange SBNs in various banks specified therein
upto 30th December 2016 subject to certain conditions. Initially it provided
a limit of Rs.4,000/- for such exchange. It also provided that the limit of
Rs.4,000/- for exchanging SBNs shall be reviewed after 15 days from
the date of commencement of the impugned notification. It further G
provided that, insofar as Know Your Customer (KYC) compliant bank
account maintained by a person with a bank was concerned, there was
no limit on the quantity or value of the SBNs that could be credited to
such an account. However, insofar as non-KYC compliant bank accounts
were concerned, an outer limit was fixed at Rs.50,000/-. There were
certain other provisions made under the impugned notification. H
34 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 7. Vide another notification of the even date, various other
relaxations were granted whereunder SBNs could be used for making
payment in Government hospitals, pharmacies, Railway booking centers,
for purchases at consumer cooperative stores, milk booths, purchase of
petrol, etc. The said relaxations were to be valid till 11th November 2016.
Thereafter, various notifications came to be issued from time to time
B
granting further relaxations.
8. On 30th December 2016, the Specified Bank Notes (Cessation
of Liabilities) Ordinance, 2016 (hereinafter referred to as “the 2016
Ordinance”) was promulgated by the Hon’ble President of India.
Subsequently, the Parliament enacted the Specified Bank Notes
C (Cessation of Liabilities) Act, 2017 (hereinafter referred to as “the 2017
Act”), which received the assent of the then Hon’ble President of India
on 27th February 2017.
9. Section 3 of the 2017 Act provides that, on and from the
appointed day, notwithstanding anything contained in the RBI Act or any
D other law for the time being in force, the SBNs which had ceased to be
legal tender in view of the impugned Notification of the Government of
India, shall cease to be liabilities of the RBI under Section 34 of the RBI
Act and shall cease to have the guarantee of the Central Government
under sub-section (1) of Section 26 of the RBI Act.
E 10. Section 4 of the 2017 Act provides for a grace period in case
of certain classes of persons holding such SBNs on or before the 8th day
of November, 2016 for tendering, with such declarations or statements,
at such offices of the RBI or in such other manner as may be specified
by it. One of the classes of persons who was provided a grace period by
F clause (i) of sub-section (1) of Section 4 of the 2017 Act was a citizen of
India who makes a declaration that he was outside India between 9th
November 2016 and 30th December 2016. Clause (ii) of sub-section (1)
of Section 4 of the 2017 Act also provided a grace period for such class
of persons and for such reasons as may be specified by Notification, by
the Central Government.
G
11. Sub-section (2) of Section 4 of the 2017 Act provides that the
RBI may, if satisfied, after making such verification as it may consider
necessary that the reasons for failure to deposit the notes within the
period specified in the notification referred to in Section 3, are genuine,
credit the value of the notes in his ‘KYC compliant bank account’ in
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 35
[B. R. GAVAI, J.]

such manner as may be specified by it. Sub-section (3) of Section 4 of A
the 2017 Act makes a provision for enabling any person, aggrieved by
the refusal of the RBI to credit the value of the notes under sub-section
(2), to make a representation to the Central Board of the RBI (hereinafter
referred to as “the Central Board”) within fourteen days of the
communication of such refusal to him.
B
12. On the very same day of the promulgation of the 2016
Ordinance i.e. 30th December 2016, the Central Government issued
Notification No. 4251(E), in exercise of the powers conferred by clause
(b) of sub-section (1) of Section 2, read with clause (i) of sub-section (1)
of Section 4 of the 2016 Ordinance. It provided a grace period till 31st
day of March 2017 to citizens who were residents in India. Insofar as C
the citizens who were not resident in India are concerned, the period
was upto 30th day of June 2017. The proviso thereto limited the amount
of SBNs tendered to not exceed the amount specified under regulation 3
or regulation 8 of the Foreign Exchange Management (Export and Import
of Currency) Regulations, 2015 [Notification No. FEMA 6 (R)/RB-2015, D
dated the 29th December, 2015] made under the provisions of the Foreign
Exchange Management Act, 1999 (42 of 1999) and the conditions
specified therein are complied with.
13. Some of the writ petitions were listed before this Court on 21 st
March 2017, when this Court passed the following order: E
“1. Issue notice.
2. On our asking, Mr. R. Balasubramanyam, learned counsel,
accepts notice on behalf of the Union of India and Mr. H.S.
Parihar, learned counsel, accepts notice on behalf of the Reserve
Bank of India. F
3. Having heard submissions, which remained inconclusive, and
before proceeding further with the matter, it was felt, that this
Court should ascertain from the Union of India (a) whether the
Central Government intends to exercise the power conferred by
clause (4)(1)(ii) of Ordinance 10 of 2016; and (b) if the answer to G
(a) is in the negative, the reason why the Central Government
chose not to exercise its jurisdiction. An affidavit may accordingly
be filed by the Central Government, explaining its position to this
Court.
4. Needful be done within two weeks from today. H
36 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 5. Post for hearing on 11th April, 2017.”
14. In pursuance of the directions issued by this Court, a short
affidavit came be to be filed on behalf of the Union of India on 7th April,
2017. It was stated in the said affidavit thus:
“26. In view of the above and those to be urged at the time of
B hearing, it is most humbly submitted that the Central Government
took a conscious decision that no necessity or any justifiable reason
exists either in law or on facts to invoke its power under Section
4(1)(ii) of the Ordinance to entitle any person to tender within the
grace period the specified bank notes.”
C 15. The matter came up for hearing before this Bench initially on
12th October, 2022 and, thereafter, on various dates. We have heard Shri
P. Chidambaram and Shri Shyam Divan, learned Senior Counsel, Shri
Prashant Bhushan, learned counsel, Shri Viplav Sharma, petitioner-in-
person in support of the petitions and Shri R. Venkataramani, learned
D Attorney General appearing for the Union of India and Shri Jaideep
Gupta, learned Senior Counsel appearing for the RBI. We have also
heard the learned counsels appearing in the connected petitions.
III. SUBMISSIONS OF PETITIONERS
16. Shri P. Chidambaram, learned Senior Counsel led the arguments
E on behalf of the petitioners.
17. Shri P. Chidambaram submitted that, upon its correct
interpretation, sub-section (2) of Section 26 of the RBI Act will have to
be read down in a manner that sub-section (2) of Section 26 of the RBI
Act does not permit the power to be exercised in respect of “all series”
F of notes of a specified denomination. He submits that the word “any”
will denote that the power can be exercised only when a particular series
of any denomination is sought to be demonetized.
18. Shri Chidambaram submits that, on earlier occasions i.e. by
the High Denomination Bank Notes (Demonetization) Ordinance, 1946
G (hereinafter referred to as “the 1946 Ordinance”) and the High
Denomination Bank Notes (Demonetization) Act, 1978 (hereinafter
referred to as “the 1978 Act”), “all series” of high denomination bank
notes were demonetized. He submits that, by the 1946 Ordinance, high
denomination bank notes were meant to be “all series” of bank notes of
the denominational value of Rs.500/- Rs.1,000/- and Rs.10,000/-. Similarly,
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 37
[B. R. GAVAI, J.]

by the 1978 Act, the high denomination bank notes were meant to be “all A
series” of the bank notes of the denominational value of Rs.1,000/-,
Rs.5,000/- and Rs,10,000/-. It is thus submitted that, whenever it was
found necessary to demonetize “all series” of a particular denomination,
it was considered necessary to do so by way of a separate enactment of
Parliament.
B
19. Shri Chidambaram submits that, since the bank notes are issued
in different series, the words “any series” before the words “of bank
notes of any denomination” appearing in sub-section (2) of Section 26 of
the RBI Act, will have to be construed as limiting the power of the
Government to declare only a specified series of notes to be no longer
legal tender. He submits that it will have to be held that the words “any C
series” mean “any specified series” and not “all series” of bank notes.
20. Shri Chidambaram submits that, if it is held that the Central
Government is conferred with the power under sub-section (2) of Section
26 of the RBI Act to demonetize currency notes of “all series”, then a
situation may arise wherein the bank notes issued on the previous day D
can be demonetized on the very next day. He submits that, as a result of
the demonetization done on 8th November 2016, even the currency notes
issued on the previous day of the denominational value of Rs.500/- and
Rs.1,000/- had become illegal tender.
21. Shri Chidambaram submits that if sub-section (2) of Section E
26 of the RBI Act is not read down in the aforesaid manner, then the
said Section would be vulnerable to be challenged on the ground that it
confers an unguided, uncanalised and arbitrary power upon the Executive
Government. He submits that, in such a situation, the said provision is
liable to be struck down on the ground that it violates Articles 14, 19, 21 F
and 300A of the Constitution of India. He submits that the fact that the
demonetization of “all series” of high denominational currency notes in
the years 1946 and 1978 was done through separate enactments of
Parliament would support the said proposition.
22. Shri Chidambaram submits that, upon a plain reading of sub- G
section (2) of Section 26 of the RBI Act, it is obvious that there is neither
any policy nor any guidelines in the said provision. What factors are
required to be taken into consideration and what factors are to be
eschewed from consideration, are not specified in sub-section (2) of
Section 26 of the RBI Act. It is submitted that if a drastic power of
H
38 SUPREME COURT REPORTS [2023] 1 S.C.R.

A demonetizing currency notes of “all series” in certain denominations is
to be entrusted to the Executive Government, then Parliament ought to
have laid down the guidelines for exercising such power. He submits
that, in the absence of anything of that nature, it will have to be held that
the delegation to the Executive Government is excessive, arbitrary and
as such, violative of Articles 14, 19, 21 and 300A of the Constitution of
B
India. Learned Senior Counsel relied on the Constitution Bench Judgments
of this Court in the cases of Hamdard Dawakhana (Wakf) Lal Kuan,
Delhi and another v. Union of India and others1 and Harakchand
Ratanchand Banthia and others v. Union of India and others2 in
support of his submissions.
C 23. Shri Chidambaram submits that, in any case, the decision-
making process in the present case was deeply flawed and, therefore, is
liable to the scrutiny of judicial review by this Court.
24. The learned Senior Counsel submits that a plain reading of
sub-section (2) of Section 26 of the RBI Act would reveal that the Central
D Government can exercise the power only on the recommendation of the
Central Board. It is, therefore, submitted that it is implicit in the said sub-
section that the proposal for demonetization must emanate from the RBI.
It is submitted that, from the scheme of the RBI Act, it is clear that the
Central Board, consisting of Members specified in Section 8 of the RBI
E Act, would consider all relevant material, weigh the pros and cons,
consider the impact of the proposed measure on the people of the country
and the consequences on the economy before making a recommendation.
It is submitted that, on a plain reading of sub-section (2) of Section 26 of
the RBI Act, it is clear that the Central Government is not bound to
accept the recommendation of the Central Board. The word ‘may’ used
F therein, postulates exercise of discretion and, therefore, the discretion
so exercised by the Central Government must be exercised after
considering the matter carefully, as to whether the recommendation of
the RBI is required to be accepted or not.
25. Learned Senior Counsel, therefore, submits that it is implicit in
G sub-section (2) of Section 26 of the RBI Act that the Central Board
constituted under Section 8 of the RBI Act must devote sufficient time
to apply their mind while making a recommendation, particularly when a
major step like demonetization is to be taken.
1
(1960) 2 SCR 671
2
H (1969) 2 SCC 166 = (1970) 1 SCR 479
VIVEK NARAYAN SHARMA v. UNION OF INDIA 39
[B. R. GAVAI, J.]

26. Learned Senior Counsel submits that, however, in the present A
case, the decision-making process is deeply flawed. He submits that,
under Section 8 of the RBI Act, the only channel for non-government
Directors to come on the Central Board of the RBI is through clause (c)
of sub-section (1) of Section 8 of the RBI Act. He submits that, usually,
experts in trade and commerce, economists, industrialists, etc. are
B
nominated in the said category. However, on the date on which the
decision for demonetization was taken by the Central Board i.e. 8 th
November, 2016, there were only 3 independent Directors under clause
(c) of sub-section (1) of Section 8 of the RBI Act. He submits that, it is
thus clear that, at the relevant time, the Central Board consisted of a
majority of the Directors who were representatives of the Central C
Government inasmuch as there were 7 vacancies of Directors in category
under clause (c) of sub-section (1) of Section 8 of the RBI Act.
27. Learned Senior Counsel further submits that, in the present
case, a reverse mechanism was adopted. He submits that it was the
Central Government which initiated the proposal for demonetization and D
sought opinion of the Central Board vide its communication dated 7th
November 2016. The meeting of the Central Board was held immediately
on the next day i.e. 8th November 2016 at 5.00 p.m. Within hours, a
recommendation of the Central Board was sent to the Central
Government and, on the same date itself, i.e. 8th November 2016, the
Hon’ble Prime Minister announced the decision of the Cabinet with E
regard to demonetization on National Television at 8.00 p.m.
28. Learned Senior Counsel submits that, unless the following
documents are produced by the respondents, it cannot be verified as to
whether the Central Board while recommending demonetization or as to
whether the Central Government while deciding to notify demonetization F
had taken into consideration the relevant factors or eschewed irrelevant
factors:
a) The letter of the Central Government dated 7th November
2016;
G
b) The Agenda Note dated 8th November 2016, if any, placed
before the Central Board of RBI and the relevant research
papers, background notes, information, data, report, etc.;
c) The recommendation of the Central Board dated 8 th
November 2016 to the Central Government;
H
40 SUPREME COURT REPORTS [2023] 1 S.C.R.

A d) The Note for Cabinet, if any, that was placed before the
Cabinet on 8th November 2016;
e) The actual decision of the Cabinet as recorded in the
Minutes of the Cabinet of its meeting dated 8th November
2016.
B 29. It is submitted that it is only on the perusal of the minutes of
the meeting dated 8th November 2016, of the Central Board, it could be
seen as to whether the requisite quorum was there or not and as to
whether one director from the category under Section 8(1)(c) of the
RBI Act as required under the Reserve Bank of India (General)
C Regulations, 1949 (hereinafter referred to as “the 1949 Regulations”)
was present in the meeting or not.
30. Shri Chidambaram submits that there is no record available to
show that there was application of mind to the relevant factors by the
Central Board, so also by the Central Government. He submits that it is
D also not clear as to whether there was any Cabinet note based on the
recommendation of the Central Board, which was placed before the
Cabinet for consideration. He submits that the Hon’ble Prime Minister
went on National Television at 8.00 p.m. on 8th November 2016, in a slot
that had already been booked by the Government since all channels
telecasted the speech at 8.00 p.m., and announced the decision on
E demonetization. He submits that the decision-making process was pre-
meditated and rushed, which depicted a non-application of mind and
was deeply and fatally flawed. It is thus submitted that the procedure
adopted was in total violation of the procedure contemplated under sub-
section (2) of Section 26 of the RBI Act.
F 31. Shri Chidambaram further submits that neither the RBI nor
the Central Government took into consideration the relevant factors and
eschewed irrelevant factors before making such a far-reaching
recommendation and decision respectively, that would have serious
consequences. He submits that, as a result of demonetization, 86.4% of
G the currency (by value) was declared no longer to be legal tender and
was eventually withdrawn. He submits that, in terms of absolute value,
it amounted to Rs.15,44,000 crore. It is submitted that 2,300 crore distinct
notes had become illegal overnight. It is submitted that, at the relevant
time, the notes in the denomination of Rs.500/- and Rs.1,000/- were
commonly used and, since they were demonetized overnight, millions of
H people were left with no valid bank notes to buy essential goods, such
VIVEK NARAYAN SHARMA v. UNION OF INDIA 41
[B. R. GAVAI, J.]

as, food, milk or even medicines, etc. Thousands of families went without A
a meal. In fact, various voluntary organizations distributed free food to
thousands of families during the relevant period.
32. Shri Chidambaram submits that the result of demonetization
was disastrous. It resulted in steep unemployment within a short period.
Wages were not paid for several weeks. Millions of farmers were unable B
to withdraw or deposit money. They did not have money to buy seeds or
fertilizers or to hire labour. It is submitted that the price of agricultural
products dropped to a huge extent, thereby causing loss to the farmers.
33. Shri Chidambaram submits that the Government also did not
take into consideration the fact that over 2 lakh ATMs were required to C
be recalibrated to dispense the newly issued notes. It is submitted that
the Government, as also the RBI, also did not take into consideration
that, out of 1,38,626 bank branches in India, over two-thirds were located
in metropolitan, urban and semi-urban areas, while only one-third were
located in rural areas, and that 90% of all ATMs were located merely in
16 States. He submits that the seven States in North-East India had only D
5199 ATMs, of which 3645 were in Assam alone. As a result thereof,
the individuals residing in rural areas and those in the Northeast region
were disproportionately and adversely impacted. They had to travel long
distances and stand in queues to exchange notes, forsaking their livelihood
at considerable expense. E
34. Learned Senior Counsel submits that, without taking into
consideration all these factors, the Central Board made the
recommendation and the Central Government took the decision of
demonetization. It is submitted that the consequence thereof is that
demonetization cost the economy about 1-2% of the GDP, i.e. about F
Rs.1,50,000 crore.
35. Shri Chidambaram further submits that the objectives stated
in the impugned Notification were false and illusory which could not
have been achieved and which, in fact, were not achieved. He submits
that one of the objectives was to weed out fake currency notes that G
were causing adverse effect on the economy. Another objective was to
stop the use of high denomination bank notes for the storage of
unaccounted wealth. Learned Senior Counsel submits that, when a fake
currency note is detected by a Bank Officer, he is obliged to impound it,
report it and give the same to the RBI. The RBI is required to destroy
the note, thus taking the fake currency note out of possible circulation. It H
42 SUPREME COURT REPORTS [2023] 1 S.C.R.

A is submitted that the Annual Report of the RBI for the year 2016-2017
reported that only fake currency of the value of Rs.43.3 crore was
detected in the nearly Rs.15.31 lakh crore of currency exchanged through
the banking system. It is submitted that this represented 0.0028% of the
total currency notes that were returned/exchanged through the banking
system/RBI.
B
36. Learned Senior Counsel submitted that, in fact, the Indian
Express quoted a senior Directorate of Revenue Intelligence (DRI)
official who said that, while fake currency seized before demonetization
was of low quality and easily identifiable by the naked eye, the quality of
fake notes considerably improved post-demonetization, making it harder
C to identify. It is submitted that, as such, it is clearly seen that the said
objective was false and, in any case, demonetization hopelessly failed to
achieve the said objectives.
37. Learned Senior Counsel further submitted that the third
objective was to arrest the use of fake currency for financing subversive
D activities such as drug trafficking and terrorism, which cause damage to
the economy and the security of the country. In this respect, learned
Senior Counsel submits that new notes of denominational value of
Rs.2,000/- were found on the bodies of two terrorists killed in an encounter
in Bandipora on 22nd November 2016. Learned Senior Counsel submits
E that nearly 99.3% of the demonetized notes were returned, whether
they represented storage of accounted or unaccounted wealth. It is
submitted that to facilitate the exchange of money, several brokers sprung
up, who offered to exchange ‘demonetized’ notes for a price. As such,
even honest people turned dishonest to make some money.

F 38. Learned Senior Counsel submits that, shortly after
demonetization, the Income Tax Department and the DRI conducted
searches and raids and seized alleged unaccounted wealth in the form
of Rs.2,000 notes. It is, therefore, submitted that all the stated objectives
have utterly failed.

G 39. Shri P. Chidambaram further submitted that the impugned
Notification is liable to be set aside on another ground also. He submits
that the doctrine of proportionality has now been recognised in Indian
jurisprudence. Applying the test of proportionality to the impugned act of
demonetization, he submits that there was absolutely no justification to
demonetize 86.4% of the currency in circulation representing a value of
H Rs.15,44,000 crore that caused enormous damage to the economy and
VIVEK NARAYAN SHARMA v. UNION OF INDIA 43
[B. R. GAVAI, J.]

placed an intolerable and horrendous burden upon the people of the A
country, especially the poor. It is submitted that, before resorting to such
a drastic step, the Central Board as well as the Central Government
ought to have taken into consideration as to whether an alternative method
could have been resorted to achieve the purpose for which the exercise
of demonetization was done. In this respect, learned Senior Counsel
B
relied on the judgment of this Court in the case of K.S. Puttaswamy
(Retired) and another (Aadhaar) v. Union of India and another3
and Internet and Mobile Association of India v. Reserve Bank of
India 4.
40. Learned Senior Counsel submitted that though, while exercising
the power of judicial review, it may not be permissible for this Court to C
examine the correctness of the decision, however, this Court can very
well exercise its powers to examine the correctness of the decision-
making process. He submits that the decision-making process in the
present case is totally flawed. He submits that neither the Central Board
while making the recommendation nor the Central Government while D
taking the decision have followed the procedure as prescribed in sub-
section (2) of Section 26 of the RBI Act. He submits that, in any case,
they have failed to take into consideration the relevant factors which
were required to be taken into consideration and have taken into
consideration those factors which were false from the very inception
and have subsequently been proved to be so. He, therefore, submits that E
this Court is entitled to exercise its powers of judicial review and hold
that the decision-making process was not sustainable in law. In this
respect, learned Senior Counsel relied on the judgments of this Court in
the cases of Tata Cellular v. Union of India 5, Uttamrao Shivdas
Jankar v. Ranjitsinh Vijaysinh Mohite Patil 6, Centre for Public F
Interest litigation and others v. Union of India and others7, Lt.
General Manomoy Ganguly Vsm v. Union of India and others 8 and
K.S. Puttaswamy (Retired) and another (Aadhaar) (supra).
41. Learned Senior Counsel further submitted that, despite the
passage of time, this Court has the power to grant declaratory relief G
3
(2019) 1 SCC 1
4
(2020) 10 SCC 274
5
(1994) 6 SCC 651
6
(2009) 13 SCC 131
7
(2012) 3 SCC 1
8
(2018) 18 SCC 83 H
44 SUPREME COURT REPORTS [2023] 1 S.C.R.

A including the relief of declaring as to what is the true meaning and
interpretation of various provisions of the RBI Act and also to mould the
relief accordingly. Learned Senior Counsel relied on the judgment of this
Court in the case of Somaiya Organics (India) Ltd. and another v.
State of U.P. and another9, Orissa Cement Ltd. v. State of Orissa
and others10, and I.C. Golak Nath & Others v. State of Punjab &
B
Another11 in support of the said submissions.
42. Learned Senior Counsel further submitted that the impugned
Notification is also violative of Article 19(1)(g) of the Constitution of
India. He submits that, if it is the contention of the State that the restriction
imposed is reasonable and in the interest of the general public, then the
C burden is on the respondents to establish the same. However, in the
present case, the respondents have failed to do so. He further submits
that this Court in the case of Jayantilal Ratanchand Shah v. Reserve
Bank of India and others12 has held the currency notes to be property.
He, therefore, submits that depriving a person of his property by
D demonetization would be violative of Article 300A of the Constitution of
India.
43. Shri Shyam Divan, learned Senior Counsel appearing on behalf
of the applicant-Malvinder Singh, submitted that, apart from the guarantee
given by the Central Government with regard to exchange of every
E bank note as legal tender at any place in India, they are also the liabilities
of the Issue Department under Section 34 of the RBI Act to an amount
equal to the total of the amount of the currency notes of the Government
of India and bank notes for the time being in circulation.
44. Learned Senior Counsel submitted that the Hon’ble Prime
F Minister, in his speech on 8 th November 2016, gave a categorical
assurance that the rights and interests of honest, hard-working people
would be fully protected. A specific assurance was also given that if
there may be some who, for some reason, are not able to deposit their
old five hundred or one thousand rupee notes by 30 th December 2016,
they could go to specified offices of the RBI upto 31st March 2017 and
G deposit the notes after submitting a declaration form. He submits that a
person of a stature no less than the Hon’ble Prime Minister of India has
9
(2001) 5 SCC 519
10
1991 Supp (1) SCC 430
11
(1967) 2 SCR 762
12
H (1996) 9 SCC 650
VIVEK NARAYAN SHARMA v. UNION OF INDIA 45
[B. R. GAVAI, J.]

given an assurance that such persons would be able to go to specified A
offices of the RBI upto 31st March 2017 and deposit the notes after
submitting a declaration form. It is further submitted that in the Press
Note published on the same day, i.e. 8th November 2016, an assurance
was given to the following effect:
“(x) For those who are unable to exchange their Old High B
Denomination Bank Notes or deposit the same in their bank
accounts on or before December 30, 2016, an opportunity will be
given to them to do so at specified offices of the RBI on later
dates along with necessary documentation as may be specified
by the Reserve Bank of India.”
C
45. Learned Senior Counsel submits that the said assurance was
also reiterated in the RBI Notice dated 8th November 2016. Learned
Senior Counsel, therefore, submits that applicant’s/petitioner’s case
(petitioner in Writ Petition (Civil) No.149 of 2017) stands on peculiar
facts. Shri Divan submits that the applicant/petitioner withdrew an amount
of Rs.1,20,000/- from his bank account operating in Central Cooperative D
Bank, Sangrur, Punjab (Branch-Ghelan) on 3rd December 2015 and kept
the same with his previous savings of Rs.42,000/- in cash, which totals
to Rs.1,62,000/- (i.e. 60 notes of Rs. 500 denomination and 132 notes of
Rs.1000/- denomination). On 11 th April, 2016, he went to visit
his son residing in the USA, leaving his above mentioned saving of E
Rs.1,62,000/- at home in India for his future knee operation. The applicant
travelled with his wife. During their absence, their home was locked and
the money could not have been deposited. Learned Senior Counsel submits
that, after returning to India on 3rd February, 2017, and relying on the
assurance given by the Hon’ble Prime Minister of India, he made a
representation to the RBI for exchange of the currency notes in his F
possession. However, the same was not considered, thus constraining
him to file a writ petition (i.e. Writ Petition (Civil) No.149 of 2017). This
Court, vide order dated 3rd November 2017 disposed of the said writ
petition giving him the liberty to file an application for intervention/
impleadment in Writ Petition (Civil) No.906 of 2016 (Vivek Narayan G
Sharma vs. Union of India), which was accordingly filed him vide I.A.
No.26757 of 2018 in Writ Petition (Civil) No.906 of 2016.
46. Shri Divan submits that the proviso to the Notification dated
30th December 2016 issued by the Ministry of Finance, Department of
Economic Affairs, Government of India, totally excludes persons like
H
46 SUPREME COURT REPORTS [2023] 1 S.C.R.

A the applicant. He submits that, only on account of the number of days
residing abroad, the applicant was categorized as non-resident Indian
and as such, he was only entitled to exchange currency notes to the
extent as provided in the proviso to the Notification dated 30th December
2016. Learned Senior Counsel submits that, however, the applicant had
not carried the cash while travelling abroad and as such, there was no
B
question of making a declaration under clause (i) of sub-section (1) of
Section 4 of the 2016 Notification.
47. Learned Senior Counsel further submitted that, in view of
clause (ii) of sub-section (1) of Section 4 of the 2017 Act, the Central
Government is empowered to provide a grace period to such class of
C persons and for such reasons as may be specified, by notification. He
submits that the said power is coupled with a duty. It is, therefore,
submitted that when there are genuine cases, the Central Government is
bound to exercise the power under clause (ii) of sub-section (1) of Section
4 of the 2017 Act and provide grace period to the applicant and persons
like him.
D
48. Shri Divan further submits that the Circular of the RBI dated
31st December 2016 is also discriminatory, inasmuch as in the case of
Resident Indians, there is no monetary limit for tender of SBNs. However,
insofar as the Non-Resident Indians (NRIs) are concerned, the tender
is restricted to a maximum of Rs.25,000/- per individual depending on
E when the notes were taken out of India as per relevant FEMA Rules.
Learned counsel submits that an additional liability is imposed upon the
NRIs to produce a certificate issued by the Indian Customs on arrival
through Red Channel after 30th December 2016, indicating the import of
SBNs, with details and value thereof.
F 49. Shri Divan relied on the article titled “Using Fast Frequency
Household Survey Data to Estimate the Impact of Demonetization on
Employment” by Mr. Mahesh Vyas, Centre for Monitoring Indian
Economy (2018) in support of his submission that on account of
demonetization, there was substantial reduction in employment, which
was about 12 million lower than it was during the 2 months preceding
G demonetization. And, over a 4-month period when the entire sample
was surveyed, the impact of demonetization reduced to a loss of about 3
million jobs. He submits that an article in the Indian Express dated 17th
January 2017 based on a study conducted by the All India Manufacturers’
Organisation (AIMO), indicated that the manufacturing sector suffered
H from considerable job loss post-demonetization.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 47
[B. R. GAVAI, J.]

50. Learned Senior Counsel also submits that in the absence of a A
specific study with regard to the effect of demonetization on the Indian
economy, the decision of the Central Government for demonetizing about
86.4% of the total currency in circulation will have to be held to be
vitiated on account of manifest arbitrariness. It is submitted that the
impugned notification is also liable to be set aside applying the test of
proportionality. Applying the classical equality test, he submits that it will B
have to be held that the decision of demonetization had no nexus to the
objectives to be achieved. Learned Senior Counsel relies on the judgment
of theConstitution Bench of this Court in the case of K.S. Puttaswamy
(Retired) and another (Aadhaar) (supra) in this regard.
51. Shri Divan lastly submits that the right to life also includes the C
right to live with dignity. Relying on the Constitution Bench judgment of
this Court in the case of Maneka Gandhi v. Union of India13, he submits
that the right to live with dignity also includes the right to travel abroad,
especially to visit the son of the petitioner/applicant in the USA. He,
therefore, submits that when the applicant/petitioner had gone to the
USA to visit his son during the period wherein the currency notes could D
have been exchanged, he will be deprived of his right under Article 21 of
the Constitution of India if he is not granted an opportunity now to exchange
the demonetized notes with the new notes.
IV. SUBMISSIONS OF UNION OF INDIA
52. Shri R. Venkataramani, learned Attorney General (“A.G.” for E
short), at the outset, submits that the action taken vide the impugned
notification stands ratified by the 2017 Act. It is, therefore, submitted
that with the executive action being validated by the will of Parliament,
the challenge to the same would not survive.
53. The learned A.G. submits that the word “any” appearing before F
the words “series of bank notes” in sub-section (2) of Section 26 of the
RBI Act should be construed as “all”. Learned A.G. relies on the
following judgments of this Court in support of his submission that the
word “any” will have to be construed to be “all”.
(i) The Chief Inspector of Mines and another v. Lala Karam
G
Chand Thapar etc.14
(ii) Banwarilal Agarawalla v. The State of Bihar and
others15
13
(1978) 2 SCR 621
14
(1962) 1 SCR 9
15
(1962) 1 SCR 33 H
48 SUPREME COURT REPORTS [2023] 1 S.C.R.

A (iii) Tej Kiran Jain and others v. N. Sanjiva Reddy and
others16
(iv) Lucknow Development Authority v. M.K. Gupta 17
(v) K.P. Mohammed Salim v. Commissioner of Income Tax,
Cochin18
B
(vi) Raj Kumar Shivhare v. Assistant Director, Directorate
of Enforcement and another19
54. The learned A.G. submits that the action under sub-section
(2) of Section 26 of the RBI Act cannot be construed in a narrow
C compass. It is submitted that various factors, aspects and challenging
confrontations affecting the economic system of the country and its
stability will have to be given due weightage while considering the validity
of the action taken under sub-section (2) of Section 26 of the RBI Act.
55. The learned A.G. submits that the comparison of the action
D taken under sub-section (2) of Section 26 of the RBI Act with the 1946
and the 1978 legislations is totally misconceived. It is submitted that, in
any case, the 2017 Act not only addresses the issues relating to cessationof
legal tender under sub-section (2) of Section 26 of the RBI Act, but also
provides for exchange of bank notes in order that Article 300A of the
Constitution of India is complied with, and also extinguishes the liabilities
E of the Issue Department of the RBI under Section 34 of the RBI Act.
56. The learned A.G. submits that if the construction as advanced
by the petitioners is accepted, then the very purpose for which the
provision is made shall stand frustrated. The learned A.G., relying on the
judgment of this Court in the case of C.I.T. v. S. Teja Singh20, submits
F that it is a settled principle of law that the Courts will strongly lean against
a construction of a provision which will render it futile.It issubmitted that
the bolder construction, based on the view that Parliament would legislate
only for the purpose of bringing about an effective result, is required to
be accepted.
G 57. The learned A.G. submits that the argument that the word
“any” would not mean “all” is fallacious in nature. If the same is accepted,
16
(1970) 2 SCC 272
17
(1994) 1 SCC 243
18
(2008) 11 SCC 573
19
(2010) 4 SCC 772
20
H AIR 1959 SC 352
VIVEK NARAYAN SHARMA v. UNION OF INDIA 49
[B. R. GAVAI, J.]

the Government would technically be permitted to issue separate A
notifications for each series but would be prohibited from issuing a
common notification for all series. It is submitted that if such process is
held to be permitted, it would lead to chaos and uncertainty.
58. The learned A.G. further submits that the word “any” has
been used at two places in sub-section (2) of Section 26 of the RBI Act. B
It is submitted that the word “any” preceding the words “series of bank
notes” has to be construed to mean “all”, whereas the word “any”
preceding the word “denomination” may be construed to be singular or
otherwise. He submits that the same word used in the same provision
twice could be permitted to have a different meaning. He relies on the
judgment of this Court in the case of Maharaj Singh v. State of Uttar C
Pradesh and others21 in support of his submission.
59. The learned A.G. submits that the alternative submission that
if the word “any” is not given any restricted meaning then sub-section
(2) of Section 26 of the RBI Act will have to be held to be invalid on the
ground of vesting of excessive delegation, is also without substance. D
The learned A.G. submits that the RBI is not just like any other statutory
body created by an Act of legislature. It is submitted that it is a creature
created with a mandate to get liberated even from its creator. It is
submitted that the guiding factors for exercise of power under sub-section
(2) of Section 26 of the RBI Act have to be found from Section 3 of the E
RBI Act as well as from its preamble. It is submitted that the RBI Act
was enacted for the purposes of taking over the management and
regulation of the currency from the Central Government as per Section
3 of the RBI Act. The preamble of the RBI Act also states that the RBI
has been constituted to “regulate the issue of bank notes”. It is submitted
that the words “taking over the management of the currency” in Section F
3 of the RBI Act and “regulate” in the Preamble have to be given the
widest possible import. It is submitted that a narrower construction would
defeat the very purpose of the RBI Act. It is submitted that the word
“regulate” would also include “prohibit”.
60. The learned A.G., relying on the judgment of this Court in the G
case of Municipal Corporation of Delhi v. Birla Cotton, Spinning
and Weaving Mills, Delhi and another22 submits that, in order to find
out as to whether the legislature has given guidance for exercise of
21
(1977) 1 SCC 155
22
AIR 1968 SC 1232 : (1968) 3 SCR 251 H
50 SUPREME COURT REPORTS [2023] 1 S.C.R.

A delegated powers, the Court will have to consider the provisions of the
particular Act with which the Court has to deal with, including its
preamble. It is submitted that the preamble of the RBI Act read with
Section 3 thereof provides sufficient guidance to the delegatee Central
Government for exercising its powers. It is further submitted that, while
considering the question as to whether the delegation is excessive or
B
not, the nature of the body to which delegation is made is also a factor to
be taken into consideration. It is submitted that in the present case, the
delegation is to the Central Government and not to any subordinate office
or department.
61. The learned A.G. submitted that the judgment of this Court in
C the case of Harakchand Ratanchand Banthia and others (supra)
would not be applicable to the facts of the present case inasmuch as in
the said case, the delegation was to an Administrator and this Court
found that the delegation to the Administrator was too wide and, thus,
suffered from the vice of excessive delegation. It is submitted that,
D similarly, the judgment of this Court in the case of Hamdard
Dawakhana (Wakf) Lal Kuan, Delhi and another (supra) also would
not be applicable to the facts of the present case.
62. The learned A.G., in addition to the reliance placed on the
judgment of this Court in the case of Birla Cotton, Spinning and
E Weaving Mills Delhi (supra) also relies on the judgments of this Court
in the following cases:
(i) Delhi Laws Act, In Re23
(ii) M.P. High Court Bar Association v. Union of India and
others24
F
(iii) Kerala State Electricity Board v. The Indian Aluminium
Co. Ltd.25
(iv) Ajoy Kumar Banerjee and others v. Union of India and
others26
G (v) Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt.
Commissioner of Sales Tax and others27
23
AIR 1951 SC 332: 1951 SCC 568
24
(2004) 11 SCC 766
25
(1976) 1 SCC 466
26
(1984) 3 SCC 127
27
H (1974) 4 SCC 98
VIVEK NARAYAN SHARMA v. UNION OF INDIA 51
[B. R. GAVAI, J.]

(vi) Ramesh Birch and others v. Union of India and others28 A
(vii) M/s Gammon India Limited Etc. v. Union of India &
Others29
(viii) Prabhudas Swami and Another v. State of Rajasthan
and Others30
B
(ix) Rojer Mathew v. South Indian Bank Ltd. represented
by its Chief Manager and Ors.31
(x) The Registrar of Co-operative Societies, Trivandrum and
another vs. K. Kunjabmu and others32
(xi) Darshan Lal Mehra and others v. Union of India and C
others33
63. The learned A.G. also relies on the judgments of the U.S.
Supreme Court in the cases of Yakus v. U.S.34 and Federal Energy
Administration v. Algonquin SNG. Inc.35 in support of his submission.
D
64. Insofar as the contention of the petitioners with regard to the
impugned action being susceptible to challenge on the ground of
proportionality is concerned, the learned A.G. submits that the reliance
placed on the judgment of this Court in the case of Internet and Mobile
Association of India (supra) is wholly misconceived. Relying on various
paragraphs from the said judgment, the learned A.G. submits that the E
observations made in paragraph 224 of the said judgment have to be
read in context with the issue that fell for consideration before this Court
in the said case. It is submitted that in the said case, this Court was
considering the action of the RBI in restricting the banks and financial
institutions regulated by it from providing access to banking services to
F
those engaged in transactions in crypto assets. It is submitted that, though
this Court held that, in view of the provisions contained in the RBI Act,
the Banking Regulation Act, 1949 and the Payment and Settlement
Systems Act, 2007, and also in view of the special place and role that the
28
1989 Supp. (1) SCC 430
29
(1974) 1 SCC 596
G
30
AIR 2003 RAJ 190
31
(2020) 6 SCC 1
32
(1980) 1 SCC 340
33
(1992) 4 SCC 28
34
321 U.S. 414 (1944)
35
426 U.S. 548 (1976) H
52 SUPREME COURT REPORTS [2023] 1 S.C.R.

A RBI has in the economy of the country, the RBI had very wide and
ample powers to take preventive and curable measures. However, this
Court found that applying the test of proportionality, in the absence of
the RBI pointing out some semblance of any damage suffered by its
regulatory entities, the action was not sustainable.The learned A.G.
submitted that the action in the present case was taken after considering
B
the relevant factors and to address serious concerns such as terror
financing, black money and fake currency. It is, therefore, submitted
that the judgment of this Court in the case of Internet and Mobile
Association of India (supra) would not be applicable to the facts of the
present case.
C 65. The learned A.G., relying on the judgment of this Court in the
case of State of Tamil Nadu and another v. National South Indian
River Interlinking Agriculturist Association36, submitted that in a case
of non-classificatory arbitrariness, the test of proportionality would be
applicable. However, in a case of classificatory arbitrariness, the only
D test that will have to be satisfied is the rational nexus test, i.e. whether
the action taken has a reasonable nexus with the object to be achieved.
In such a case, the proportionality test would not be applicable. It is
submitted that the present case would fall in the latter category and not
in the former category.
E 66. Countering the argument made on behalf of the petitioners
that the power exercised under sub-section (2) of Section 26 of the RBI
Act has not been exercised in the manner as provided therein and further
that the decision-making process is flawed on account of patent
arbitrariness, the learned A.G. submitted that in view of the settled legal
position, the said contention is also not tenable. It is submitted that what
F is postulated under sub-section (2) of Section 26 of the RBI Act is that
the Central Government may take a decision on the recommendation of
the Central Board. It is submitted that in the present case, there was, in
fact, a recommendation by the Central Board recommending
demonetization. The decision by the Central Government has been taken
G after considering the said recommendation. It is, therefore, submitted
that the procedure as provided in sub-section (2) of Section 26 of the
RBI Act stands duly complied with. The learned A.G. submitted that the
RBI is not only an expert body but a very special institution charged with
a duty of conceiving and implementing various facets of economic and
36
H (2021) SCC OnLine SC 1114
VIVEK NARAYAN SHARMA v. UNION OF INDIA 53
[B. R. GAVAI, J.]

monetary policy. It is submitted that there cannot be a straitjacket formula A
in the discharge of its duty. Learned A.G. submits that in any case, it is a
settled law that this Court should not interfere with the opinion of experts
and leave it to experts who are more familiar with the problems they
face. Reliance in this respect is placed on the judgment of this Court in
the case of Rajbir Singh Dalal (Dr.) v. Chaudhari Devi Lal
B
University, Sirsa and another37 and Secretary and Curator, Victoria
Memorial Hall v. Howrah Ganatantrik Nagrik Samity and others 38.
67. Relying on the judgment of this Court in the case of Bajaj
Hindustan Limited v. Sir Shadi Lal Enterprises Limited and
another39, the learned A.G. submits that economic and fiscal regulatory
measures are a field where Judges should encroach upon very warily as C
Judges are not experts in these matters.
68. The learned A.G. submitted that the recommendation of the
RBI and the decision of the Central Government was taken after taking
into consideration that fake currency notes of the SBNs have largely
been in circulation and it was difficult to identify genuine bank notes D
from the fake ones and to also address three serious problems viz., fake
currency notes, storage of unaccounted wealth and terror financing. It
is submitted that the material with regard to such factors cannot be
considered overnight. It is submitted that the 2012 White Paper on Black
Money throws light on the complexity of the problem. The information E
and data gathered from various agencies of the Government of India
are required to be taken into consideration. It is submitted that both the
RBI and the Central Government act in coordination with each other.
The learned A.G. submits that the discussions over the issue have taken
place over a long period of time and, after considering all the aspects,
the RBI recommended demonetization and the Central Government took F
the decision to demonetize.
69. The learned A.G. further submitted that the contention of the
petitioners that demonetization has utterly failed to achieve its objectives
as stated in the impugned Notification is also without substance. The
learned A.G. submits that the repercussion of an action like the one G
under consideration can be best understood by considering the legal tender
cessation measure not in isolation but by looking at the overall benefits
37
(2008) 9 SCC 284
38
(2010) 3 SCC 732
39
(2011) 1 SCC 640 H
54 SUPREME COURT REPORTS [2023] 1 S.C.R.

A flowing from such a measure. The learned A.G. submits that the benefits
and advantages of such an action are direct as well as indirect. The
learned A.G. submits that, as a result of the impugned action, there are
direct benefits, like:
(i) significant reduction in fake currency;
B (ii) significant increase in the number of tax payers;
(iii) 25% growth in filing income-tax returns;
(iv) significant increase in returns filed by corporate tax payers;
(v) substantial growth in new PAN numbers.
C
70. The learned A.G. submits that, whereas self-assessment tax
in the year 2015-16 was Rs.55,000 crore and Rs.68,000 crore in the
year 2016-2017, it has jumped to Rs.1,00,000 crore in the year 2017-18.
The learned A.G. further submitted that, as a direct benefit of
demonetization, the volume of Unified Payments Interface (UPI)
D transactions shot up from 1.06 crore in 2016-2017 to 90.5 crore in 2017-
18 and further to about 5000 crore in 2021-22. The value of the UPI
transactions also grew 1210 times in 2021-22 as compared to 2016-17.
It is submitted that the real GDP growth in the year 2017-18 was higher
than the average annual growth of 6.6% in the decade (2010-11 to 2019-
20).
E
71. The learned A.G. further submitted that there have also been
various indirect benefits. Action against domestic black money resulted
in undisclosed income of Rs.82,168 crores. Surveys conducted in 63,691
cases led to undisclosed income of Rs.84,396 crores getting deducted.
The employees provident fund organization (EPFO) enrolment data saw
F
an increase of 1.1 crore new enrolments. It also saw 55% increase in
Employees’ State Insurance Corporation (ESIC) registrations. It is,
therefore, submitted that if the effect of impugned action is considered
in a larger perspective, it will clearly show that there have been several
direct as well as indirect benefits on account of the demonetization.
G 72. The learned A.G. further submitted that, merely because in
1946 and 1978 the demonetization was effected by enactments of
Parliament, cannot be a ground to hold that the Central Government
does not have a power under sub-section (2) of Section 26 of the RBI
Act. It is submitted that, in any case, the said argument does not hold
H water inasmuch as what has been provided under the impugned
VIVEK NARAYAN SHARMA v. UNION OF INDIA 55
[B. R. GAVAI, J.]

notification is wholly ratified by the 2017 Act. It is submitted that once A
the executive action is ratified by Parliament by way of legislation, the
argument that since Parliament had chosen to do so in 1946 and 1978,
the Central Government could not have done it under the impugned
notification itself is contradictory.
73. The learned A.G. submits that the perusal of the Parliamentary B
debates while enacting the 1978 Act would clearly show that, though by
the said Act only high denomination bank notes of the denominational
value of Rs.1,000/-, Rs.5,000/- and Rs.10,000/- were demonetized, the
Members of Parliament advocated for demonetization of even the bank
notes of the denominational value of Rs.100.
C
74. The learned A.G. submits that the provisions of the 1978 Act
have been found to be constitutional by the Constitution Bench Judgment
of this Court in the case of Jayantilal Ratanchand Shah (supra). It is
submitted that, for the reasoning adopted by the Constitution Bench in
the said case, the impugned notification, which now stands ratified by
the 2017 Act, also deserves to be upheld. D

75. In respect of the submission made on behalf of the petitioners,
that in order to address concern of the genuine difficulties of various
persons who could not deposit the demonetized bank notes within the
limited period, a window should be opened for a limited period; the learned
A.G. submitted that if such is permitted, it would amount to devising a E
norm which will alter the essential character of the enactment. It is
submitted that, firstly, it is difficult to ascertain genuineness of the money.
Such a request will have to be based on certain declarations being made
by the party whose veracity cannot be verified. It is submitted that this
would also provide a loophole for non-genuine bank note holders to F
channelize their unaccounted money through the window. It is submitted
that, incidentally, the law enforcing agencies are still recovering significant
amount of SBNs from the individuals.
76. The learned A.G. further submitted that, as of now, Rs.10,719
crore of SBNs are still in circulation. It is submitted that in any case, in G
view of the provisions of clause (i) of sub-section (1) of Section 4 of the
2017 Act, 77,748 applications involving an amount of Rs.284.25 crore
were received from resident and non-resident Indians by the five
designated Regional Offices of the RBI during the grace period. Out of
this, a total of 57,405 cases (74% of the total applications received)
H
56 SUPREME COURT REPORTS [2023] 1 S.C.R.

A amounting to Rs.221.95 crore (78% of the total amount under these
applications) have been accepted and the amounts have been credited
to their KYC compliant bank accounts. It is submitted that out of the
total cases, 20,343 cases were rejected due to various reasons. The
learned A.G. submits that it will not be permissible for the Court to devise
a norm which would result in altering the essential character of the
B
enactment. In support of this submission, he relies on the judgment of
United States Supreme Court in the case of Metropolis Theater
Company et al v. City of Chicago and Ernest J. Magerstadt40.
77. The learned A.G. lastly submits that the Court must not proceed
for a formal judgment when it cannot grant any effectual relief. In this
C respect, he relies on the judgments of United States Supreme Court in
the cases of North Carolina v. Wayne Claude RICE41 and Mills v.
Green42 and the judgment of the Court of Appeal of New York in the
case of People ex rel. Kingsland v. Clark43.
78. Taking the line further, the learned A.G. submits that it is also
D a settled proposition of law that the Court should not decide academic
questions. In this respect, he relies on the judgment of this Court in the
cases of Shrimanth Balasaheb Patil v. Speaker, Karnataka
Legislative Assembly and others 44, Central Areca Nut & Cocoa
Marketing & Processing Cooperative Ltd. v. State of Karnataka
E and others45 and R.S. Nayak v. A.R. Antulay46.
V. SUBMISSIONS OF THE RBI
79. Shri Jaideep Gupta, learned Senior Counsel appearing on behalf
of the RBI, would submit that the contention of the petitioners that the
power under sub-section (2) of Section 26 of the RBI Act is uncanalised,
F unguided and arbitrary is without any basis. He submits that sub-section
(2) of Section 26 of the RBI Act itself provides that the power by the
Central Government has to be exercised on the recommendation of the
Central Board. It is, therefore, submitted that there is an inbuilt safeguard
in the provision itself.
G 40
228 US 61 (1913)
41
404 U.S. 244 (1971)
42
159 U.S. 651 (1895)
43
25 Sickels 518 (1877)(Court of Appeals of New York)
44
(2020) 2 SCC 595
45
(1997) 8 SCC 31
46
H (1984) 2 SCC 183
VIVEK NARAYAN SHARMA v. UNION OF INDIA 57
[B. R. GAVAI, J.]

80. Relying on the judgment of this Court in the case of Peerless A
General Finance and Investment Co. Limited and another v.
Reserve Bank of India47, it is submitted that the RBI, which is a
bankers’ bank, has a large contingent of experts to render advice relating
to matters affecting the economy of the entire country. It is submitted
that the RBI plays an important role in the economy and financial affairs
B
of India and one of its important functions is to regulate the banking
system in the country. It is submitted that the recommendation of the
Central Board is based upon the advice of the experts that the RBI has
in its contingent. Shri Gupta also relies on the judgment of the Constitution
Bench of this Court in the case of Joseph Kuruvilla Velukunnel v.
Reserve Bank of India and others48 in support of this submission. C
81. Shri Gupta further submitted that the contention that the
decision-making process is faulty on account of not following the
procedure under sub-section (2) of Section 26 of the RBI Act is also
without substance. The learned Senior Counsel submits that the procedure
under sub-section (2) of Section 26 of the RBI Act contemplates two D
things i.e. recommendation of the Central Board and the decision by the
Central Government. It is submitted that both these requirements stand
fully satisfied in the present case. He submits that though it is the
contention of the petitioners that the procedure is flawed, however, the
petition itself is bereft of such averments. Shri Gupta submits that the
Constitution Bench of this Court in the case of Ram Kishore Sen and E
others v. Union of India and others49 has held that the burden of proof
primarily lies on a person who complains that the procedure prescribed
has not been followed. In any case, he submits that in both the affidavits
filed on behalf of the RBI i.e. the counter affidavit dated 19th December
2018filed by Haokholal, Assistant General Managerand theadditional F
affidavit dated 15th November 2022 ofShri Kuntal Kaim, Deputy General
Manager,it has been specifically averred that the procedure as prescribed
under sub-section (2) of Section 26 of the RBI Act read with Regulation
8 of the 1949 Regulations was duly followed. He submits that the quorum
as prescribed under the 1949 Regulations was very much available when
the meeting of the Central Board was held on 8th November 2016. In G
any case, it is submitted that in view of sub-section (5) of Section 8 of
the RBI Act, a decision of the Board cannot be questioned merely on
47
(1992) 2 SCC 343
48
1962 Supp (3) SCR 632
49
(1966) 1 SCR 430 H
58 SUPREME COURT REPORTS [2023] 1 S.C.R.

A the ground of existence of any vacancy or any defect in the constitution
of the Board. The learned Senior Counsel has placed on record an
additional affidavit dated 6th December, 2022 reiterating the statements
made in the aforesaid two affidavits dated 19th December 2018 and 15th
November 2022.
B 82. Relying on the judgment of this Court in the case of Internet
and Mobile Association of India (supra), Shri Gupta submits that to
consider the question of proportionality, a four-pronged test, as set out in
the judgment of this Court in the case of Modern Dental College and
Research Centre and Others v. State of Madhya Pradesh and
Others50 is required to be applied. It is submitted that since the measure
C is designated for the purpose of dealing with fake currency, black money
and terror funding, the first test stands satisfied. The measure, i.e.
demonetization, has a reasonable nexus for the fulfillment of the purpose
of aforesaid three objectives and, as such, the second test is also fulfilled.
Insofar as the third test is concerned, it is submitted that it is a matter of
D economic policy as to what measure is found to be appropriate for
achieving the objective of dealing with the menace of aforesaid three
evils. It is submitted that it is for the experts in the economic and monetary
fields to take a decision in that regard and, as such, the third test, as to
whether there was no alternative less invasive measure, would not be
applicable to a decision pertaining to economic policy. Insofar as the
E fourth test is concerned, it is submitted that, as a matter of fact, there
has been no infringement of the rights of the citizens. As a matter of
fact, no currency is being taken away. Full value of the legitimate currency
has been exchanged. It is submitted that non-cash transactions such as
credit card, debit card, on-line transaction, etc. were permitted even
F during the period between 8th November 2016 and 31st December 2016.
In any case, it is submitted that immediately after the demonetization
was notified, in spite of enormity of operations, immediate steps were
taken for the betterment of the public and to ensure adequate cash supply.
It is submitted that various measures were taken in order to alleviate the
genuine grievances of the citizens, which have been enumerated in
G paragraphs 11 to 17 of the affidavit dated 19th December 2018 filed on
behalf of the RBI.It is, therefore, submitted that the proportionality test
would not be applicable in the present case.
83. Shri Gupta relying on the judgment of this Court in the case of
Small Scale Industrial Manufactures Association (Registered) v.
50
H (2016) 7 SCC 353
VIVEK NARAYAN SHARMA v. UNION OF INDIA 59
[B. R. GAVAI, J.]

Union of India and others51 submits that normally, it is not within the A
domain of any court to weigh the pros and cons of the policy or to
scrutinize it except only when it is found to be arbitrary and violative of
any constitutional or any statutory provisions of law.
84. Shri Gupta further submits that a similar provision providing
for a specified time for exchange of notes has already been found to be B
valid by the Constitution Bench of this Court in the case of Jayantilal
Ratanchand Shah (supra). He submits that the time provided in the
present case is almost similar to the time provided under the 1978 Act.
The said period has been found to be reasonable having regard to the
purpose sought to be achieved by the said Act. It is, therefore, submitted
that the challenge that the period provided was not sufficient is without C
any substance. It is submitted that everybody had sufficient opportunity
either to deposit the notes in their banks or to exchange the same. He
further submits that it was not necessary even for the individuals to go to
Banks to exchange notes and on the prescribed procedure being followed,
an authorized representative could also exchange the notes on their behalf.
D
85. Shri Gupta further submitted that the provisions of sub-section
(2) of Section 4 of the 2017 Act cannot be read in isolation. He submits
that if it is read in isolation, it will lead to an anomalous situation where
the RBI has an independent power to act in violation of the provisions of
Section 3 and sub-section (1) of Section 4 of the 2017 Act. He submits
that Section 3 and sub-sections (1) and (2) of Section 4 of the 2017 Act E
will have to be read together to hold that the power available to the RBI
under sub-section (2) of Section 4 of the 2017 Act is with regard to the
grace period as provided under sub-section (1) of Section 4 of the 2017
Act. It is submitted that the power vested in the Central Government
under clause (ii) of sub-section (1) of Section 4 of the 2017 Act is to
provide grace period to such class of persons and for such reasons as F
may be specified by notification. However, such power has not been
exercised by the Central Government and, therefore, it cannot be
construed that the RBI will have an independent power in this regard.
86. Shri Gupta reiterated the submission made by the learned A.G.
that since the relief sought in the petitions cannot be granted, no G
declaration as sought should be granted by this Court. In this respect, he
relies on the judgment of this Court in the case of Bholanath Mukherjee
and others v. Ramakrishna Mission Vivekananda Centenary College
and others52.
51
(2021) 8 SCC 511
52
(2011) 5 SCC 464 H
60 SUPREME COURT REPORTS [2023] 1 S.C.R.

A VI. SUBMISSIONS IN REJOINDER
87. Shri P. Chidambaram, learned Senior Counsel, in rejoinder,
almost reiterated his earlier submissions. He submitted that there are
two methods of demonetization of currency, one is by legislative method
and the other under sub-section (2) of Section 26 of the RBI Act. He
B reiterated that the word “any” will always have to be read in the context
of the provisions and if read in that manner, the only meaning that can be
given to the word “any” in sub-section (2) of Section 26 of the RBI is
“some”. In this respect, he relies on the judgment of this Court in the
case of Union of India v. A.B. Shah and others53.
C 88. Shri Chidambaram further submitted that from the perusal of
the affidavit filed on behalf of the Central Government as well as the
RBI, it is clear that the procedure emanated from the Central Government,
which was through the advice given by the Government to the RBI in its
communication dated 7th November 2016. The affidavit would clearly
show that the RBI acted on the advice of the Central Government and
D gave its recommendation in a mechanical manner. He reiterated that, as
per sub-section (2) of Section 26 of the RBI Act, the proposal has to
emanate from the RBI and not from the Central Government. It is
reiterated that the procedure is in total breach of sub-section (2) of Section
26 of the RBI Act.
E 89. Shri Chidambaram submits that unless the documents, to which
he had already referred in his arguments while opening the case, are
placed for perusal of this Court, the Court cannot come to a satisfaction
about the correctness of the decision-making process. Relying on the
judgment of this Court in the case of R.K. Jain v. Union of India54, he
F submits that unless the respondents plead privilege and the issue is
decided, the respondent cannot withhold the said documents, at least
from this Court.
90. Relying on an excerpt from “Forks in the Road: My Days at
RBI and Beyond”, a book by former RBI Governor C. Rangarajan, Shri
G Chidambaram submits that demonetization has nothing to do with
monetary policy. Emphasizing on the judgment of this Court in the case
of Internet and Mobile Association of India (supra), the learned Senior
Counsel submits that the proportionality test will have to be satisfied in
53
(1996) 8 SCC 540
54
H (1993) 4 SCC 119
VIVEK NARAYAN SHARMA v. UNION OF INDIA 61
[B. R. GAVAI, J.]

the present case. It is submitted that the 2017 Act does not validate the A
action taken under the impugned Notification. It only extinguishes the
liabilities of the Issue Department of the RBI. The learned Senior Counsel,
therefore, submits that this is a fit case wherein this Court should decide
the scope of sub-section (2) of Section 26 of the RBI Act and declare
that the exercise of power by the Central Government under sub-section
B
(2) of Section 26 of the RBI Act was not valid in law. In this respect, he
relies on the judgment of this Court in the case of S.R. Bommai and
others v. Union of India and others55.
91. Shri Shyam Divan, learned Senior Counsel, in rejoinder, submits
that the perusal of sub-section (1) of Section 26 of the RBI Act would
reveal that, though the tendering of any series of bank notes of any C
denomination ceases to be a legal one under sub-section (2) of Section
26 of the RBI Act, the guarantee of the Central Government continues
to exist. It is submitted that it would be clear from the provisions contained
in the 2016 Ordinance, which became the 2017 Act, that Section 3 of the
2017 Act which provides that the SBNs which have ceased to be legal D
tender in view of the impugned notification, shall cease to be liabilities of
the RBI under Section 34 of the RBI Act and shall cease to have the
guarantee of the Central Government under sub-section (1) of Section
26 of the said Act. It is submitted that this is also clear from the affidavit
dated 16th November 2022 filed on behalf of the Union of India.
E
92. Shri Divan further submitted that the 2017 Act can neither be
construed to validate the impugned notification nor can it be held that it
is a piece of incorporation by reference. It is submitted that the argument
with regard to the impugned notification having merged in the 2017 Act
is also without substance. The learned Senior Counsel submits that it is
simply a plenary parliamentary declaration. F

93. Taking further his argument, Shri Divan submits that clause
(i) of sub-section (1) of Section 4 of the 2017 gives a power to the
Central Government which is coupled with a duty. It is submitted that
genuine cases like that of the applicants/petitioners viz., Malvinder Singh
and Sarla Shrivastav, who is the applicant/petitioner in I.A. No. 152009 G
of 2022, should be given some window to exchange the SBNs. It is
submitted that there is a large section of NRIs who, during the period
between 8th November 2016 and 30th December 2016, were not in India.
It is submitted that they could have also not travelled to India since
55
(1994) 3 SCC 1 H
62 SUPREME COURT REPORTS [2023] 1 S.C.R.

A either the tickets were not available or the rates were prohibitively
expensive.
94. Shri Divan, in the alternative, submitted that the proviso to the
Notification dated 30th December, 2016 has to be read in a manner that
it is silent on NRIs who have kept their money in India. It is submitted
B that exclusion of NRIs who have left their money in India would be
manifestly arbitrary and in order to save the proviso, it will have to be
read in the manner making it inapplicable to such NRIs who had kept
their money in India while residing abroad during that period.
VII. REFRAMED QUESTIONS
C 95. Though nine important questions have been framed by the
Bench of learned three Judges vide order dated 16th December 2016 in
Writ Petition (Civil) No.906 of 2016, upon hearing the submissions
advanced before us on behalf of the petitioners as well as the respondents,
we find that only the following questions of law arise for consideration.
D As such, the questions are reframed as under:
(i) Whether the power available to the Central Government
under sub-section (2) of Section 26 of the RBI Act can be
restricted to mean that it can be exercised only for “one”
or “some” series of bank notes and not “all” series in view
E of the word “any” appearing before the word “series” in
the said sub-section, specifically so, when on earlier two
occasions, the demonetization exercise was done through
the plenary legislations?
(ii) In the event it is held that the power under sub-section (2)
F of Section 26 of the RBI Act is construed to mean that it
can be exercised in respect of “all” series of bank notes,
whether the power vested with the Central Government
under the said sub-section would amount to conferring
excessive delegation and as such, liable to be struck down?
(iii) As to whether the impugned Notification dated 8 th
G
November 2016 is liable to be struck down on the ground
that the decision making process is flawed in law?
(iv) As to whether the impugned notification dated 8th November
2016 is liable to be struck down applying the test of
proportionality?
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 63
[B. R. GAVAI, J.]

(v) As to whether the period provided for exchange of notes A
vide the impugned notification dated 8th November 2016
can be said to be unreasonable?
(vi) As to whether the RBI has an independent power under
sub-section (2) of Section 4 of the 2017 Act in isolation of
provisions of Section 3 and Section 4(1) thereof to accept B
the demonetized notes beyond the period specified in
notifications issued under sub-section (1) of Section 4?
VIII. STATUTORY SCHEME
96. Before we proceed to consider the various issues reframed
by us, we find it appropriate to refer to the scheme of the RBI Act. C

97. The preamble of the RBI Act would itself reveal that the RBI
Act was enacted since it was found expedient to constitute a Reserve
Bank of India to regulate the issue of Bank notes and for the keeping of
reserves with a view to securing monetary stability in India and generally
to operate the currency and credit system of the country to its advantage. D
The preamble of the RBI Act would also show that it was amended in
the year 2016 with effect from 27th June 2016 by Act No. 28 of 2016.
Post amendment, it was stated in the preamble that, whereas it was
essential to have a modern monetary policy framework to meet the
challenge of an increasingly complex economy, and whereas the primary E
objective of the monetary policy is to maintain price stability while keeping
in mind the objective of growth and whereas the monetary policy
framework in India shall be operated by the RBI, the RBI Act was
enacted.
98. Section 3 of the RBI Act would reveal that the RBI was F
constituted for the purposes of taking over the management of the
currency from the Central Government and of carrying on the business
of banking in accordance with the provisions of the RBI Act.
99. Section 8 of the RBI Act deals with composition of the Central
Board and term of office of the Directors. It will be relevant to refer to
G
sub-sections (1) and (5) of Section 8 of the RBI, which read thus:
“8. Composition of the Central Board, and term of office of
Directors.— (1) The Central Board shall consist of the following
Directors, namely:-
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64 SUPREME COURT REPORTS [2023] 1 S.C.R.

A (a) a Governor and not more than four Deputy Governors to
be appointed by the Central Government;
(b) four Directors to be nominated by the Central Government,
one from each of the four Local Boards as constituted by
section 9;
B (c) ten Directors to be nominated by the Central Government;
and
(d) two Government officials to be nominated by the Central
Government.

C xxx xxx xxx
xxx xxx xxx
(5) No act or proceeding of the Board shall be questioned on the
ground merely of the existence of any vacancy in, or any defect
in the constitution of, the Board.”
D
100. Section 17 of the RBI Act would reveal that the RBI has
been authorised to carry on and transact several kinds of business
specified therein.
101. Section 22 of the RBI Act would reveal that the RBI shall
have the sole right to issue bank notes in India and may, for a period
E which shall be fixed by the Central Government on the recommendation
of the Central Board, issue currency notes of the Government of India
supplied to it by the Central Government. It further provides that the
provisions of the RBI Act applicable to bank notes shall, unless a contrary
intention appears, apply to all currency notes of the Government of India
F issued either by the Central Government or by the RBI in like manner as
if such currency notes were bank notes. Sub-section (2) of Section 22
of the RBI Act specifically provides that on and from the date on which
Chapter III of the RBI Act comes into force, the Central Government
shall not issue any currency notes.
G 102. Section 23 of the RBI Act would reveal that the issue of
bank notes shall be conducted by the RBI through an Issue Department
which shall be separated and kept wholly distinct from the Banking
Department, and the assets of the Issue Department shall not be subject
to any liability other than the liabilities of the Issue Department as defined
in Section 34. Sub-section (2) of Section 23 provides that the Issue
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 65
[B. R. GAVAI, J.]

Department shall not issue bank notes to the Banking Department or to A
any other person except in exchange for other bank notes or for such
coin, bullion or securities as are permitted by the RBI Act to form part of
the Reserve.
103. Sub-section (1) of Section 24 of the RBI Act provides that,
subject to the provisions of sub-section (2), bank notes shall be of the B
denominational values to two rupees, five rupees, ten rupees, twenty
rupees, fifty rupees, one hundred rupees, five hundred rupees, one
thousand rupees, five thousand rupees and ten thousand rupees or of
such other denominational values, not exceeding ten thousand rupees as
the Central Government may, on the recommendation of the Central
Board, specify in this behalf. Sub-section (2) of Section 24 of the RBI C
Act provides that the Central Government may, on the recommendation
of the Central Board, direct the non-issue or the discontinuance of issue
of bank notes of such denominational values as it may specify in this
behalf.
104. Section 25 of the RBI Act provides that the design, form and D
the material of bank notes shall be such as may be approved by the
Central Government after consideration of the recommendations made
by the Central Board.
105. Section 26 of the RBI is the provision which directly falls for
consideration. The same reads thus: E

“26. Legal tender character of notes.-(1) Subject to the
provisions of sub-section (2), 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. F
(2) On recommendation of the Central Board the Central
Government may, by notification in the Gazette of India, declare
that, with effect from such date as may be specified in the
notification, any series of bank notes of any denomination shall
cease to be legal tender save at such office or agency of the G
Bank and to such extent as may be specified in the notification.”
106. It can thus be seen that sub-section (1) of Section 26 of the
RBI Act provides that, subject to the provisions of sub-section (2), 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 H
66 SUPREME COURT REPORTS [2023] 1 S.C.R.

A the Central Government. Sub-section (2) of Section 26 of the RBI Act
provides that on recommendation of the Central Board, the Central
Government may, by notification in the Gazette of India, declare that,
with effect from such date as may be specified in the notification, any
series of bank notes of any denomination shall cease to be legal tender
save at such office or agency of the Bank and to such extent as may be
B
specified in the notification.
107. Section 34 of the RBI Act provides that the liabilities of the
Issue Department of the RBI shall be an amount equal to the total of the
amount of the currency notes of the Government of India and bank
notes for the time being in circulation.
C
108. Perusal of the aforesaid provisions of the RBI Act would
reveal that insofar as monetary policy and specifically with regard to the
matters of management and regulation of currency are concerned, the
RBI plays a pivotal role. As a matter of fact, both the sides are ad idem
on the said issue.
D
109. The importance of the role assigned to the RBI in such matters
would be amplified from the various judgments of this Court, which we
will refer to in the paragraphs to follow. In this background, we will
consider the issues that fall for our consideration.

E ISSUE NO. (i) : WHETHER THE POWER AVAILABLE
TO THE CENTRAL GOVERNMENT UNDER SUB-SECTION
(2) OF SECTION 26 OF THE RBI ACT CAN BE RESTRICTED
TO MEAN THAT IT CAN BE EXERCISED ONLY FOR
“ONE” OR “SOME” SERIES OF BANK NOTES AND NOT
“ALL” SERIES IN VIEW OF THE WORD “ANY” APPEARING
F BEFORE THE WORD “SERIES” IN THE SAID SUB-
SECTION, SPECIFICALLY SO, WHEN ON EARLIER TWO
OCCASIONS, THE DEMONETIZATION EXERCISE WAS
DONE THROUGH THE PLENARY LEGISLATIONS?
110. It is strenuously urged by the learned Senior Counsel appearing
G on behalf of the petitioners that the word “any” used in sub-section (2)
of Section 26 of the RBI Act will have to be given a restricted meaning
to mean “some”. It is submitted that if sub-section (2) of Section 26 of
the RBI Act is not read in such manner, the very power available under
the said sub-section will have to be held to be invalid on the ground of
excessive delegation. It is submitted that it cannot be construed that the
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 67
[B. R. GAVAI, J.]

legislature intended to bestow uncanalised, unguided and arbitrary power A
to the Central Government to demonetize the entire currency. It is,
therefore, the submission of the petitioners that in order to save the said
Section from being declared void, the word “any” requires to be
interpreted in a restricted manner to mean “some”.
111. Per contra, it is submitted on behalf of the respondents that B
the word “any” under sub-section (2) of Section 26 of the RBI Act,
cannot be interpreted in a narrow manner and it will have to be construed
to include “all”.
Precedents construing the word “any”
112. A Constitution Bench of this Court in the case of The Chief C
Inspector of Mines and another v. Lala Karam Chand Thapar etc.
(supra)was considering the question as to whether the phrase “any one
of the directors” as found in Section 76 of the Mines Act, 1952 could
mean “only one of the directors” or could it be construed to mean “every
one of the directors”. In the said case, all the directors of the Company D
were prosecuted for the offences punishable under Sections 73 and 74
of the Mines Act, 1952. The High Court had held that any ‘one’ of the
directors of the Company could only be prosecuted. The Constitution
Bench of this Court observed thus:
“It is quite clear and indeed not disputed that in some E
contexts, “any one” means “one only it matters not which one”
the phrase “any of the directors” is therefore quite capable of
meaning “only one of the directors, it does not matter which one”.
Is the phrase however capable of no other meaning? If it is not,
the courts cannot look further, and must interpret these words in
that meaning only, irrespective of what the intention of the F
legislature might be believed to have been. If however the phrase
is capable of another meaning, as suggested, viz., “every one of
the directors” it will be necessary to decide which of the two
meanings was intended by the legislature.
If one examines the use of the words “any one” in G
common conversation or literature, there can be no doubt that
they are not infrequently used to mean “every one” — not
one, but all. Thus we say of any one can see that this is wrong,
to mean “everyone can see that this is wrong”. “Any one may
enter” does not mean that “only one person may enter”, but
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68 SUPREME COURT REPORTS [2023] 1 S.C.R.

A that all may enter. It is permissible and indeed profitable to
turn in this connection to the Oxford English Dictionary, at p.
378, of which, we find the meaning of “any” given thus: “In
affirmative sentences, it asserts, concerning a being or thing
of the sort named, without limitation as to which, and thus
collectively of every one of them”. One of the illustrations
B
given is — “I challenge anyone to contradict my assertions”.
Certainly, this does not mean that one only is challenged; but
that all are challenged. It is abundantly clear therefore that
“any one” is not infrequently used to mean “every one”.
But, argues Mr Pathak, granting that this is so, it must be
C held that when the phrase “any one” is used with the preposition
“of”, followed by a word denoting a number of persons, it never
means “every one”. The extract from the Oxford Dictionary, it
is interesting to notice, speaks of an assertion “concerning a being
or thing of the sort named”; it is not unreasonable to say that, the
D word “of” followed by a word denoting a number of persons or
things is just such “naming of a sort” as mentioned there. Suppose,
the illustration “I challenge any one to contradict my assertions”
was changed to “I challenge any one of my opponents to contradict
my assertion”. “Any one of my opponents” here would mean “all
my opponents” — not one only of the opponents.
E
While the phrase “any one of them” or any similar phrase
consisting of “any one”, followed by “of” which is followed in its
turn by words denoting a number of persons or things, does not
appear to have fallen for judicial construction, in our courts or in
England — the phrase “any of the present directors” had to be
F interpreted in an old English case, Isle of Wight Railway
Co. v. Tahourdin [25 Chancery Division 320] . A number of
shareholders required the directors to call a meeting of the company
for two objects. One of the objects was mentioned as “To remove,
if deemed necessary or expedient any of the present directors,
G and to elect directors to fill any vacancy on the Board”. The
directors issued a notice to convene a meeting for the other object
and held the meeting. Then the shareholders, under the Companies
Clauses Act, 1845, issued a notice of their own convening a
meeting for both the objects in the original requisition. In an action
by the directors to restrain the requisitionists, from holding the
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 69
[B. R. GAVAI, J.]

meeting, the Court of Appeal held that a notice to remove “any of A
the present directors” would justify a resolution for removing all
who are directors at the present time. “Any”, Lord Cotton, L.J.
pointed out, would involve “all”.
It is true that the language there was “any of the present
directors” and not “any one of the present directors” and it is B
urged that the word “one”, in the latter phrase makes all the
difference. We think it will be wrong to put too much emphasis on
the word “one” here. It may be pointed out in this connection that
the Permanent Edition of Words and Phrases, mentions an
American case Front & Hintingdon Building & Loan
Association v. Berzinski where the words “any of them” were C
held to be the equivalent of “any one of them”.
After giving the matter full and anxious consideration,
we have come to the conclusion that the words “any one of
the directors” is ambiguous; in some contexts, it means “only
one of the directors, does not matter which one”, but in other D
contexts, it is capable of meaning “every one of the directors”.
Which of these two meanings was intended by the legislature
in any particular statutory phrase has to be decided by the
courts on a consideration of the context in which the words
appear, and in particular, the scheme and object of the E
legislation.”
[emphasis supplied]
113. The Constitution Bench found that the words “any one” has
been commonly used to mean “every one” i.e. not one, but all. It found
that the word “any”, in affirmative sentences, asserts, concerning a being F
or thing of the sort named, without limitation. It held that it is abundantly
clear that the word “any one” is not infrequently used to mean “every
one”.
114. It could be seen that the Constitution Bench, after giving the
matter full and anxious consideration, came to the conclusion that the G
words “any one of the directors” was an ambiguous one. It held that in
some contexts, it means “only one of the directors, does not matter which
one”, but in other contexts, it is capable of meaning “every one of the
directors”. It held that which of these two meanings was intended by
the legislature in any particular statutory phrase has to be decided by the
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70 SUPREME COURT REPORTS [2023] 1 S.C.R.

A courts on consideration of the context in which the words appear, and in
particular, the scheme and object of the legislation.
115. After examining the scheme of the Mines Act, 1952, the
Constitution Bench of this Court further observed thus:
“But, argues Mr Pathak, one must not forget the special
B rule of interpretation for “penal statute” that if the language is
ambiguous, the interpretation in favour of the accused should
ordinarily be adopted. If you interpret “any one” in the sense
suggested by him, the legislation he suggests is void and so the
accused escapes. One of the two possible constructions, thus being
in favour of the accused, should therefore be adopted. In our
C opinion, there is no substance in this contention. The rule of strict
interpretation of penal statutes in favour of the accused is not
of universal application, and must be considered along with
other well-established rules of interpretation. We have already
seen that the scheme and object of the statute makes it
reasonable to think that the legislature intended to subject all
D
the directors of a company owning coal mines to prosecution
and penalties, and not one only of the directors. In the face of
these considerations there is no scope here of the application
of the rule for strict interpretation of penal statutes in favour
of the accused.
E The High Court appears to have been greatly impressed by
the fact that in other statutes where the legislature wanted to
make every one out of a group or a class of persons liable it used
clear language expressing the intention; and that the phrase “any
one” has not been used in any other statute in this country to
express “every one”. It will be unreasonable, in our opinion, to
F
attach too much weight to this circumstance; and as for the
reasons mentioned above, we think the phrase “any one of
the directors” is capable of meaning “every one of the
directors”, the fact that in other statutes, different words were
used to express a similar meaning is not of any significance.
G We have, on all these considerations come to the
conclusion that the words “any one of the directors” has been
used in Section 76 to mean “every one of the directors”, and
that the contrary interpretation given by the High Court is not
correct.”
H [emphasis supplied]
VIVEK NARAYAN SHARMA v. UNION OF INDIA 71
[B. R. GAVAI, J.]

116. It could thus be seen that though it was sought to be argued A
before the Court that since the rule of strict interpretation of penal statutes
in favour of the accused has to be adopted and that the word “any” was
suffixed by the word “one”, it has to be given restricted meaning; the
Court came to the conclusion that the words “any one of the directors”
used in Section 76 of the Mines Act, 1952 would mean “every one of the
B
directors”. It is further to be noted that the word “any” in the said case
was suffixed by the word “one”, still the Court held that the words “any
one” would mean “all” and not “one”. It is to be noted that in the present
case, the legislature has not employed the word “one” after the word
“any”. It is settled law that it has to be construed that every single word
employed or not employed by the legislature has a purpose behind it. C
117. On the very date on which the judgment in the case of The
Chief Inspector of Mines and another v. Lala Karam Chand Thapar
etc. (supra) was pronounced, the same Constitution Bench also
pronounced the judgment in the case of Banwarilal Agarawalla (supra),
wherein the Constitution Bench observed thus: D
“The first contention is based on an assumption that the
word “any one” in Section 76 means only “one of the directors,
and only one of the shareholders”. This question as regards the
interpretation of the word “any one” in Section 76 was raised in
Criminal Appeals Nos. 98 to 106 of 1959 (Chief Inspector of Mines, E
etc.) and it has been decided there that the word “any one” should
be interpreted there as “every one”. Thus under Section 76 every
one of the shareholders of a private company owning the mine,
and every one of the directors of a public company owning
the mine is liable to prosecution. No question of violation of
Article 14 therefore arises.” F

[emphasis supplied]
118. Another Constitution Bench of this Court in the case of Tej
Kiran Jain and others (supra) was considering the provisions of Article
105 of the Constitution of India and, particularly, the immunity as available G
to the Member of Parliament “in respect of anything said…….. in
Parliament”. The Constitution Bench observed thus:
“8. In our judgment it is not possible to read the provisions
of the article in the way suggested. The article means what it
says in language which could not be plainer. The article confers
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72 SUPREME COURT REPORTS [2023] 1 S.C.R.

A immunity inter alia in respect of “anything said ... in Parliament”.
The word “anything” is of the widest import and is equivalent
to “everything”. The only limitation arises from the words
“in Parliament” which means during the sitting of Parliament
and in the course of the business of Parliament. We are
concerned only with speeches in Lok Sabha. Once it was proved
B
that Parliament was sitting and its business was being transacted,
anything said during the course of that business was immune from
proceedings in any Court this immunity is not only complete but is
as it should be. It is of the essence of parliamentary system of
Government that people’s representatives should be free to express
C themselves without fear of legal consequences. What they say is
only subject to the discipline of the rules of Parliament, the good
sense of the members and the control of proceedings by the
Speaker. The Courts have no say in the matter and should really
have none.”
D [emphasis supplied]
119. This Court held that the word “anything” is of the widest
import and is equivalent to “everything”. The only limitation arises from
the words “in Parliament” which means during the sitting of Parliament
and in the course of the business of Parliament. It held that, once it was
E proved that Parliament was sitting and its business was being transacted,
anything said during the course of that business was immune from
proceedings in any Court.
120. This Court, in the case of Lucknow Development Authority
(supra),was considering clause (o) of Section (2) of the Consumer
F Protection Act, 1986 which defines “service”, wherein the word “any”
again fell for consideration. This Court observed thus:
“4. …… The words ‘any’ and ‘potential’ are significant.
Both are of wide amplitude. The word ‘any’ dictionarily means
‘one or some or all’. In Black’s Law Dictionary it is explained
G thus, “word ‘any’ has a diversity of meaning and may be employed
to indicate ‘all’ or ‘every’ as well as ‘some’ or ‘one’ and its meaning
in a given statute depends upon the context and the subject-matter
of the statute”. The use of the word ‘any’ in the context it has
been used in clause (o) indicates that it has been used in wider
sense extending from one to all……”
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 73
[B. R. GAVAI, J.]

121. This Court held that the word “any” is of wide amplitude. It A
means “one or some or all”. Referring to Black’s Law Dictionary, the
Court observed that the word “any” has a diversity of meaning and may
be employed to indicate “all” or “every” as well as “some” or “one”.
However, the meaning which is to be given to it would depend upon the
context and the subject-matter of the statute.
B
122. In the case of K.P. Mohammed Salim (supra), this Court
was considering the power of the Director General or Chief Commissioner
or Commissioner to transfer any case from one or more assessing officers
subordinate to him to any other assessing officer or assessing officers.
This Court observed thus:
C
“17. The word “any” must be read in the context of the statute
and for the said purpose, it may in a situation of this nature, means
all. The principles of purposive construction for the said purpose
may be resorted to. (See New India Assurance Co. Ltd. v. Nusli
Neville Wadia [(2008) 3 SCC 279 : (2007) 13 SCR 598]) Thus,
in the context of a statute, the word “any” may be read as all D
in the context of the Income Tax Act for which the power of
transfer has been conferred upon the authorities specified
under Section 127.”
[emphasis supplied]
E
123. The Court again reiterated that the word “any” must be read
in the context of the statute. The Court also applied the principles of
purposive construction to the term “any” to mean “all”.
124. In the case of Raj Kumar Shivhare (supra), an argument
was sought to be advanced that since Section 35 of the Foreign Exchange F
Management Act, 1999 uses the words “any decision or order”, only
appeals from final order could be filed. Rejecting the said contention,
this Court observed thus:
“19. The word “any” in this context would mean “all”. We are of
this opinion in view of the fact that this section confers a right of
G
appeal on any person aggrieved. A right of appeal, it is well settled,
is a creature of statute. It is never an inherent right, like that of
filing a suit. A right of filing a suit, unless it is barred by statute, as
it is barred here under Section 34 of FEMA, is an inherent right
(see Section 9 of the Civil Procedure Code) but a right of appeal
is always conferred by a statute. While conferring such right a H
74 SUPREME COURT REPORTS [2023] 1 S.C.R.

A statute may impose restrictions, like limitation or pre-deposit of
penalty or it may limit the area of appeal to questions of law or
sometime to substantial questions of law. Whenever such limitations
are imposed, they are to be strictly followed. But in a case where
there is no limitation on the nature of order or decision to be
appealed against, as in this case, the right of appeal cannot be
B
further curtailed by this Court on the basis of an interpretative
exercise.
20. Under Section 35 of FEMA, the legislature has conferred a
right of appeal to a person aggrieved from “any” “order” or
“decision” of the Appellate Tribunal. Of course such appeal will
C have to be on a question of law. In this context the word “any”
would mean “all”.
xxx xxx xxx
26. In the instant case also when a right is conferred on a
D person aggrieved to file appeal from “any” order or decision
of the Tribunal, there is no reason, in the absence of a contrary
statutory intent, to give it a restricted meaning. Therefore, in
our judgment in Section 35 of FEMA, any “order” or
“decision” of the Appellate Tribunal would mean all decisions
or orders of the Appellate Tribunal and all such decisions or
E orders are, subject to limitation, appealable to the High Court
on a question of law.”
[emphasis supplied]
125. While holding that the word “any” in the context would mean
F “all”, this Court observed that a right of appeal is always conferred by a
statute. It has been held that, while conferring such right, a statute may
impose restrictions, like limitation or pre-deposit of penalty or it may limit
the area of appeal to questions of law or sometime to substantial questions
of law. It has been held that whenever such limitations are imposed,
they are to be strictly followed. It has been held that in a case where
G there is no limitation, the right of appeal cannot be curtailed by this Court
on the basis of an interpretative exercise.
126. Shri P. Chidambaram, learned Senior Counsel relied on the
judgment of this Court in the case of Union of India v. A.B. Shah and
others (supra). In the said case, the High Court was considering an
H appeal preferred by the Union of India wherein it had challenged the
VIVEK NARAYAN SHARMA v. UNION OF INDIA 75
[B. R. GAVAI, J.]

acquittal of the accused by the learned trial court, which was confirmed A
in appeal by the High Court. The learned trial court and the High Court
had held that the complaint filed was beyond limitation. This Court
reversed the judgments of the learned trial court and the High Court.
This Court while interpreting the expression “at any time” observed thus:
“12. If we look into Conditions 3 and 6 with the object and purpose B
of the Act in mind, it has to be held that these conditions are not
only relatable to what was required at the commencement of
depillaring process, but the unstowing for the required length must
exist always. The expression “at any time” finding place in
Condition 6 has to mean, in the context in which it has been
used, “at any point of time”, the effect of which is that the C
required length must be maintained all the time. The
accomplishment of object of the Act, one of which is safety in the
mines, requires taking of such a view, especially in the backdrop
of repeated mine disasters which have been taking, off and on,
heavy toll of lives of the miners. It may be pointed out that the D
word ‘any’ has a diversity of meaning and in Black’s Law
Dictionary it has been stated that this word may be employed
to indicate ‘all’ or ‘every’, and its meaning will depend
“upon the context and subject-matter of the statute”. A
reference to what has been stated in Stroud’s Judicial
Dictionary Vol. I, is revealing inasmuch as the import of the word E
‘any’ has been explained from pp. 145 to 153 of the 4th Edn., a
perusal of which shows it has different connotations depending
primarily on the subject-matter of the statute and the context of
its use. A Bench of this Court in Lucknow Development
Authority v. M.K. Gupta [(1994) 1 SCC 243] , gave a very wide F
meaning to this word finding place in Section 2(o) of the Consumer
Protection Act, 1986 defining ‘service’. (See para 4)”
[emphasis supplied]
127. Shri Chidambaram rightly argued that the word “any” will
have to be construed in its context, taking into consideration the scheme G
and the purpose of the enactment. There can be no quarrel with regard
to the said proposition. Right from the judgment of the Constitution Bench
of this Court in the case of The Chief Inspector of Mines and another
v. Lala Karam Chand Thapar etc. (supra), the position is clear. What
is the meaning which the legislature intended to give to a particular H
76 SUPREME COURT REPORTS [2023] 1 S.C.R.

A statutory provision has to be decided by the Court on a consideration of
the context in which the word(s) appear(s) and in particular, the scheme
and object of the legislation.
Purposive interpretation
128. We find that for deciding the present issue, it will also be
B necessary to refer an important principle of interpretation of statutes i.e.
of purposive interpretation.
129. “Legislation has an aim, it seeks to obviate some mischief, to
supply an inadequacy, to effect a change of policy, to formulate a plan of
government. That aim, that policy is not drawn, like nitrogen, out of the
C air; it is evidenced in the language of the statute, as read in the light of
other external manifestations of purpose [Some Reflections on the
Reading of Statutes, 47 Columbia LR 527, at p. 538 (1947)].”
130. This is how Justice Frankfurter succinctly propounds the
principle of purposive interpretation. It is thus necessary to cull out the
D legislative policy from various factors like the words in the statute, the
preamble of the Act, the statement of objects and reasons, and in a
given case, even the attendant circumstances. After the legislative policy
is found, then the words used in the statute must be so interpreted such
that it advances the purpose of the statute and does not defeat it.
E 131. Francis Bennion in his treatise Statutory Interpretation, at
page 810 described purposive construction in an equally eloquent manner
as under:
“A purposive construction of an enactment is one which gives
effect to the legislative purpose by—
F
(a) following the literal meaning of the enactment where
that meaning is in accordance with the legislative purpose (in
this Code called a purposive-and-literal construction), or
(b) applying a strained meaning where the literal meaning
is not in accordance with the legislative purpose (in the Code
G
called a purposive-and-strained construction).”
132. A statute must be construed having regard to the legislative
intent. It has to be meaningful. A construction which leads to manifest
absurdity must not be preferred to a construction which would fulfil the
object and purport of the legislative intent.
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 77
[B. R. GAVAI, J.]

133. Aharon Barak, the former President of the Supreme Court A
of Israel, whose exposition of “doctrine of proportionality” has found
approval by the Constitution Bench of this Court in the case of Modern
Dental College and Research Centre and Others (supra), to which
we will refer to in the forthcoming paragraphs, in his commentary on
“Purposive Interpretation in Law”, has summarized ‘the goal of
B
interpretation in law’ as under:
“At some point, we need to find an Archimedean foothold, external
to the text, from which to answer that question. My answer is
this: The goal of interpretation in law is to achieve the objective –
in other words, the purpose – of law.56 The role of a system of
interpretation in law is to choose, from among the semantic options C
for a given text, the meaning that best achieves the purpose of the
text. Each legal text – will, contract, statute, and constitution –
was chosen to achieve a social objective. Achieving this objective,
achieving this purpose, is the goal of interpretation. The system of
interpretation is the device and the means. It is a tool through D
which law achieves self-realization. In interpreting a given text,
which is, after all, what interpretation in law does, a system of
interpretation must guarantee that the purpose of the norm trapped
in the – in our terminology, the purpose of the text – will be
achieved in the best way. Hence the requirement that the system
of interpretation be a rational activity. A coin toss will not do. This E
is also the rationale – which is at the core of my own views – for
the belief that purposive interpretation is the most proper system
of interpretation. This system is proper because it guarantees the
achievement of the purpose of law. There is social, jurisprudential,
hermeneutical, and constitutional support for my claim that the F
proper criterion for interpretation is the search for law’s purpose,
and that purposive interpretation best fulfills that criterion. A
comparative look at the law supports it, as well. I will discuss
each element of that support below.”
134. The learned Judge emphasized that purposive interpretation
is the most proper system of interpretation. He observed that this system G
is proper because it guarantees the achievement of the purpose of law.
The proper criterion for interpretation is the search for law’s purpose,
and that purposive interpretation best fulfills that criterion.
56
D. Brink, “Legal Theory, Legal Interpretation, and Judicial Review,” 17 Phil.
And Pub. Aff. 105, 125 (1988). H
78 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 135. The principle of purposive interpretation has also been
expounded through a catena of judgments of this Court. A Constitution
Bench of this Court in the case of M. Pentiah and others v. Muddala
Veeramallappa and others57 was considering a question, as to whether
the term prescribed in Section 34 would apply to a member of a “deemed”
committee under the provisions of the Hyderabad District Municipalities
B
Act, 1956. An argument was put forth that, upon a correct interpretation
of the provisions of Section 16, the same would be permissible. Rejecting
the said argument, K. Subba Rao, J, observed thus:
“Before we consider this argument in some detail, it will be
convenient at this stage to notice some of the well established
C rules of Construction which would help us to steer clear of the
complications created by the Act. Maxwell on the Interpretation
of Statutes, 10th Edn., says at p. 7 thus:
“… if the choice is between two interpretations, the narrower
of which would fail to achieve the manifest purpose of the
D legislation, we should avoid a construction which would reduce
the legislation to futility and should rather accept the bolder
construction based on the view that Parliament would legislate
only for the purpose of bringing about an effective result”.
It is said in Craies on Statute Law, 5th Edn., at p. 82—
E
“Manifest absurdity or futility, palpable injustice, or absurd
inconvenience or anomaly to be avoided.”
Lord Davey in Canada Sugar Refining Co. v. R. [(1898) AC
735] provides another useful guide of correct perspective to such
F a problem in the following words:
“Every clause of a statute should be construed with reference
to the context and the other clauses of the Act, so as, so far as
possible, to make a consistent enactment of the whole statute
or series of statutes relating to the subject-matter.””
G 136. A.K. Sarkar, J. in his concurring opinion observed thus:
“There is no doubt that the Act raises some difficulty. It was
certainly not intended that the members elected to the Committee
under the repealed Act should be given a permanent tenure of
office nor that there would be no elections under the new Act.
57
H (1961) 2 SCR 295
VIVEK NARAYAN SHARMA v. UNION OF INDIA 79
[B. R. GAVAI, J.]

Yet such a result would appear to follow if the language used in A
the new Act is strictly and literally interpreted. It is however well
established that “Where the language of a statute, in its
ordinary meaning and grammatical construction, leads to a
manifest contradiction of the apparent purpose of the
enactment, or to some inconvenience or absurdity, hardship
B
or in justice, presumably not intended, a construction may be
put upon it which modifies the meaning of the words, and
even the structure of the sentence.…Where the main object
and intention of a statute are clear, it must not be reduced to
a nullity by the draftsman’s unskilfulness or ignorance of the
law, except in a case of necessity, or the absolute intractability C
of the language used. Nevertheless, the courts are very reluctant
to substitute words in a Statute, or to add words to it, and it has
been said that they will only do so where there is a repugnancy to
good Sense.”: see Maxwell on Statutes (10th Edn.) p. 229.
In Seaford Court Estates Ltd. v. Asher [(1949) 2 AER 155, 164]
D
, Denning, L.J. said:
“when a defect appears a judge cannot simply fold his
hands and blame the draftsman. He must set to work on
the constructive task of finding the intention of Parliament
… and then he must supplement the written word so as to
give “force and life” to the intention of the legislature …. A E
judge should ask himself the question how, if the makers of
the Act had themselves come across this ruck in the texture
of it, they would have straightened it out? He must then do
as they would have done. A judge must not alter the material
of which the Act is woven, but he can and should iron out F
the creases.””
[emphasis supplied]
137. Another Constitution Bench Judgment of this Court in the
case of Chief Justice of Andhra Pradesh and others v. L.V.A. Dixitulu
and others58 reiterated the position in the following words: G
“67. Where two alternative constructions are possible, the court
must choose the one which will be in accord with the other parts
of the statute and ensure its smooth, harmonious working, and
58
(1979) 2 SCC 34 H
80 SUPREME COURT REPORTS [2023] 1 S.C.R.

A eschew the other which leads to absurdity, confusion, or friction,
contradiction and conflict between its various provisions, or
undermines, or tends to defeat or destroy the basic scheme and
purpose of the enactment. …….”
138. In the case of M/s Girdhari Lal and Sons v. Balbir Nath
B Mathur and others59, O. Chinnappa Reddy, J. explained the position as
under:
“9. So we see that the primary and foremost task of a court in
interpreting a statute is to ascertain the intention of the legislature,
actual or imputed. Having ascertained the intention, the court must
C then strive to so interpret the statute as to promote or advance the
object and purpose of the enactment. For this purpose, where
necessary the court may even depart from the rule that plain words
should be interpreted according to their plain meaning. There need
be no meek and mute submission to the plainness of the language.
To avoid patent injustice, anomaly or absurdity or to avoid
D
invalidation of a law, the court would be well justified in departing
from the so-called golden rule of construction so as to give effect
to the object and purpose of the enactment by supplementing the
written word if necessary.”
139. After referring to various earlier judgments of other
E jurisdictions, His Lordship observed thus:
“16. Our own court has generally taken the view that
ascertainment of legislative intent is a basic rule of statutory
construction and that a rule of construction should be preferred
which advances the purpose and object of a legislation and
F that though a construction, according to plain language,
should ordinarily be adopted, such a construction should not
be adopted where it leads to anomalies, injustices or
absurdities, vide K.P. Varghese v. ITO [(1981) 4 SCC 173 : 1981
SCC (Tax) 293] , State Bank of Travancore v. Mohd. M.
G Khan [(1981) 4 SCC 82] , Som Prakash Rekhi v. Union of
India [(1981) 1 SCC 449 : 1981 SCC (L&S) 200] , Ravula Subba
Rao v. CIT [AIR 1956 SC 604 : 1956 SCR 577], Govindlal v. Agricultural
Produce Market Committee [(1975) 2 SCC 482 : AIR 1976 SC
59
(1986) 2 SCC 237
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 81
[B. R. GAVAI, J.]

263 : (1976) 1 SCR 451] and Babaji Kondaji v. Nasik Merchants A
Coop. Bank Ltd. [(1984) 2 SCC 50]”
[emphasis supplied]
140. M.N. Venkatachaliah, J. speaking for the Constitution Bench
of this Court in the case of Tinsukhia Electric Supply Co. Ltd. v. State
of Assam and others60 observed thus: B

“118. The courts strongly lean against any construction which
tends to reduce a statute to futility. The provision of a statute
must be so construed as to make it effective and operative, on the
principle “ut res magis valeat quam pereat”. It is, no doubt, true
that if a statute is absolutely vague and its language wholly C
intractable and absolutely meaningless, the statute could be
declared void for vagueness. This is not in judicial review by testing
the law for arbitrariness or unreasonableness under Article 14;
but what a court of construction, dealing with the language of a
statute, does in order to ascertain from, and accord to, the statute D
the meaning and purpose which the legislature intended for it.
In Manchester Ship Canal Co. v. Manchester Racecourse
Co. [(1904) 2 Ch 352 : 16 TLR 429 : 83 LT 274] Farwell J. said:
(pp. 360-61)
“Unless the words were so absolutely senseless that I E
could do nothing at all with them, I should be bound to find
some meaning and not to declare them void for uncertainty.”
119. In Fawcett Properties Ltd. v. Buckingham County
Council [(1960) 3 All ER 503] Lord Denning approving the dictum
of Farwell, J., said:(All ER p. 516) F
“But when a Statute has some meaning, even though it
is obscure, or several meanings, even though there is little to
choose between them, the courts have to say what meaning
the statute to bear rather than reject it as a nullity.”
120. It is, therefore, the court’s duty to make what it can of the G
statute, knowing that the statutes are meant to be operative and
not inept and the nothing short of impossibility should allow a court
to declare a statute unworkable. In Whitney v. IRC [1926 AC 37]
Lord Dunedin said: (AC p. 52)
60
(1989) 3 SCC 709 H
82 SUPREME COURT REPORTS [2023] 1 S.C.R.

A “A statute is designed to be workable, and the
interpretation thereof by a court should be to secure that object,
unless crucial omission or clear direction makes that end
unattainable.””
141. In the case of State of Gujarat and another v. Justice
B R.A. Mehta (Retired) and others61, this Court held as under:
“98. The doctrine of purposive construction may be taken recourse
to for the purpose of giving full effect to statutory provisions, and
the courts must state what meaning the statute should bear, rather
than rendering the statute a nullity, as statutes are meant to be
C operative and not inept. The courts must refrain from declaring a
statute to be unworkable. The rules of interpretation require
that construction which carries forward the objectives of the
statute, protects interest of the parties and keeps the remedy
alive, should be preferred looking into the text and context of
the statute. Construction given by the court must promote the
D object of the statute and serve the purpose for which it has
been enacted and not efface its very purpose. “The courts
strongly lean against any construction which tends to reduce a
statute to futility. The provision of the statute must be so construed
as to make it effective and operative.” The court must take a
E pragmatic view and must keep in mind the purpose for which
the statute was enacted as the purpose of law itself provides
good guidance to courts as they interpret the true meaning of
the Act and thus legislative futility must be ruled out. A statute
must be construed in such a manner so as to ensure that the Act
itself does not become a dead letter and the obvious intention of
F the legislature does not stand defeated unless it leads to a case of
absolute intractability in use. The court must adopt a construction
which suppresses the mischief and advances the remedy and “to
suppress subtle inventions and evasions for continuance of the
mischief, and pro privato commodo, and to add force and life to
G the cure and remedy, according to the true intent of the makers of
the Act, pro bono publico”. The court must give effect to the
purpose and object of the Act for the reason that legislature is
presumed to have enacted a reasonable statute. (Vide M.
Pentiah v. Muddala Veeramallappa [AIR 1961 SC 1107] , S.P.
61
H (2013) 13 SCC 1
VIVEK NARAYAN SHARMA v. UNION OF INDIA 83
[B. R. GAVAI, J.]

Jain v. Krishna Mohan Gupta [(1987) 1 SCC 191 : AIR 1987 A
SC 222] , RBI v. Peerless General Finance and Investment Co.
Ltd. [(1987) 1 SCC 424 : AIR 1987 SC 1023] , Tinsukhia Electric
Supply Co. Ltd. v. State of Assam [(1989) 3 SCC 709 : AIR 1990
SC 123] , SCC p. 754, para 118, UCO Bank v. Rajinder Lal
Capoor [(2008) 5 SCC 257 : (2008) 2 SCC (L&S) 263] and Grid
B
Corpn. of Orissa Ltd. v. Eastern Metals and Ferro
Alloys [(2011) 11 SCC 334].)”
[emphasis supplied]
142. The principle of purposive construction has been enunciated
in various subsequent judgments of this Court. However, we would not C
like to burden this judgment with a plethora of citations. Suffice it to say,
the law on the issue is very well crystalized.
143. It is thus clear that it is a settled principle that the modern
approach of interpretation is a pragmatic one, and not pedantic. An
interpretation which advances the purpose of the Act and which ensures D
its smooth and harmonious working must be chosen and the other which
leads to absurdity, or confusion, or friction, or contradiction and conflict
between its various provisions, or undermines, or tends to defeat or destroy
the basic scheme and purpose of the enactment must be eschewed. The
primary and foremost task of the Court in interpreting a statute is to
gather the intention of the legislature, actual or imputed. Having E
ascertained the intention, it is the duty of the Court to strive to so interpret
the statute as to promote or advance the object and purpose of the
enactment. For this purpose, where necessary, the Court may even depart
from the rule that plain words should be interpreted according to their
plain meaning. There need be no meek and mute submission to the F
plainness of the language. To avoid patent injustice, anomaly or absurdity
or to avoid invalidation of a law, the court would be justified in departing
from the so-called golden rule of construction so as to give effect to the
object and purpose of the enactment. Ascertainment of legislative intent
is the basic rule of statutory construction.
G
Construction of sub-section (2) of Section 26 of the RBI Act.
144. Applying the aforesaid pronouncements on the construction
of the term “any” and the principle of purposive construction, we will
now consider the scope of the term “any” used in sub-section (2) of
Section 26 of the RBI Act.
H
84 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 145. Sub-section (2) of Section 26 of the RBI Act empowers the
Central Government to issue a notification in the Gazette of India thereby
declaring that, with effect from such date as may be specified in the
notification, any series of bank notes of any denomination shall cease to
be legal tender. It further provides that such an action has to be taken by
the Central Government on the recommendation of the Central Board.
B
146. As already discussed herein above, the RBI Act is a special
Act, vesting all the powers and functions with regard to monetary policy
and all matters pertaining to management and regulation of currency
with the RBI. The Central Government is required to take its decision
on the basis of the recommendation of the Central Board.
C
147. It could thus be seen that power is vested with the Central
Government and that power has to be exercised on the recommendation
of the RBI. Both sides agree that RBI plays a unique role in the matter
of monetary policy and issuance of currency. The Central Government
is empowered under sub-section (2) of Section 26 of the RBI Act to
D notify any series of bank notes of any denomination to cease to be a
legal tender. The effect of such a notification would be that the liabilities
as provided under Section 34 of the RBI Act and the guarantee as
provided under sub-section (1) of Section 26 of the RBI Act shall cease
to have effect on such notification being issued thereby demonetizing
E the bank notes.
148. As already discussed herein above, the RBI Act has been
enacted to regulate the issue of bank notes and generally to operate the
currency and credit system of the country. Section 3 of the RBI Act
provides that the RBI has been constituted for the purposes of taking
F over the management of the currency from the Central Government
and carrying on the business of banking in accordance with the provisions
of the RBI Act. Sub-section (1) of Section 22 of the RBI Act provides
that the RBI shall have the sole right to issue bank notes in India. However,
for a period which is to be fixed by the Central Government on the
recommendation of the Central Board, it can issue currency notes of the
G Government of India supplied to it by the Central Government. Further,
sub-section (2) of Section 22 of the RBI Act specifically prohibits the
Central Government from issuing any currency notes on and from the
date on which Chapter III of the RBI Act comes into effect.
149. It can thus clearly be seen that a primary and very important
H role is assigned to the RBI in the matter of issuance of bank notes. As
VIVEK NARAYAN SHARMA v. UNION OF INDIA 85
[B. R. GAVAI, J.]

held by this Court in the case Peerless General Finance and Investment A
Co. Limited and another (supra), the RBI has a large contingent of
expert advice available to it. The Central Government would exercise
its power on the recommendation of the Central Board. When the
legislature itself has provided that the Central Government would take a
decision after considering the recommendation of the Central Board of
B
the RBI, which has been assigned a primary role in matters with regard
to monetary policy and management and regulation of currency, we are
of the view that the legislature could not have intended to give a restricted
power under sub-section (2) of Section 26 of the RBI Act. In any case,
if the argument that the provisions of sub-section (2) of Section 26 of the
RBI Act have to be interpreted in a restricted manner, is to be accepted, C
it may, at times, lead to an anomalous situation.
150. For example, if there are 20 series of a particular denomination,
and if the argument of the petitioners is to be accepted, the Central
Government would be empowered to demonetize 19 series of a particular
denomination, leaving one series of the said denomination to continue to D
be a legal tender, which would lead to a chaotic situation.
151. As discussed hereinabove, the policy underlining the provisions
of Section 26 of the RBI Act is to enable the Central Government on the
recommendation of the Central Board, to effect demonetization. The
same can be done in respect of any series of bank notes of any E
denomination. The legislative policy is with regard to management and
regulation of currency. Demonetization of notes would certainly be a
part of management and regulation of currency. The legislature has
empowered the Central Government to exercise such a power. The
Central Government may take recourse to such a power when it finds
necessary to do so taking into consideration myriad factors. No doubt F
that such factors must have reasonable nexus with the object sought to
be achieved. If the Central Government finds that fake notes of a
particular denomination are widely in circulation or that they are being
used to promote terrorism, can it be said, for instance, that out of 20
series of bank notes of a particular denomination, it can demonetize only G
19 series of bank notes but not all 20 series? In our view, this will result
in nothing else but absurdity and the very purpose for which the power is
vested shall stand frustrated. An interpretation which, in effect, nullifies
the purpose for which a power is to be exercised, in our view, would be
opposed to the principle of purposive interpretation. Such an interpretation,
H
86 SUPREME COURT REPORTS [2023] 1 S.C.R.

A in our view, rather than advancing the object of the enactment, would
defeat the same.
152. Another line of argument that is sought to be advanced with
regard to the submission that the power under sub-section (2) of Section
26 of the RBI Act has to be construed to restricting it to “one” or “some”
B series of bank notes, is that the Parliament also meant the same inasmuch
as on earlier two occasions i.e. in 1946 and 1978 the demonetization
exercise in respect of “all” series was done by resorting to plenary
legislations. Shri Chidambaram has taken us through various volumes of
the history of the RBI. Perusal of Volume I thereof would reveal that, in
1946, it is not known when the Government Authorities started thinking
C on the demonetization measure, but the final consultation could take place
with the Governor and Deputy Governor. It appears that the RBI
authorities were not enthusiastic about the scheme. It appears that in
spite of the opposition by the then Governor of the RBI, Shri C.D.
Deshmukh, the Government went ahead with the scheme and issued an
D ordinance on 12th January 1946.
153. Further, perusal of Volume III would reveal that the then
Governor I.G. Patel was not in favour of the demonetization scheme of
1978. However, in spite of the opposition of the Governor of the RBI,
the Government went ahead with the demonetization scheme and issued
E an ordinance in the early hours of 16th January 1978 and the news was
announced on All India Radio’s news bulletin at 9 am on the same day.
154. It could thus be seen that on earlier two occasions, since the
RBI was not in favour of the demonetization, the Government resorted
to promulgating ordinances for the said purpose.
F 155. It is to be noted that after the ordinance of 1946 was
promulgated, the RBI Act was amended vide Act No.62 of 1956 and
Section 26A was added, thereby specifically providing that no bank note
of the denominational value of Rs.500/-, Rs. 1,000/- and Rs.10,000/-
issued before the 13th day of January 1946 shall be legal tender in payment
G or on account for the amount expressed therein.
156. After the ordinance was issued on 16th January 1978, the
same transformed into an Act of Parliament upon the President of India
giving his assent to the Act on 30th March 1978.
157. Merely because on earlier two occasions the Government
H decided to take recourse to plenary power of legislation, this, by itself,
VIVEK NARAYAN SHARMA v. UNION OF INDIA 87
[B. R. GAVAI, J.]

cannot be a ground to give a restricted meaning to the word “any” in A
sub-section (2) of Section 26 of the RBI Act. As already discussed
herein above, in our considered view, the legislative intent could not have
been to give a restricted meaning to the word “any” in sub-section (2) of
Section 26 of the RBI Act.
158. We are, therefore, unable to accept the contention that the B
word “any” has to be given a restricted meaning taking into consideration
the overall scheme, purpose and the object of the RBI Act and also the
context in which the power is to be exercised. We find that the word
“any” would mean “all” under sub-section (2) of Section 26 of the RBI
Act.
C
ISSUE NO. (ii): IN THE EVENT IT IS HELD THAT THE
POWER UNDER SUB-SECTION (2) OF SECTION 26 OF THE
RBI ACT IS CONSTRUED TO MEAN THAT IT CAN BE
EXERCISED IN RESPECT OF “ALL” SERIES OF BANK
NOTES, WHETHER THE POWER VESTED WITH THE
CENTRAL GOVERNMENT UNDER THE SAID SUB-SECTION D
WOULD AMOUNT TO CONFERRING EXCESSIVE
DELEGATION AND AS SUCH, LIABLE TO BE STRUCK
DOWN?
159. The second limb of argument on behalf of the petitioners is
that, if the word “any” used in sub-section (2) of Section 26 of the RBI E
Act is not given a restricted meaning, then sub-section (2) of Section 26
of the RBI Act will have to be held invalid on the ground that it confers
excessive delegation upon the Central Government.
160. It is submitted that sub-section (2) of Section 26 of the RBI
Act vests uncanalised, unguided and arbitrary powers in the Central F
Government and as such, on this ground alone, the said provision is liable
to be struck down.
161. Shri P. Chidambaram, learned Senior Counsel has relied on
the Constitution Bench judgment of this Court in the case of Hamdard
Dawakhana (Wakf) Lal Kuan, Delhi and another (supra) to buttress G
his submissions.
Precedents considering delegated legislation
162. In the case of Hamdard Dawakhana (Wakf) Lal Kuan,
Delhi and another (supra), the Constitution Bench of this Court while
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88 SUPREME COURT REPORTS [2023] 1 S.C.R.

A considering the validity of clause (d) of Section 3 of the Drug and Magic
Remedies (Objectionable Advertisement) Act, (21 of 1954) observed
thus:
“33. The interdiction under the Act is applicable to conditions and
diseases set out in the various clauses of Section 3 and to those
B that may under the last part of clause (d) be specified in the Rules
made under Section 16. The first sub-section of Section 16
authorises the making of rules to carry out the purposes of the
Act and clause (a) of sub-section (2) of that section specifically
authorises the specification of diseases or conditions to which the
provisions of Section 3 shall apply. It is the first sub-section of
C Section 16 which confers the general rule-making power i.e. it
delegates to the administrative authority the power to frame rules
and regulations to subserve the object and purpose of the Act.
Clause (a) of the second sub-section is merely illustrative of the
power given under the first sub-section; King-
D Emperor v. Sibnath Banerji [(1945) LR 72 IA 241] . Therefore,
sub-section 2(a) also has the same object as sub-section (1) i.e.
to carry out the purposes of the Act. Consequently, when the
rule-making authority specifies conditions and diseases in the
Schedule it exercises the same delegated authority as it does when
it exercises powers under sub-section (1) and makes other rules
E and therefore it is delegated legislation. The question for decision
then is, is the delegation constitutional in that the administrative
authority has been supplied with proper guidance. In our view
the words impugned are vague. Parliament has established
no criteria, no standards and has not prescribed any principle
F on which a particular disease or condition is to be specified
in the Schedule. It is not stated what facts or circumstances are
to be taken into consideration to include a particular condition or
disease. The power of specifying diseases and conditions as given
in Section 3(d) must therefore be held to be going beyond
permissible boundaries of valid delegation. As a consequence the
G Schedule in the rules must be struck down. But that would not
affect such conditions and diseases which properly fall within the
four clauses of Section 3 excluding the portion of clause (d) which
has been declared to be unconstitutional. In the view we have
taken it is unnecessary to consider the applicability of Baxter v. Ah
H Way [(1957) SCR 604].”
VIVEK NARAYAN SHARMA v. UNION OF INDIA 89
[B. R. GAVAI, J.]

163. In the said case, this Court found that sub-section (1) of A
Section 16 conferred a power on the Central Government to make rules
for carrying out the purposes of the Act. The Court further found that, it
is the first sub-section of Section 16 which confers the general rule-
making power i.e. it delegates to the administrative authority the power
to frame rules and regulations to subserve the object and purpose of the
B
Act. The Court found that the question, therefore, was, as to whether
the delegation to the administrative authority without supplying proper
guidance was constitutional or not. The Court held that the words
impugned were vague and Parliament had established no criteria, no
standards and had not prescribed any principle on which a particular
disease or condition was to be specified in the Schedule. The Court, C
therefore, held clause (d) of Section 3 to be amounting to excessive
delegation and as such unconstitutional.
164. In the case of Harakchand Ratanchand Banthia and
others (supra), the Constitution Bench of this Court was considering the
power given to the Administrator under the Gold (Control) Act, 1968. D
Section 5 of the Gold (Control) Act, 1968, which confers power on the
Administrator to issue directions and orders, fell for consideration, which
read thus:
“5. Power of Administrator issue directions and orders.— (1) The
Administrator may, if he thinks fit, make orders, not inconsistent E
with the provisions of this Act, for carrying out the provisions of
this Act.
(2) The Administrator may, so far as it appears to him to be
necessary or expedient for carrying out the provisions of this Act,
by order— F
(a) regulate, after consultation with the Reserve Bank of
India, the price at which any gold may be bought or sold, and
(b) regulate by licences, permits or otherwise, the manufacture,
distribution, transport, acquisition, possession, transfer, disposal,
use or consumption of gold.” G
[emphasis supplied]
165. It can be seen that under clause (b) sub-section (2) of Section
5 of the Gold (Control) Act, 1968, the Administrator was conferred with
the power to regulate by licences, permits or otherwise, the manufacture,
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90 SUPREME COURT REPORTS [2023] 1 S.C.R.

A distribution, transport, acquisition, possession, transfer, disposal, use or
consumption of gold. In this premise, this Court observed thus:
“20. It is manifest upon a review of all these provisions that the
power conferred upon the Administrator under Section 5(2)(b)
is legislative in character and extremely wide. A parallel
B power of subordinate legislation is conferred to the Central
Government under Section 114(1) and (2) of the Act. But
Section 114(3) however makes it incumbent upon the Central
Government to place the Rules before each House of
Parliament while it is in session for a total period of thirty
days which may be comprised in one session or in two
C successive sessions. It is clear that the substantive provisions of
the Act namely Sections 8, 11, 21, 31(3), 34(3) confer powers on
the Administrator similar to those contemplated by Section 5(2)(b)
of the Act. In these circumstances we are of opinion that the
power of regulation granted to the Administrator under Section
D 5(2)(b) of the Act suffers from excessive delegation of
legislative power and must be held to be constitutionally
invalid.”
[emphasis supplied]
166. This Court in the case of Harakchand Ratanchand Banthia
E and others (supra), therefore, was considering the delegation of power
to the Administrator under clause (b) of sub-section (2) of Section 5 of
the Gold (Control) Act, 1968. The Court found that a parallel power of
subordinate legislation was conferred to the Central Government under
Section 114(1) and (2) of the said Act. However, under sub-section (3)
F of Section 114 of the said Act it is incumbent upon the Central Government
to place the Rules before each House of Parliament. This Court further
held that the substantive provisions of the Act namely Sections 8, 11, 21,
31(3) and 34(3) of the said Act also confer powers on the Administrator
which was similar to the one contemplated by Section 5(2)(b) of the said
Act. In these circumstances, the Court held that the power of regulation
G granted to the Administrator under Section 5(2)(b) of the said Act suffers
from excessive delegation and as such unconstitutional.
167. It could thus be seen that clause (b) of sub-section (2) of
Section 5 of the Gold (Control) Act, 1968 conferred a power on the
Administrator which was legislative in nature, to regulate the transactions
H with regard to use and consumption of gold.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 91
[B. R. GAVAI, J.]

168. It is to be noted that clause (a) of sub-section (2) of Section A
5 of the Gold (Control) Act, 1968 also empowered the Administrator to
regulate, after consultation with the RBI, the price at which any gold
may be bought or sold. It was also argued before the Court that the said
provision is also invalid amounting to excessive delegation inasmuch as
the power conferred was unguided. This Court specifically rejected the
B
said contention. It will be apposite to refer to the following observations
of this Court:
“..…As the power to fix the price may also be exercised not only
in respect of primary gold but also in respect of articles and
ornaments the business of the petitioners and similarly other
persons will be adversely affected. But the section provides the C
safeguard that the regulation of the price should be made by
the Administrator after consultation with the Reserve Bank
of India. It was argued that the phrase “so far as it appears to
him to be necessary or expedient for carrying out the provisions
of this Act” was a subjective formula and action of the D
Administrator in making the orders under Section 5 (2)(a) may be
arbitrary and unreasonable. But in our opinion the formula is not
subjective and does not constitute the Administrator the sole judge
as to what is in fact necessary or expedient for the purposes of
the Act. On the contrary we hold that in the context of the scheme
and object of the legislation as a whole the expression cannot be E
construed in a subjective sense and the opinion of the Administrator
as to the necessity or expediency of making the order must be
reached objectively after having regard to the relevant
considerations and must be reasonably tenable in a court of law.
It must be assumed that the Administrator will generally address F
himself to the circumstances of the situation before him and not
try to promote purposes alien to the object of the Act….”
[emphasis supplied]
169. It is thus clear that though the Court found the power under
Section 5(2)(b) of the Gold (Control) Act, 1968 suffered from excessive G
delegation and, therefore, constitutionally invalid; it, however, categorically
rejected the contention insofar as Section 5(2)(a) of the Gold (Control)
Act, 1968 is concerned, inasmuch as it provided a safeguard that the
regulation of the price should be made by the Administrator after
consultation with the RBI. H
92 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 170. This Court rejected the argument that the phrase “so far as
it appears to him to be necessary or expedient for carrying out the
provisions of this Act” was a subjective formula and as such, the action
of the Administrator under Section 5(2)(a) was arbitrary and
unreasonable. Rejecting the said contention, the Court held that in the
context of the scheme and object of the legislation as a whole, the
B
expression cannot be construed in a subjective sense and the opinion of
the Administrator as to the necessity or expediency of making the order
must be reached objectively after having regard to the relevant
considerations and must be reasonably tenable in a court of law.
171. It could thus be seen that though the Court found the power
C under Section 5(2)(b) of the Gold (Control) Act, 1968 to be invalid on the
ground of excessive delegation, yet it found the power under Section
5(2)(a) of the Gold (Control) Act, 1968 to be valid since it provides an
inbuilt safeguard that the Administrator has to act after consultation with
the RBI.
D 172. A Seven-Judge Bench of this Court in the case of Birla
Cotton, Spinning and Weaving Mills Delhi (supra) was considering
the validity of Section 150 of the Delhi Municipal Corporation Act, 1957,
which reads thus:
“150. Imposition of other taxes.
E
(1) The Corporation may, at a meeting, pass a resolution for the
levy of any of the taxes specified in sub-section (2) of Section
113, defining the maximum rate of the tax to be levied, the class
or classes of persons or the description or descriptions of articles
and properties to be taxed, the system of assessment to be adopted
F and the exemptions, if any, to be granted.
(2) Any resolution passed under sub-section (1) shall be submitted
to the Central Government for its sanction, and if sanctioned by
that Government, shall come into force on and from such date as
may be specified in the order of sanction.
G
(3) After a resolution has come into force under sub-section (2),
the Corporation may, subject to the maximum rate, pass a second
resolution determining the actual rates at which the tax shall be
leviable; and the tax shall come into force on the first day of the
quarter of the year next following the date on which such second
H resolution is passed.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 93
[B. R. GAVAI, J.]

(4) After a tax has been levied in accordance with the foregoing A
provisions of this section, the provisions of sub-section (2) of
Section 109, shall apply in relation to such tax as they apply in
relation to any tax imposed under sub-section (1) of Section 113.”
173. It was sought to be argued that Section 150(1) delegates
completely unguided power to the Corporation in the matter of optional B
taxes and suffers from the vice of excessive delegation and, therefore,
is unconstitutional.
174. This Court after considering various earlier cases including
Hamdard Dawakhana (Wakf) Lal Kuan, Delhi and another (supra)
observed thus: C
“A review of these authorities therefore leads to the
conclusion that so far as this Court is concerned the principle is
well established that essential legislative function consists of the
determination of the legislative policy and its formulation as a
binding rule of conduct and cannot be delegated by the legislature. D
Nor is there any unlimited right of delegation inherent in the
legislative power itself. This is not warranted by the provisions of
the Constitution. The legislature must retain in its own hands the
essential legislative functions and what can be delegated is the
task of subordinate legislation necessary for implementing the
purposes and objects of the Act. Where the legislative policy is E
enunciated with sufficient clearness or a standard is laid down,
the courts should not interfere. What guidance should be given
and to what extent and whether guidance has been given in a
particular case at all depends on a consideration of the
provisions of the particular Act with which the Court has to F
deal including its preamble. Further it appears to us that the
nature of the body to which delegation is made is also a factor
to be taken into consideration in determining whether there is
sufficient guidance in the matter of delegation.
What form the guidance should take is again a matter G
which cannot be stated in general terms. It will depend upon
the circumstances of each statute under consideration; in some
cases guidance in broad general terms may be enough; in
other cases more detailed guidance may be necessary.”
[emphasis supplied]
H
94 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 175. K.N. Wanchoo, CJ, speaking for himself and J.M. Shelat, J.
held that where the legislative policy is enunciated with sufficient clarity
or a standard is laid down, the courts should not interfere. What guidance
should be given and to what extent and whether guidance has been
given in a particular case at all depends on a consideration of the provisions
of the particular Act with which the Court has to deal, including its
B
preamble. They further held that the nature of the body to which
delegation is made is also a factor to be taken into consideration in
determining whether there is sufficient guidance in the matter of
delegation. The Court further held that what form the guidance should
take is again a matter which cannot be stated in general terms. It will
C depend upon the circumstances of each statute under consideration. It
further held that in some cases guidance in broad general terms may be
enough, in other cases more detailed guidance may be necessary.
176. The Court further observed thus:
“The first circumstance which must be taken into account in
D this connection is that the delegation has been made to an
elected body responsible to the people including those who
pay taxes. The councillors have to go for election every four
years. This means that if they have behaved unreasonably
and the inhabitants of the area so consider it they can be
E thrown out at the ensuing elections. This is in our opinion a
great check on the elected councillors acting unreasonably
and fixing unreasonable rates of taxation. This is a democratic
method of bringing to book the elected representatives who
act unreasonably in such matters….”

F [emphasis supplied]
177. It was thus found that the delegation was made to an elected
body responsible to the people including those who pay taxes. It has
been observed that if the councillors behave unreasonably and the
inhabitants of the area so consider it, they can be thrown out at the
G ensuing elections. As such, there is a great check on the elected councillors
acting unreasonably and fixing unreasonable rates of taxation. This is a
democratic method of bringing to book the elected representatives who
act unreasonably in such matters.
178. The Court further found that another guide or control on the
limit of taxation is to be found in the purposes of the Act. After careful
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 95
[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.
179. 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]
180. 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 E
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.
181. It will also be apposite to refer to the following observations F
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
G
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
96 SUPREME COURT REPORTS [2023] 1 S.C.R.

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]
182. Observing thus, M. Hidayatullah, J. also rejected the
C 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
D delegatee acts contrary to the wishes of the legislature the legislature
can undo what the delegate has done.
183. 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
E 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
F 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
G 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 97
[B. R. GAVAI, J.]

the Executive to make subordinate legislation within a prescribed A
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
B
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 C
may be, for that of the popular will as expressed by the
representatives of the people.”
[emphasis supplied]
184. 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 E
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 F
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 G
popular will as expressed by the representatives of the people.
185. 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 :
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98 SUPREME COURT REPORTS [2023] 1 S.C.R.

A (1967) 3 SCJ 557 : (1967) 20 STC 430] confers a power and
imposes a duty on the Legislature to make laws. The essential
legislative function is the determination of the legislative policy
and its formulation as a rule of conduct. Obviously it cannot
abdicate its functions in favour of another. But in view of the
multifarious activities of a welfare State, it cannot presumably
B
work out all the details to suit the varying aspects of a complex
situation. It must necessarily delegate the working out of details
to the Executive or any other agency. But there is danger inherent
in such a process of delegation. An over-burdened Legislature or
one controlled by a powerful Executive may unduly overstep the
C 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. This self-effacement
D
of legislative power in favour of another agency either in whole
or in part is beyond the permissible limits of delegation. It is for a
court to hold on a fair, generous and liberal construction of
an impugned statute whether the Legislature exceeded such
limits.”
E [emphasis supplied]
186. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 99
[B. R. GAVAI, J.]

hold on a fair, generous and liberal construction of an impugned statute A
to examine whether the Legislature exceeded such limits.
187. 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 B
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 D
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 E
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 F
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 G
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
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100 SUPREME COURT REPORTS [2023] 1 S.C.R.

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]
C 188. 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.

F 189. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 101
[B. R. GAVAI, J.]

the expectations and the needs, the limits to the patience and the A
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
B
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 C
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
D
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 E
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,
F
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]
190. 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
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102 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C case of taxing statutes and welfare legislations.
191. 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…...”
192. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 103
[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.”
193. 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
194. 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
195. 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 F
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 G
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
104 SUPREME COURT REPORTS [2023] 1 S.C.R.

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]
196. 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.
197. 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
F 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
G country….”
[emphasis supplied]
198. 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
H country. It has been held that the RBI plays an important role in the
VIVEK NARAYAN SHARMA v. UNION OF INDIA 105
[B. R. GAVAI, J.]

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.
199. 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]
200. 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.
201. 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
106 SUPREME COURT REPORTS [2023] 1 S.C.R.

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]
202. 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
203. 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.
204. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 107
[B. R. GAVAI, J.]

205. 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
B
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 C
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.
206. As already discussed herein above, the RBI has been D
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 F
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.
207. We are of the considered view that there is sufficient guidance G
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
108 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 208. 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.
209. 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.
210. 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.
211. 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?
212. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 109
[B. R. GAVAI, J.]

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
B
demonetization and, within hours, the decision was announced by the
Hon’ble Prime Minister.
213. 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 C
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.
214. 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 E
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
215. The law with regard to scope of judicial review has been
very well crystalized in the case of Tata Cellular (supra). In the said F
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 G
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.
216. After referring to various pronouncements on the scope of
judicial review, the Court has summed-up thus: H
110 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
E 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
F 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.”
217. Though various authorities are cited at the Bar with regard
G 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 111
[B. R. GAVAI, J.]

the issue is still covered by what has been held in the case of Tata A
Cellular (supra).
218. 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
219. 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
220. 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 D
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 E
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]
221. 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
112 SUPREME COURT REPORTS [2023] 1 S.C.R.

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]

C 222. 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]
223. Recently, this Court in the case of Small Scale Industrial
Manufactures Association (Registered) v. Union of India and
65
H (1990) 3 SCC 223
VIVEK NARAYAN SHARMA v. UNION OF INDIA 113
[B. R. GAVAI, J.]

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, C
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 D
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 E
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 F
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 G
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
114 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 224. 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).
225. 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
E 226. 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
F 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
G reasonably could have reached thereat, and as to whether there has
been a procedural impropriety.
227. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 115
[B. R. GAVAI, J.]

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.
228. 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.
229. 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 E
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 F
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.
230. The said communication thereafter refers to the constitution
of a Special Investigation Team (SIT) headed by two former Judges of G
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
116 SUPREME COURT REPORTS [2023] 1 S.C.R.

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.
231. 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
C 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
D raised in the meeting were considered.
232. 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.

F 233. 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.
234. Upon perusal of the material on record, we are of the
considered view that the Central Board had taken into consideration the
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 117
[B. R. GAVAI, J.]

relevant factors while recommending withdrawal of legal tender of bank A
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
B
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
235. 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.
236. 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.”
237. 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
118 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Recommendation of the RBI
238. 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.
239. As already discussed hereinabove, the RBI has a pivotal role
C 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
D 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
E to economic and monetary policies cannot be denied to the RBI and the
Central Government.
240. 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
F 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
G 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
H the relevant factors.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 119
[B. R. GAVAI, J.]

241. The dictionary meaning of the word “recommend” is “to A
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
B
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.
242. 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 C
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 D
context in which it is used, the word “recommendation” would mean a
consultative process between the Central Board and the Central
Government.
243. 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
120 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
244. 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
G 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.
245. As already discussed herein above, the record itself reveals
H that the RBI and the Central Government were in consultation with
VIVEK NARAYAN SHARMA v. UNION OF INDIA 121
[B. R. GAVAI, J.]

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
246. 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
247. 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
248. 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 F
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 G
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
122 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C 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
D
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
F
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
G 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]
VIVEK NARAYAN SHARMA v. UNION OF INDIA 123
[B. R. GAVAI, J.]

249. 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
250. 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 D
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 E
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]
251. The Constitution Bench holds that the Court would not have
the necessary competence and expertise to adjudicate upon such an
H
124 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
static, liberal, not verbal”.
252. 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
C 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
D 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
E 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.
253. 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.
254. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 125
[B. R. GAVAI, J.]

the difficulties of the people and availability of the new notes. No doubt A
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 B
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]
255. 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 D
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.
256. In this respect, we may gainfully refer to the following E
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
F
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 G
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
126 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
C every noble cause claims its martyr.”
[emphasis supplied]
257. 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
D 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.
258. 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
F 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.
259. 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
G 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.
260. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 127
[B. R. GAVAI, J.]

R. Janakiraman, a senior official in the RBI was asked by some officers A
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
B
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 C
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
261. 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 E
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.
262. We, therefore, find that the impugned notification dated 8th
November 2016 does not suffer from any flaws in the decision-making F
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
263. 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
128 SUPREME COURT REPORTS [2023] 1 S.C.R.

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).
264. 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.
265. The said action came to be challenged by writ petition filed
C 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
D 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
266. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 129
[B. R. GAVAI, J.]

imposed on the other hand. This is what is known as “doctrine of A
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
B
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; D
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 E
constitutional right.”
267. 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 F
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 G
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
130 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 131
[B. R. GAVAI, J.]

268. 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.
269. 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.
270. 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).
271. 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
132 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 272. 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
B
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.
273. The second test is as to whether the measure undertaken to
effectuate such a limitation is rationally connected to the fulfilment of
C 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
D 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
274. 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
F 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
G 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 133
[B. R. GAVAI, J.]

the Central Government, in consultation with the RBI. Unless the said A
discretion has been exercised in a palpably arbitrary and unreasonable
manner, it will not be possible for the Court to interfere with the same.
275. 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 B
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
276. 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?
277. 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 E
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, F
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.
278. 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 G
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.

H
134 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 279. 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
B
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
C 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
280. 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.
281. 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?
282. 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.
283. 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 135
[B. R. GAVAI, J.]

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.
284. Under Section 8 of the 1978 Act, a person who failed to
apply for exchange of any demonetized notes within the time provided B
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 C
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.
285. 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
136 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 137
[B. R. GAVAI, J.]

was empowered to extend the period of such exchange. Such A
being the scheme of the Act regarding exchange of high
denomination banknotes it cannot be said that the time and
the manner in which the high denomination banknotes could
be exchanged were unreasonable, unjust and violative of the
petitioners’ fundamental rights.”
B
[emphasis supplied]
286. The Constitution Bench found that if the time for such
exchange was not limited, the high denomination bank notes could be
circulated and transferred without the knowledge of the authorities
concerned, from one person to another and any such transferee could C
walk into the Bank on any day thereafter and demand exchange of his
notes. It was held that, in such an eventuality, the very object which the
Demonetization Act sought to achieve would have been defeated. The
Court found that between 16th January 1978 and 19th January 1978, the
holder was entitled to get the exchange value of his notes from the Bank
without any limit or hindrance. The challenge that the period of three D
days was unreasonable, unjust and violative of the petitioners’ fundamental
rights, stood specifically rejected.
287. In the present case, the period for exchanging any amount of
SBNs and depositing the same in the KYC compliant bank account
without any limit or hindrance was 52 days, whereas the said period in E
the case of Jayantilal Ratanchand Shah (supra) was only three days,
which is much less as compared to the one provided by the impugned
Notification. In the light of what has been held by the Constitution Bench
in the case of Jayantilal Ratanchand Shah (supra), we fail to
understand as to how the said period of 52 days could be construed to be
unreasonable, unjust and violative of the petitioners’ fundamental rights. F

288. We, therefore, hold that the period provided for exchange of
notes vide the impugned Notification dated 8th November 2016 cannot
be said to be unreasonable.
ISSUE NO. (vi): AS TO WHETHER THE RBI HAS AN
G
INDEPENDENT POWER UNDER SUB-SECTION (2) OF
SECTION 4 OF THE 2017 ACT IN ISOLATION OF THE
PROVISIONS OF SECTION 3 AND SECTION 4(1) THEREOF
TO ACCEPT THE DEMONETIZED NOTES BEYOND THE
PERIOD SPECIFIED IN NOTIFICATIONS ISSUED UNDER
SUB-SECTION (1) OF SECTION 4 OF THE 2017 ACT? H
138 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 289. It is sought to be urged by Shri Divan that the RBI has
independent power under sub-section (2) of Section 4 of the 2017 Act.
Contextual and harmonious construction of the provisions of
the 2017 Act.
290. For appreciating the said contention, it will be appropriate to
B refer to Sections 3 and 4 of the 2017 Act, which read thus:
“3. Specified bank notes to cease to be liability of Reserve
Bank or Central Government.— On and from the appointed
day, notwithstanding anything contained in the Reserve Bank of
India Act, 1934 (2 of 1934) or any other law for the time being in
C 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
D 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.
4. Exchange of specified bank notes.— (1) Notwithstanding
anything contained in section 3, the following persons holding
E specified bank notes on or before the 8th day of November, 2016
shall be entitled to tender within the grace period with such
declarations or statements, at such offices of the Reserve Bank
or in such other manner as may be specified by it, namely:—
(i) a citizen of India who makes a declaration that he was outside
F India between the 9th November, 2016 to 30th December, 2016,
subject to such conditions as may be specified, by notification, by
the Central Government; or
(ii) such class of persons and for such reasons as may be specified
by notification, by the Central Government.
G (2) The Reserve Bank may, if satisfied, after making such
verifications as it may consider necessary that the reasons for
failure to deposit the notes within the period specified in the
notification referred to in section 3, are genuine, credit the value
of the notes in his Know Your Customer compliant bank account
in such manner as may be specified by it.
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 139
[B. R. GAVAI, J.]

(3) Any person, aggrieved by the refusal of the Reserve Bank to A
credit the value of the notes under sub-section (2), may make a
representation to the Central Board of the Reserve Bank within
fourteen days of the communication of such refusal to him.
Explanation.— For the purposes of this section, the expression
“Know Your Customer compliant bank account” means the B
account which complies with the conditions specified in the
regulations made by the Reserve Bank under the Banking
Regulation Act, 1949 (10 of 1949).”
291. The effect of Section 3 of the 2017 Act is that the SBNs,
which have ceased to be legal tender, in view of the impugned Notification, C
shall cease to be liabilities of the RBI under Section 34 of the RBI Act
and shall cease to have the guarantee of the Central Government under
sub-section (1) of Section 26 of the RBI Act. The legislative intent under
Section 3 of the 2017 Act is to provide clarity and finality to the liabilities
of the RBI and the Central Government arising from such bank notes
which have ceased to be legal tender with effect from 9th November D
2016.
292. Sub-section (1) of Section 4 of the 2017 Act provides that
notwithstanding anything contained in Section 3 of the 2017 Act, a class
of persons would be entitled to tender within the grace period with such
declarations or statements, at such offices of the RBI or in such other E
manner as may be specified by it. Clause (i) of sub-section (1) of Section
4 of the 2017 Act deals with a citizen of India who makes a declaration
that he was outside India between 9th November 2016 and 30th December,
2016, however, subject to such conditions as may be specified, in the
notification, by the Central Government. Clause (ii) of sub-section (1) of F
Section 4 of the 2017 Act empowers the Central Government to issue a
notification with regard to persons holding SBNs who would be entitled
to tender within the grace period for such reasons as may be specified in
the said notification.
293. It is thus clear that, though in view of the impugned G
Notification and in view of Section 3 of the 2017 Act, demonetized notes
have ceased to be a legal tender and have ceased to be the liabilities of
the RBI under Section 34 of the RBI Act and the guarantee of the
Central Government under sub-section (1) of Section 26 of the RBI Act,
a window is provided by Section 4 of the 2017 Act. Clause (i) of sub-
H
140 SUPREME COURT REPORTS [2023] 1 S.C.R.

A section (1) of Section 4 of the 2017 Act deals with a citizen of India who
makes a declaration that he was outside India between 9 th November
2016 and 30th December, 2016, subject to such conditions as may be
specified, by notification, by the Central Government. Accordingly, a
notification is issued by the Central Government on 30th December 2016.
In view of clause (ii) of sub-section (1) of Section 4 of the 2017 Act, the
B
Central Government is empowered to provide a window for tendering
the SBNs which have otherwise ceased to be a legal tender to such
class of persons and for the reasons as may be specified in the notification.
Sub-section (2) of Section 4 of the 2017 Act provides that the RBI, if
satisfied with the reasons for failure to deposit the notes within the period
C specified in the impugned Notification, i.e., prior to 30th December 2016,
are genuine, credit the value of the notes in his KYC compliant bank
account in such manner as may be specified by it. However, prior to
doing so, the RBI is required to make such verifications as it may consider
necessary for finding out the genuineness of the reasons for failure to
deposit the notes prior to 30th December 2016. The provisions of sub-
D
section (2) of Section 4 of the 2017 Act are somewhat analogous to the
provisions in sub-sections (1) and (2) of Section 8 of the 1973 Act. Sub-
section (3) of Section 4 of the 2017 Act provides that any person,
aggrieved by the refusal of the RBI to credit the value of the notes
under sub-section (2), can make a representation to the Central Board
E of the RBI within fourteen days of the communication of such refusal to
him. This provision is somewhat analogous with sub-section (3) of Section
8 of the 1973 Act.
294. It is thus clear that Section 4 of the 2017 Act provides an
integrated scheme. Sub-section (1) of Section 4 of the 2017 Act
F empowers the Central Government to provide a window to the persons
holding SBNs on or before 8th November 2016 to tender the same within
the grace period with such declarations or statements. Clause (i) thereof
is applicable to the citizens who were outside India between 9th November
2016 and 30th December 2016. Clause (ii) thereof enables the Central
Government to provide a window to such class of persons and for such
G
reasons as may be specified in the notification by the Central
Government. Sub-section (2) of Section 4 of the 2017 Act provides for
consideration of the cases covered by sub-section (1) thereof. It provides
that the RBI, upon its satisfaction, after making such verifications as it
may consider necessary that the reasons for failure to deposit the notes
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 141
[B. R. GAVAI, J.]

prior to 30th December 2016, are genuine, will credit the value of the A
notes in KYC compliant bank account of such a person. If any person is
aggrieved by the refusal of the RBI under sub-section (2), an appellate
opportunity is provided to such a person, under sub-section (3).
295. The Constitution Bench of this Court in the case of Popatlal
Shah v. The State of Madras72, observed thus: B

“It is a settled rule of construction that to ascertain the legislative
intent, all the constituent parts of a statute are to be taken together
and each word, phrase or sentence is to be considered in the light
of the general purpose and object of the Act itself.”
C
296. We may gainfully refer to the following observations of this
Court in the case of Peerless General Finance and Investment
Company Limited (supra):
“33. Interpretation must depend on the text and the context. They
are the bases of interpretation. One may well say if the text is the D
texture, context is what gives the colour. Neither can be ignored.
Both are important. That interpretation is best which makes the
textual interpretation match the contextual. A statute is best
interpreted when we know why it was enacted. With this
knowledge, the statute must be read, first as a whole and then
E
section by section, clause by clause, phrase by phrase and word
by word. If a statute is looked at, in the context of its enactment,
with the glasses of the statute-maker, provided by such context,
its scheme, the sections, clauses, phrases and words may take
colour and appear different than when the statute is looked at
without the glasses provided by the context. With these glasses F
we must look at the Act as a whole and discover what each
section, each clause, each phrase and each word is meant and
designed to say as to fit into the scheme of the entire Act. No part
of a statute and no word of a statute can be construed in isolation.
Statutes have to be construed so that every word has a place and
G
everything is in its place. ….”
297. The interpretation which makes the textual interpretation
match the contextual has to be preferred. A statute is best interpreted
when the reason and purpose for its enactment is ascertained. The statute
72
[1953] 4 SCR 677 H
142 SUPREME COURT REPORTS [2023] 1 S.C.R.

A must be read first as a whole, and then section by section, clause by
clause, phrase by phrase and word by word. It has been held that if the
statute is looked at in the context of its enactment with the glasses of the
statute-maker, provided by such context, its scheme, the sections, clauses,
phrases and words may take colour and appear different than when the
statute is looked at without the glasses provided by the context. With
B
these glasses we must look at the Act as a whole and discover what
each section, each clause, each phrase and each word means and what
it is designed to say as to fit into the scheme of the entire Act. No part of
a statute and no word of a statute can be construed in isolation.

C 298. If we look at the purpose of the 2017 Act, it is for extinguishing
the liabilities of the SBNs which have ceased to be legal tender with
effect from 9th November 2016 so as to give clarity and finality to the
liabilities of the RBI and the Central Government arising from such bank
notes which have ceased to be legal tender. However, in order to provide
a grace period to genuine cases, Section 4 of the 2017 Act has been
D incorporated. Section 5 of the 2017 Act provides for prohibition on holding,
transferring or receiving SBNs. Sections 6 and 7 of the 2017 Act are
penal sections which provide for penalty for contravention of Sections 4
and 5 of the 2017 Act, respectively.
299. It is thus clear that Section 4 of the 2017 Act provides for an
E integrated scheme. It is a complete code in itself. Under sub-section (1)
of Section 4 of the 2017 Act, the Central Government is entitled to provide
grace period. Under sub-section (2) thereof, the RBI is required to satisfy
as to whether a person seeking to take benefit of grace period under
sub-section (1) is entitled thereto after satisfying that the reasons for not
F depositing the SBNs prior to 30th December 2016, are genuine, and
thereafter, credit the value of the said notes in his ‘KYC compliant bank
account’. Sub-section (3) thereof provides for an appeal. We are
therefore of the considered view that sub-section (2) of Section 4 of the
2017 Act cannot be read independently to provide power to the RBI in
isolation of sub-sections (3) and (4) thereof. It is to be read as a part of
G the scheme of Section 4 of the 2017 Act.
300. Shri Divan and various other learned counsel contended that
there were various genuine cases wherein the persons could not deposit
the demonetized notes within the specified period. The impugned
Notification was sought to be challenged on the ground that it has caused
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 143
[B. R. GAVAI, J.]

hardship to number of persons. It was therefore urged that this Court A
should either hold the impugned Notification to be arbitrary or direct the
Central Government to exercise the powers under Section 4(1)(ii) of the
2017 Act or by exercising the powers under Article 142 of the Constitution
of India to provide a window so as to enable genuine persons to exchange
their demonetized notes. We have already referred to the judgment of
B
this Court in the case of Km. Sonia Bhatia (supra) hereinbefore.
301. As such, the contention that the impugned notification is liable
to be set aside on the ground that it caused hardship to individual/citizens
will hold no water. The individual interests must yield to the larger public
interest sought to be achieved by impugned Notification. C
302. Insofar as the suggestion to frame a scheme and provide a
window for a limited period so as to enable citizens having genuine
reasons to exchange the notes is concerned, we do not find that it will be
appropriate for us in the absence of any expertise in economic, monetary
and fiscal matters to frame such a scheme. In our view, it will be D
encroaching upon the areas reserved for the experts. If the Central
Government finds that there exists any such class of persons and there
are any reasons for extending the benefit under Section 4 of the 2017
Act, it is within its discretion to do so. In our view, it cannot be done by
a judicial mandate.
E
303. We therefore hold that the RBI does not have independent
power under sub-section (2) of Section 4 of the 2017 Act in isolation of
the provisions of Sections 3 and 4(1) thereof to accept the demonetized
notes beyond the period specified in notifications issued under sub-section
(1) of Section 4 of the 2017 Act.
F
IX. ANSWERS TO THE QUESTIONS
304. We accordingly answer the Reference as under:
(i) The power available to the Central Government under sub-
section (2) of Section 26 of the RBI Act cannot be restricted G
to mean that it can be exercised only for ‘one’ or ‘some’
series of bank notes and not for ‘all’ series of bank notes.
The power can be exercised for all series of bank notes.
Merely because on two earlier occasions, the
demonetization exercise was by plenary legislation, it cannot
H
144 SUPREME COURT REPORTS [2023] 1 S.C.R.

A be held that such a power would not be available to the
Central Government under sub-section (2) of Section 26 of
the RBI Act;
(ii) Sub-section (2) of Section 26 of the RBI Act does not
provide for excessive delegation inasmuch as there is an
B inbuilt safeguard that such a power has to be exercised on
the recommendation of the Central Board. As such, sub-
section (2) of Section 26 of the RBI Act is not liable to be
struck down on the said ground;
(iii) The impugned Notification dated 8th November 2016 does
C not suffer from any flaws in the decision-making process;
(iv) The impugned Notification dated 8th November 2016
satisfies the test of proportionality and, as such, cannot be
struck down on the said ground;
D (v) The period provided for exchange of notes vide the impugned
Notification dated 8th November 2016 cannot be said to
unreasonable; and
(vi) The RBI does not possess independent power under sub-
section (2) of Section 4 of the 2017 Act in isolation of the
E provisions of Sections 3 and 4(1) thereof to accept the
demonetized notes beyond the period specified in
notifications issued under sub-section (1) of Section 4 of
the 2017 Act.
305. Having answered the Reference, we direct the Registry of
F this Court to place the matter before Hon’ble the Chief Justice of India
for placing it before the appropriate Bench(es). Needless to state that
all other contentions are kept open to be considered by the Bench(es)
before which the matters would be placed.
306. Before parting with the judgment, we place on record our
G
deep appreciation for the valuable assistance rendered by Shri R.
Venkataramani, learned Attorney General, Shri P. Chidambaram, Shri
Shyam Divan and Shri Jaideep Gupta, learned Senior Counsel and all
other counsel appearing for the parties.

H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 145

NAGARATHNA, J. A
I N D E X*

B

C

D

E

1. I have had the benefit of reading the judgment proposed by His F
Lordship, B.R.Gavai, J.

2. However, I wish to differ on the reasoning and conclusions
arrived at in his judgement with regard to exercise of power by the
Central Government under sub-section (2) of Section 26 of the Reserve
Bank of India Act, 1934 (hereinafter referred to as “the Act” for the G
sake of brevity) by issuance of the impugned notification dated 8th
November, 2016.

Hence, my separate judgment.
*The Index is as per the Original Judgment. H
146 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Preface:
3. By way of a preface, I state that the judgment proposed by His
Lordship, Gavai, J. does not recognise the essential fact that the Act
does not envisage initiation of demonetisation of bank notes by the Central
Government. Sub-section (2) of Section 26 of the Act, contemplates
B demonetisation of bank notes at the instance of the Central Board of the
Reserve Bank of India (hereinafter referred to as “the Bank”). Hence,
if demonetisation is to be initiated by the Central Government, such power
is derived from Entry 36 of List I of the Seventh Schedule to the
Constitution which speaks of currency, coinage and legal tender; foreign
C exchange.
In view of the interpretation given by me to sub-section (2) of
Section 26 of the Act in the context of the powers of the Central Board
of the Bank and the Central Government vis-à-vis demonetisation of
bank notes, my answer is only with regard to question No.1 of the
D reference order. Incidentally, while considering the same, I would touch
upon questionNo. 7 of the reference order.
4. The questions for consideration of this Constitution Bench
framed by the Predecessor Bench on 16th December, 2016 are extracted
as under:
E
(i) “Whether the notification dated 8th November 2016 is ultra
vires Section 26(2) and Sections 7,17,23,24,29 and 42 of
the Reserve Bank of India Act, 1934;
(ii) Does the notification contravene the provisions of Article
F 300(A) of the Constitution;
(iii) Assuming that the notification has been validly issued under
the Reserve Bank of India Act, 1934 whether it is ultra
vires Articles 14 and 19 of the Constitution;
G (iv) Whether the limit on withdrawal of cash from the funds
deposited in bank accounts has no basis in law and violates
Articles 14,19 and 21;
(v) Whether the implementation of the impugned notification(s)
suffers from procedural and/or substantive unreasonableness
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 147
[B. V. NAGARATHNA, J.]

and thereby violates Articles 14 and 19 and, if so, to what A
effect?
(vi) In the event that Section 26(2) is held to permit
demonetization, does it suffer from excessive delegation of
legislative power thereby rendering it ultra vires the
Constitution; B
(vii) What is the scope of judicial review in matters relating to
fiscal and economic policy of the Government;
(viii) Whether a petition by a political party on the issues raised
is maintainable under Article 32; and C
(ix) Whether District Co-operative Banks have been
discriminated against by excluding them from accepting
deposits and exchanging demonetized notes.”
Keeping in view the general public importance and the far-reaching
implications which the answers to the questions may have, we consider D
it proper to direct that the matters be placed before the larger Bench of
five Judges for an authoritative pronouncement. The Registry shall
accordingly place the papers before Hon’ble the Chief Justice for
constituting an appropriate Bench.”
5. His Lordship,Gavai, J. has reframed the questions referred to E
this Constitution Bench and culled out six questions, which have been
answered in the erudite judgment proposed by him. My views on each
of such questions, as contrasted with those of His Lordship’s have been
expressed in a tabular form hereinunder, for easy reference.
F

G

H
148 SUPREME COURT REPORTS [2023] 1 S.C.R.

A

B

C

D

E

F

G

H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 149
[B. V. NAGARATHNA, J.]

A

B

C

D

E

F

G

H
150 SUPREME COURT REPORTS [2023] 1 S.C.R.

A

B

C

D

E

F

G

H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 151
[B. V. NAGARATHNA, J.]

A

B

C

D

E

F

G

H
152 SUPREME COURT REPORTS [2023] 1 S.C.R.

A

B

C

D
The reasons for the aforesaid conclusions shall now be discussed.
Controversy in these cases:
6. Practices such as hoarding “black” money, counterfeiting, etc.,
when coupled with corruption, are eating into the vitals of our society
E and economy. Any measure intended to strike at such practices, and
thereby eliminate off shoots thereof, such as, terror funding, drug
trafficking, emergence of a parallel economy, money laundering including
Havala transactions, must be commended. Such measures are necessary
to sanitize the economy and society, and enable it to recover from the
plague caused by the evils listed hereinabove. Therefore, it cannot be
F
denied that demonetisation in the instant case was a well-intentioned
proposal. However, in my separate opinion I shall proceed to legalistically
examine whether demonetisation, as well-intentioned as it may have
been, was carried out in accordance with the procedure established under
law.
G 6.1 The controversy in these cases revolves around the exercise
of power by the Central Government under sub-section (2)
of Section 26 of the Reserve Bank of India Act, 1934. Sub-
section (1) of Section 26 of the Act provides that every
bank note shall be a legal tender as per the amount expressed
H therein and shall be guaranteed by the Central Government.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 153
[B. V. NAGARATHNA, J.]

However, as per sub-section (2) of Section 26 of the Act, A
bank notes can cease to be legal tender when the Central
Government issues a notification in the Gazette of India
declaring that with effect from such date as may be specified
in the said notification any series of bank notes of any
denomination shall cease to be legal tender. Such a
B
notification may be issued on the recommendation of the
Central Board of the Bank. There is a challenge to the
vires of the said provision and also the validity of the
Notification dated 8th November, 2016 issued by the Central
Government. As a result of the said Notification, all series
of Rs.500/- and Rs.1,000/- denomination notes were C
demonetised or ceased to be legal tender by issuance of a
notification on the said date. At this stage itself, it may be
mentioned that subsequent to the notification there was an
Ordinance called “The Specified Bank Notes (Cessation
of Liabilities) Ordinance, 2016” (hereinafter referred to as
D
“the 2016 Ordinance” for the sake of brevity) promulgated
by the Hon’ble President of India, which was later made
an Act of the Parliament, namely,”The Specified Bank
Notes (Cessation of Liabilities) Act, 2017" (hereinafter
called “2017 Act” for the sake of brevity) and was notified
on 1st March 2017, replacing the Ordinance. The issuance E
of the aforesaid Notification and the action of the Central
Government ofdemonetisation of all series of Rs.500/- and
Rs.1,000/- are assailed in these Writ Petitions.
The Reserve Bank of India Act, 1934: An overview
7. Before proceeding further, it would be useful to refer to the F
provisions of the Act for the sake of convenience.
7.1 The object and purpose of the Act is to constitute a Reserve
Bank of Indiato regulate the issue of bank notes and for
keeping reserves with a view to secure monetary stability
in India, and to generally operate the currency and credit G
system of the country to its advantage.
7.2 The Preamble of the Act states that it is essential to have a
modern monetary policy framework to meet the challenge
of an increasingly complex economy and the primary
H
154 SUPREME COURT REPORTS [2023] 1 S.C.R.

A objective of the monetary policy is to maintain price stability
while keeping in mind the objective of growth. The monetary
policy framework in India shall be operated by the Reserve
Bank of India.
7.3 The followingprovisions of the Act are relevant for the
B purposes of this case and are extracted as under:
“Section 2- Definitions: In this Act, unless there is
anything repugnant in the subject or context, -
xxxx

C [a(ii)] “the Bank” means the Reserve Bank of India
constituted by this Act;
[a(iii)] “Bank for International Settlements” mean the
body corporate established with the said name under
the law of Switzerland in pursuance of an agreement
D dated the 20th January, 1930, signed at the Hague;]
[a(iv)] “bank note” means a bank note issued by the
Bank, whether in physical or digital form, under section
22;]
xxxxx
E (b) “the Central Board” means the Central Board of
Directors of the Bank;
xxxx
(cc) “International Monetary Fund” and “International
F Bank for Reconstruction and Development” means
respectively the “International Fund” and the
“International Bank”, referred to in the International
Monetary Fund and Bank Act, 1945;]
xxxx
G (d) “rupee coin” means (***) rupees which are legal
tender in India under the provisions of the Coinage Act,
2011 (11 of 2011)”
7.4 Chapter II of the Act deals with Incorporation, Capital,
Management and Business. Section 3 speaks of
H establishment and incorporation of the Reserve Bank while
VIVEK NARAYAN SHARMA v. UNION OF INDIA 155
[B. V. NAGARATHNA, J.]

Section 7 deals with Management of the Bank.Section 8 A
prescribes the composition of the Central Board, and term
of office of Directors of the Bank. Section 30 pertains to
the powers of the Central Government to supersede the
Central Board of the Bank.
7.5 Chapter III of the Act which is relevant for the purpose of B
these cases deals with Central Banking Function. For the
purposes of these cases, Sections 22,23,24,25,26,26A, 27,28
and 34 are relevant and the same read as under:
“22. Right to issue Bank notes. -(1) The Bank shall
have the sole right to issue Bank notes in 1[India], and C
may, for a period which shall be fixed by the [Central
Government] on the recommendation of the Central
Board, issue currency notes of the Government of India
supplied to it by the [Central Government], and the
provisions of this Act applicable to Bank notes shall,
unless a contrary intention appears, apply to all currency D
notes of the Government of India issued either by the
[Central Government] or by the Bank in like manner as
if such currency notes were Bank notes, and references
in this Act to Bank notes shall be construed accordingly.
(2) On and from the date on which this Chapter comes E
into force the 5[Central Government] shall not issue any
currency notes.”
“23. Issue Department - (1) The issue of Bank notes
shall be conducted by the Bank in an Issue Department
which shall be separated and kept wholly distinct from F
the Banking Department, and the assets of the Issue
Department shall not be subject to any liability other than
the liabilities of the Issue Department as hereinafter
defined in Section 34.
(2) The Issue Department shall not issue Bank notes to G
the Banking Department or to any other person except
in exchange for other Bank notes or for such coin, bullion
or securities as are permitted by this Act to form part of
the Reserve.”
H
156 SUPREME COURT REPORTS [2023] 1 S.C.R.

A “[24. Denominations of notes - (1) Subject to the
provisions of sub-section (2), Bank notes shall be of the
denominational values of two rupees, five rupees, ten
rupees, twenty rupees, fifty rupees, one hundred rupees,
five hundred rupees, one thousand rupees, five thousand
rupees and ten thousand rupees or of such other
B
denominational values, not exceeding ten thousand
rupees, as the Central Government may, on the
recommendation of the Central Board, specify in this
behalf.
(2) The Central Government may, on the
C recommendation of the Central Board, direct the non-
issue or the discontinuance of issue of Bank notes of
such denominational values as it may specify in this
behalf.]”
“25. Form of Bank notes - The design, form and
D material of Bank notes shall be such as may be approved
by the [Central Government] after consideration of the
recommendations made by Central Board.”
“26. Legal tender character of notes - (1) Subject to
the provisions of sub-section (2), every Bank note shall
E 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].
(2) On recommendation of the Central Board the [Central
Government] may, by notification in the Gazette of India,
F declare that, with effect from such date as may be
specified in the notification, any series of Bank notes of
any denomination shall cease to be legal tender [save at
such office or agency ofthe Bank and to such extent as
may be specified in the notification].”
“[26A. Certain Bank notes to cease to be legal
G
tender- Notwithstanding anything contained in section
26, no Bank note of the denominational value of five
hundred rupees, one thousand rupees or ten thousand
rupees issued before the 13th day of January, 1946, shall
be legal tender in payment or on account for the amount
H expressed therein.]”
VIVEK NARAYAN SHARMA v. UNION OF INDIA 157
[B. V. NAGARATHNA, J.]

“27. Re-issue of notes- The Bank shall not re-issue A
Bank notes which are torn, defaced or excessively
spoiled.”
xxx
“34. Liabilities of the Issue Department- (1) The
liabilities of the Issue Department shall be an amount B
equal to the total of the amount of the currency notes of
the Government of India and Bank notes for the time
being in circulation.”
7.6 Section 22 states that the Bank has the sole right to issue
bank notes in India, and may, for a period which shall be C
fixed by the Central Government on the recommendation
of the Central Board of the Bank, issue currency notes of
the Government of India supplied to it by the Central
Government. On and from the date on which Chapter III
comes into force, the Central Government shall not issue D
any currency notes except the denomination of Rupee One.
7.7 The issue of bank notes shall be by the Issue Department
of the Bank which shall be separated and kept wholly
distinct from the Banking Department, and the assets of
the Issue Department shall not be subject to any liability E
other than the liability of the Issue Department as defined
under Section 34 of the Act, vide Section 23 of the Act.
The liabilities of the Issue Department under Section 34 of
the Act shall be an amount equal to the total of the amount
of the currency notes of the Government of India and bank
notes for the time being in circulation. F
7.8 Sub-section (1) of Section 24 states that, subject to the
provisions of sub-section (2) of Section 24, the bank notes
shall be of the denominational values of two rupees, five
rupees, ten rupees, twenty rupees, fifty rupees, one hundred
rupees, five hundred rupees, one thousand rupees, five G
thousand rupees and ten thousand rupees or of such other
denominational values, not exceeding ten thousand rupees,
as the Central Government may, on the recommendation of
the Central Board of the Bank, specify in this behalf.
However, this provision is subject to sub-section (2) of
H
158 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Section 24 which states that the Central Government may
on the recommendation of the Central Board of the Bank,
direct the non-issue or the discontinuance of issue of bank
notes of such denominational values as it may specify in
that behalf. The Central Government has to approve the
design for all the bank notes after consideration of the
B
recommendation made by the Central Board vide Section
25 of the Act.
7.9 Sub-section (1) of Section 26 of the Act states that every
bank note shall be legal tender at any place in India in
payment, or on account for the amount expressed therein
C and shall be guaranteed by the Central Government. This
is, however, subject to sub-section (2) of Section 26 of the
Act, which states that the Central Government on the
recommendation of the Central Board may, by issuance of
a notification in the Gazette of India, declare that with effect
D from such date as may be specified in the notification, any
series of Bank notes of any denomination shall cease to be
legal tender, save at such office or agency of the Bank and
to such extent as may be specified in the notification.
Further discussion on this provision shall be made at a later
stage as the said provision is the centre of the controversy
E in these cases.
7.10 Pursuant to the demonetisation which was carried out in
the year 1946, bank notes of denominational value of
Rs.500/-, Rs.1,000/- and Rs.10,000/-, issued before
13th January, 1946, ceased to be legal tender. Section 26A
F was inserted into the Act pursuant to the demonetisation
which took place in the year 1946, which was initially by an
Ordinance and subsequently by an Act of Parliament.
Section 26A was inserted into the Act by Act 62 of 1956,
with effect from 01.11.1956.
G 7.11 Section 27 provides that if a note is torn, defaced or
excessively spoiled, the Bank shall not re-issue such a note.
Similarly, Section 28 provides that if a currency note of the
Government of India or bank note is lost, stolen, mutilated
or imperfect, the value of same cannot be recovered from
H the Central Government or the Bank by any person.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 159
[B. V. NAGARATHNA, J.]

7.12 Section 28A speaks of issue of special bank notes and special A
one-rupee notes in certain cases. The said provision was
inserted by Act 14 of 1959 with effect from 01.05.1959.
Submissions:
8. We have heard learned senior counsel as well as counsel for
the petitioners, and the learned Attorney General for India and learned B
senior counsel for the respondent-Bank, all assisted by learned counsel.
8.1 According to the learned senior counsel, Shri P.
Chidambaram, appearing for some of the petitioners, the
Central Government has the power to issue a notification
in the Gazette of India declaring any series of bank notes C
of any denomination ashaving ceased to be legal tender
and demonetise such currency notes, subject to compliance
of certain procedural conditions prescribed under sub-
section (2) of Section 26 of the Act. According to him,
first,therehas to be a recommendation of the Central Board D
of the Bank to the Central Government before the latter
can issue a notification in the Gazette of India, demonetising
any series of bank note of any denomination. That the
Central Government cannot, by a simple notification in the
Gazette of India,suo moto and in the absence of
anyrecommendation of the Central Board of the Bank, E
demonetise any currency note in circulation by issuance of
a gazette notification under the said provision.
8.2 Also, the Central Government can demonetise only a
particular series of bank notes of a particular denomination
on the recommendation of the Central Board of the Bank. F
In other words, the expression “any” series of bank notes
of “any denomination” cannot be understood as”all” series
of bank notes of “all” denominations. That the expression
“any” occurring twice in the section must be given the
intended meaning and not supposed meaning and G
interpretation.
8.3 Shri Chidambaram submitted that in the instant case, the
Central Government without complying with the procedure
envisaged under sub-section (2) of Section 26 of the Act,
simply issued a notification in the Gazette of India on 8th
H
160 SUPREME COURT REPORTS [2023] 1 S.C.R.

A November, 2016 demonetising all series of bank notes ofthe
denominations of Rs.500/- and Rs.1,000/-. Consequently,
approximately 86 per cent of all notes in circulation were
demonetised. The serious effects of demonetisation are
well-known and judicial notice of the same may be taken.
Even otherwise, carrying out the demonetisation bysimply
B
issuing a notification, in the absence of a recommendation
made by the Central Board of the Bank, which is a condition
precedent, is unlawful. Further, all series of bank notes of
Rs.500/- and Rs.1,000/- could not have been demonetised
by a stroke of a pen. The expression “any”in sub-section(2)
C of Section 26 of the Actmeans, “a particular” series of “a
particular denomination” of a bank note, and not “all” series
of “all” denominations. He contended that in the instant
case, the issuance of the Notification, demonetising the entire
currency of Rs.500/- and Rs.1,000/- in circulation at the
time, is unlawful and the exercise of power was erroneous
D
and arbitrary and hence, the same ought to be declared so.
8.4 Learned senior counsel emphasized that sub-section(2) of
Section 26 of the Act must be given an interpretation which
is legally workable and practicable and this Court ought not
give a blanket power to the Central Government to
E demonetise all currency of a particular denomination, as
such action would be contrary to the object envisaged under
sub-section (2) of Section 26 of the Act.
8.5 Further elaborating on his submission, learned senior counsel
for the petitioners contended that the expression “any” ought
F not be interpreted as “all” as such an interpretation would
be disastrous to the Indian economy and contrary to the
true letter and spirit of the Act. He contended that the word
“any” means “one of the many” and not “all”. Therefore,
according to him, any one series of bank notes of a
G denomination could be demonetised and not all series of
notes of a particular denomination or all series of bank notes
of all denominations, by issuance of an executive notification.
He contended that if the Section is read down, then, it would
be saved from the vice of unconstitutionality; otherwise,
the power of the Central Government to demonetise all series
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 161
[B. V. NAGARATHNA, J.]

of bank notes of all denominations would be arbitrary and A
an excessive power, which is devoid of any guidance. That
such power if vested with the Central Government, would
be contrary to the provisions of the Act. He further
contended that exercise of discretion by the Central
Government could be only to the extent of demonetisation
B
of particular series of bank notes of any particular
denomination that too on the recommendation of the Central
Board of the Bank. Such vast powers so as to recommend
demonetisation of all series of bank notes of any or all
denominations, cannot also be vested with the Bank.
8.6 Learned senior counsel, Shri Shyam Diwan appearing for C
the petitioner, namely, Malvinder Singh in Writ Petition (Civil)
No.149 of 2017, submitted that apart from the guarantee
given by the Central Government with regard to every bank
note as a legal tender at any place in India, such notes are
also the liabilities of the Issue Department of the Bank under D
Section 34 of the Act to the extent of an amount equal to
the total of the value of the currency notes of the
Government of India and bank notes for the time being in
circulation.
8.7 Learned senior counsel submitted that in the absence of a E
specific duty with regard to mitigating the long-lasting effects
of demonetisation on the Indian economy, the decision of
the Central Government to demonetise about 86.4% of the
total currency in circulation is vitiated on account of manifest
arbitrariness.
F
8.8 The learned senior counsel further contended that by
applying the test of proportionality, the impugned notification
dated 8th November, 2016, is liable to be set aside.
8.9 Reliance was placed on K.S. Puttaswamy (Retired)
(Aadhaar) vs. Union of India (2019) 1 SCC 1 to contend G
that the classical equality test can be applied to the present
case to come to the conclusion that the decision of
demonetisation had no nexus to the objective sought to be
achieved.

H
162 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 8.10 It was further contended that the circular dated 31 st
December, 2016, is discriminatory, insofar as it prescribed
no upper monetary limit applicable to Resident Indiansfor
submission and exchange of Specified Bank Notes, which
were declared to have ceased to be legal tender;however,
the monetary limit of Rs. 25,000/- per individual was fixed
B
for Non-Resident Indians (NRIs), depending on when the
notes were taken out of India in accordance with the FEMA
Rules. That an additional liability was imposed on NRIs as
they had to produce a certificate issued by the Indian
Customs upon arrival after 30th December, 2016, indicating
C the import of SBNs and the details and value of the same.
8.11 The learned senior counsel brought to the Court’s notice an
article titled “Using Fast Frequency Household Survey Data
to Estimate the Impact of Demonetisation on Employment”
authored by Mr. Mahesh Vyas, Centre for Monitoring Indian
D Economy (2018) to contend that owing to the demonetisation
carried out, there was a substantial reduction in employment
andemployment rates were 12 million lower than it was
two months’ preceding demonetisation. Relying on the said
article, he submitted that demonetisation resulted in a loss
of millions of jobs.
E
9. Per contra, learned Attorney General for India, Shri
R.Venkataramani, vehemently countered the arguments of Shri P.
Chidambaram, learned senior counsel, by contending that the power
vested with the Central Government under sub-section (2) of Section 26
of the Act is not arbitrary or without guidance. That the power to
F demonetise any currency note or legal tender is vested with the Central
Government and such power is of a wide import and amplitude and this
Court may not give an interpretation, restricting the said power. He
contended that the power vested with the Central Government is
exercised by the issuance of a notification in the Gazette of India which
G is on the basis of a recommendation of the Central Board of the Bank.
9.1 In this regard, learned Attorney General emphasized that
earlier demonetisations were carried out in the years 1946
and 1978 by issuance of Ordinances and thereafter,
converting the said Ordinances into Acts of Parliament. But
H in the instant case, the demonetisation dated 8 th November,
VIVEK NARAYAN SHARMA v. UNION OF INDIA 163
[B. V. NAGARATHNA, J.]

2016 was for all series of bank notes of Rs.500/- and of A
Rs.1,000/- denominations, by the issuance of a gazette
notification, which is perfectly valid in the eyes of law and
in accordance with sub-section (2) of Section 26 of the
Act.
9.2 Learned Attorney General contended that the impugned B
gazette notification was issued having regard to the salient
objectives that had to be achieved by the demonetisation of
Rs.500/- and Rs.1,000/- currency notes which are set out
clearly in the notificationdated 8th November, 2016.The
salient objectives of demonetisationin the year 2016 were
to eradicate black money, to eliminate fake currency from C
the Indian economy and to prevent terror funding. He
therefore, contended that there is no merit in the submissions
made by the learned senior counsel appearing for the
petitioners as the impugned notification dated 8th November,
2016 is in accordance with sub-section (2) of Section 26 of D
the Act and therefore, is valid.
9.3 Shri R.Venkataramani, learned Attorney General, next
submitted that the action taken by way of the impugned
notification stands ratified by the 2017 Act and as the
executive action has been validated by the will of the E
Parliament, the challenge to the notification would not
survive.
9.4 The learned Attorney General contended that the word “any”
appearing before the words “series of bank notes” in sub-
section (2) of Section 26 of the Act should be construed to F
mean “all”. He submitted that the argument of the petitioners
that the word “any” would not mean “all” is flawed and if
the same is accepted, it would permit the Government to
issue separate notifications for each series, however, the
Government would be prohibited from issuing a common
notification for all series. G
9.5 The learned Attorney General submitted that the word “any”
has been used in two places in sub-section 2 of Section 26
of the Act and the word “any” preceding the word “series
of bank notes” has to be construed to mean “all” whereas
H
164 SUPREME COURT REPORTS [2023] 1 S.C.R.

A the word “any” preceding the word “denomination” may
be construed to be a singular or otherwise. The learned
Attorney General placed reliance on Maharaj Singh vs.
State of Uttar Pradesh (1977) 1 SCC 155 to contend
that the same word used in the same provision twice could
be permitted to have a different meaning in each of such
B
usages.
9.6 The learned Attorney General contended that the submission
made by the petitioners that the powers under sub-section
(2) of Section 26 of the Act have not been exercised in the
manner provided therein and that the decision-making
C process was flawed on account of patent arbitrariness, is
not tenable. He submitted that sub-section (2) of Section
26 of the Act postulates that the Central Government may
take a decision to carry out demonetisation pursuant to the
recommendation of the Central Board of the Bank and in
D the present case, there was a recommendation made by
the Central Board to the Central Government,
recommending demonetisation. Thus, after considering the
proposal of the Central Board, the Central Government took
the decision to carry out demonetisation. Thus, the
procedure as envisaged in sub-section (2) of Section 26 of
E the Act was duly complied with.
9.7 The learned Attorney General placed reliance on Bajaj
Hindustan Limited vs. Sir Lal Enterprises Limited
(2011) 1 SCC 640 wherein it was observed that economic
and fiscal regulatory measures are fields on which Judges
F should encroach upon very warily as Judges are not experts
in these matters. The learned Attorney General submitted
that the Bank is an expert body charged with the duty of
conceiving and implementing various facets of economic
and monetary policy and that there cannot be a straitjacket
G formula guiding the discharge of its duties. That therefore,
it must be allowed to carry out its functions as it deems fit.
The learned Attorney General further placed reliance on
Rajbir Singh Dalal (Dr.) vs. Chaudhari Devi Lal
University, Sirsa (2008) 9 SCC 284 and Secretary and
Curator, Victoria Memorial Hall vs. Howrah
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 165
[B. V. NAGARATHNA, J.]

Ganatantrik Nagrik Samity (2010) 3 SCC 640 to contend A
that it is settled law that the courts should not interfere with
the opinion of experts.
9.8 Shri Jaideep Gupta, learned senior counsel for the Bank
contended that the withdrawal of all series of bank notes of
the two denominations of Rs.500/- and Rs.1,000/- was well B
within the jurisdiction and power conferred upon the Bank
and the Central Government under sub-section (2) of Section
26 of the Actand it is incorrect to say that the process under
sub-section (2) of Section 26 of the Acthad not been
followed. Thus, the process cannot be criticized on the
ground of procedural lapse on part of the Bank or the Central C
Government.
9.9 Learned senior counsel for the Bank further contended that
the submission of the petitioners that unless the phrase “any”
in sub-section (2) of Section 26 of the Actis read as “some”
or “one”, the power conferred upon the Bank and the Central D
Government under the said section would be unguided and
arbitrary, is without any basis. It was submitted that the
expression “any” when construed literally refers to one,
several or all of a total number. Thus, the expression “any”
used in sub-section (2) of Section 26 of the Actis broad E
enough to include “all”, and consequently, the power of the
Government under sub-section (2) of Section 26 of the Actis
not limited merely to a specific set or”series” alone. It was
thus contended that sub-section (2) of Section 26 of theAct
is an enabling provision conferring authority on the Central
Government to declare that any series of bank notes of any F
denomination shall cease to be legal tender on the
recommendation of the Central Board.
9.10 Learned senior counsel for the Bank also submitted that
the decision of the Central Board of the Bank to recommend
the measure of demonetisationand the decision of the G
Central Government to accept the recommendation cannot
be subject to judicial review. It was further contended that
in the sphere of economic policy making, the Wednesbury
principles are of no or little significance and that the
proportionality principle can also not be applied for judicial H
166 SUPREME COURT REPORTS [2023] 1 S.C.R.

A review of economic policy. Learned senior counsel thus
asserted that it is imperative that no restrictions are placed
on economic policies formulated by the Bank or by the
Central Government. Reliance was placed on Peerless
General Finance and Investment Co. Ltd. vs. Reserve
Bank of India (1992) 2 SCC 343 and BALCO
B
Employees’ Union (Regd.) vs. Union of India (2002) 2
SCC 333 to contend that courts cannot interfere with
economic policy which is the function of experts.
9.11 Learned senior counsel for the Bank further submitted that
the contention of the petitioners that the decision-making
C process was faulty on account of not following the
procedure under sub-section (2) of Section 26 of the Act, is
without substance. Shri Jaideep Gupta, submitted that the
procedure under sub-section (2) of Section 26 contemplates
two things i.e., recommendation of the Central Board, and
D the decision by the Central Government and that in the
present case, both the requirements have been duly followed,
thus, the argument advanced on behalf of the petitioners
does not hold any water.
9.12 Learned senior counsel for the Bank placed reliance on
E Jayantilal Ratanchand Shah vs. Reserve Bank of India
(1996) 9 SCC 650 to contend that a similar provision
providing for a specified time for exchange of notes was
found to be valid by a Constitution Bench of this Court,
while adjudicating on the legality of the 1978 demonetisation.
He submitted that the time provided in the present case is
F similar to the time provided under the 1978 Act and the
time period provided in the said act was found to be
reasonable, having regard to the purpose sought to be
achieved by the said Act. The learned senior counsel further
submitted that everybody had sufficient opportunity either
G to deposit the notes in their banks or to exchange the same.
9.13 Learned senior counsel for the Bank submitted that
demonetisation was carried out in furtherance of national
economic interest and the same ought to be given deference.
That the inconvenience caused to the public cannot be a
H ground to challenge the validity of such actions, particularly
VIVEK NARAYAN SHARMA v. UNION OF INDIA 167
[B. V. NAGARATHNA, J.]

when prompt and adequate measures were taken by the A
Bank to mitigate the temporary hardships expected to be
caused.
9.14 Learned senior counsel for the Bank submitted that the
Specified Bank Notes (Cessation of Liabilities) Act, 2017,
has given relief to certain categories of persons subject to B
verification. It was thus contended that individual cases of
hardship that have not been provided for in the Specified
Bank Notes (Cessation of Liabilities) Act, 2017, cannot be
gone into.
9.15 It was further submitted that Section 8 of the RBI Act, C
1934, provides for the composition of the Central Board
and sub-section 1 of Section 4 stipulates that the Central
Board shall consist of the following Directors, namely:
i) A Governor and not more than four Deputy Governors
to be appointed by the Central Government; D
ii) Four Directors to be nominated by the Central
Government, one from each of the four Local Boards
as constituted under Section 9;
iii) Ten Directors to be nominated by the Central
Government; and E
iv) Two Government officials to be nominated by the
Central Government.
It was submitted that the 561st meeting of the Central Board of
the Bank was held on 08.11.2016 at New Delhi and business was
F
transacted therein with the requisite quorum. That during the said meeting,
apart from the then Governor and two Deputy Governors, one Director
nominated under Section 8(1)(b) of the Act, two Directors nominated
under Section 8(1)(c) of the Act and two Directors nominated under
Section 8(1)(d) of the Act were present. Thus, the requisite quorum of
four directors of whom not less than three directors nominated under G
Section 8(1)(b) or 8(1)(c) were present for the meeting. Thus, the
requisite procedure was duly followed by the Bank in the conduct of the
561st meeting of the Central Board.
Other learned senior counsel as well as learned counsel and parties-
in-person have also addressed the Court. H
168 SUPREME COURT REPORTS [2023] 1 S.C.R.

A History and instances of Demonetisation:
10. Before proceeding to consider the rival contentions, it would
be useful to delineate on the concept of demonetisation and how it has
been carried out, the world over as well as in India.
10.1 In prosaic terms, demonetisation is the process by which a
B nation’s economic unit of exchange loses its legally
enforceable validity. Currencies that are terminated through
the process of demonetisation are no more legally considered
exchanges and have no financial value. Demonetisation is
therefore, the process of eliminating the lawful acceptance
C status of a monetary unit, by withdrawal of certain kinds or
denominations of existing currency from circulation. The
currency withdrawn may be supplanted with new currency.
10.2 The French were the first to use the term “Demonetise” in
the years between the years 1850-1855.In world history,
one can see several instances of demonetisations as many
D
countries have adopted the policy of demonetisation. Some
instances of demonetisation globally, may be recorded as
under:
a) United States of America: One of the oldest examples of
demonetisation may be found in the United States, when
E the Coinage Act of 1873, ordered the elimination of silver
as legal tender in favour of the gold standard. Again, in the
year 1969, to combat the existence of black money in the
country and to restore the country’s economy, President
Richard Nixon declared all currencies over $100 to be null.
F b) Britain: Before the year 1971, the currency of pound and
penny used to be in circulation in Britain but to bring
uniformity in currency, the government stopped circulation
of old currency in 1971, and introduced coins of 5 and 10
pounds.
G c) Congo: Mobutu Sese Seko made some changes with
respect to the currency in circulation in Congo, for the
smooth running of its economy during the Nineties.
d) Ghana: In the year 1982, Ghana demonetised notes of 50
Cedis denomination to tackle tax evasion and empty excess
H liquidity.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 169
[B. V. NAGARATHNA, J.]

e) Nigeria: Demonetisation was carried out during the A
government of Muhammadu Buhari in the year 1984, when
Nigeria introduced new currency and banned old notes.
f) Myanmar: In the year 1987, Myanmar’s military invalidated
around 80% of the value of money to curb black marketing.
g) Russia (formerly U.S.S.R): In the year 1991, in an attempt B
to combat the parallel economy, 50 and 100 Ruble notes
were removed from circulation under the leadership of
Mikhail Gorbachev.
h) Venezuela: In the year 2016, the Government of Venezuela
demonetised 100 Bolívares notes on 11th December, 2016, C
to achieve economic, monetary and price stability.
i) Zimbabwe: In 2015, the Zimbabwean government chose
to replace the Zimbabwe Dollar with the US Dollar in order
to stabilize hyperinflation.
D

History of Demonetisation in India:
j) The first demonetisation was carried out on 12th January,
1946.To bring to realisation the first demonetisation that
the country witnessed, an Ordinance was promulgated by E
the Government on 12 thJanuary, 1946. The Ordinance
demonetised currency notes of Rs.500/-, Rs.1,000/- and
Rs.10,000/- which were in circulation, primarily to check
the unaccounted hoarding of money, with a directive that
they could be exchanged for re-issued bank notes, within
F
ten days. The period of exchange was extended a number
of times by both, the Bank and the Central Government.
By the end of 1947, out of a total of Rs.143.97 crores of
high denomination notes, notes of the value of Rs.134.9
crores had been exchanged. Thus, notes worth Rs.9.07
crores went out of circulation or not exchanged. G
It is said that this exercise turned out to be more like a
currency conversion drive as the government couldn’t
achieve much profit in the cash-strapped economy at that
time.
H
170 SUPREME COURT REPORTS [2023] 1 S.C.R.

A k) The second demonetisation was carried out in the year 1978,
in pursuance of the recommendation of the Wanchoo
Committee, appointed by the Central Government, to recall
the re-introduced Rs.1,000/-, Rs.5,000/- and Rs.10,000/-
notes, entirely from the cash system. The stated objective
of such measure was to nullify black money supposedly
B
held in high denomination currency notes. The government
resorted to demonetisation of bank notes of denominations
Rs.1,000/-, Rs.5,000/-, and Rs.10,000/- notes on 16th January,
1978, under the High Denomination Bank Notes
(Demonetisation) Ordinance, 1978 (No. 1 of 1978) and
C people were allowed three days’ time to exchange their
notes. During this demonetisation exercise, out of a value
of Rs.146 Crores demonetised notes, currency notes of value
of Rs.124.45 Crores were exchanged and a sum of Rs.21.55
Crores, or 14.76% of the demonetised currency notes, were
extinguished.
D
11. It would be useful at this stage to discuss briefly the Acts of
1946 and 1978 and the impugned demonetisation having regard to sub-
section (2) of Section 26 of the Act.
11.1 The Ordinance of 12th January, 1946 stated that on the expiry
E of the 12th Day of January, 1946, all high denomination bank
notes shall, notwithstanding anything contained in
Section 26 of the Act, cease to be legal tender in payment
or on account at any place in British India. A provision was
made for the exchange of the high denomination bank notes
which had ceased to be legal tender, with bank notes of the
F denominational value of Rs.100/- which continued to be legal
tender.
11.2 The High Denomination Bank Notes (Demonetisation) Act,
1978 was enacted in public interest and provided
demonetisation of certain high denomination bank notes and
G for matters connected therewith or incidental thereto. The
said Act,inter-alia, defined a high denomination bank note
to be a bank note of the denominational value of Rs.1,000/
-, Rs.5,000/- or Rs.10,000/-, issued by the Reserve Bank of
India immediately before the commencement of the said
H Act. The said Act also stated in Section 3 that on the expiry
VIVEK NARAYAN SHARMA v. UNION OF INDIA 171
[B. V. NAGARATHNA, J.]

of the 16th Day of January, 1978, all high denomination bank A
notes shall, notwithstanding anything contained in
Section 26 of the Act, cease to be legal tender.
11.3 As noted earlier, the previous demonetisations were not
carried out on the strength of sub-section (2) of Section 26
of the Act inasmuch as both the legislations categorically B
stated that the demonetisation was “notwithstanding
anything contained in Section 26 of the Act”. In fact,
under the 1978 Act, one of the objects of the demonetisation
of high denomination bank notes was that such notes
facilitated illicit transfer of money for financial transactions
which were harmful to the national economy or were used C
for illegal purposes and therefore, it was necessary in public
interest to demonetise the high denomination bank notes.
The use of the non-obstante clause clearly indicates that
the Central Government was not demonetising the currency
on the recommendation of the Central Board of the Bank D
under sub-section (2) of Section 26 of the Act. In fact, this
position is demonstrated by the fact that in the year 1978,
the then Central Government sought an opinion of the
Central Board of the Bank regarding the demonetisation of
high denomination bank notes. The proposal for
demonetisation arose from or was initiated by the Central E
Government which sought the opinion of the Central Board
of the Bank. Therefore, the proposal for demonetisation
initiated by the Central Government was de hors sub-
section (2) of Section 26 of the Act.
11.4 The fact that the non-obstante clause found a place in F
Section 3 of the Ordinance of 1946 as well as in Section 3
of the 1978 Act, would clearly indicate that the Central
Government, in those cases, did not demonetise the high
denomination bank notes on the recommendation made by
the Central Board of the Bank under sub-section (2) of G
Section 26 of the Act but on the other hand, the same was
carried out de hors the said provision by plenary legislations.
Hence, the Central Government which initiated the process
chose the route through legislation for carrying out the
demonetisation rather than by issuing an executive
notification in the Gazette of India. H
172 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 11.5 The above is in contrast with the issuance of the gazette
notification dated 8th November, 2016, which was followed
by the Ordinance of 2016 and then the Act of 2017 was
enacted. The said Act, inter alia, provides that the specified
bank notes would cease to be the liability of the Reserve
Bank of India or the Central Government.
B
11.6 The demonetisationcarried out in the year 2016, of all series
of bank notes of denomination Rs.500/- and Rs.1,000/-
which forms the subject matter of the controversy at hand
was, on the other hand, carried out by the Central
Government by issuance of a notification in the Gazette of
C India on 8th November, 2016. For ease of reference, the
impugned notification dated 8th November, 2016 is extracted
as under:
“MINISTRY OF FINANCE
(Department of Economic Affairs)
D
NOTIFICATION
New Delhi, the 8thNovember, 2016
S.O. 3407(E). — Whereas, the Central Board of Directors
of the Reserve Bank of India (hereinafter referred to as the Board)
E has recommended that bank notes of denominations of the existing
series of the value of five hundred rupees and one thousand rupees
(hereinafter referred to as specified bank notes) shall be ceased
to be legal tender;
And whereas, it has been found that fake currency notes
F of the specified bank notes have been largely in circulation and it
has been found to be difficult to easily identify genuine bank notes
from the fake ones and that the use of fake currency notes is
causing adverse effect to the economy of the country;
And whereas, it has been found that high denomination bank
notes are used for storage of unaccounted wealth as has been
G
evident from the large cash recoveries made by law enforcement
agencies;
And whereas, 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
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 173
[B. V. NAGARATHNA, J.]

security of the country and the Central Government after due A
consideration has decided to implement the recommendations of
the Board;
Now, therefore, in exercise of the powers conferred by
sub-section (2) of section 26 of the Reserve Bank of India Act,
1934 (2 of 1934) (hereinafter referred to as the said Act), the B
Central Government hereby declares that the specified bank notes
shall cease to be legal tender with effect from the 9th November,
2016 to the extent specified below, namely:
1. (1) Every banking company defined under the Banking
Regulation Act, 1949 (10 of 1949) and every Government C
Treasury shall complete and forward a return showing the
details of specified bank notes held by it at the close of
business as on the 8th November, 2016, not later than 13:00
hours on the 10th November, 2016 to the designated
Regional Office of the Reserve Bank of India (hereinafter
referred to as the Reserve Bank) in the format specified D
by it.
(2) Immediately after forwarding the return referred to in
sub-paragraph (1), the specified bank notes shall be remitted
to the linked or nearest currency chest, or the branch or
office of the Reserve Bank, for credit to their accounts. E

2. The specified bank notes held by a person other than a
banking company referred to in sub-paragraph (1) of
paragraph 1 or Government Treasury may be exchanged
at any Issue Office of the Reserve Bank or any branch of
public sector banks, private sector banks, foreign banks, F
Regional Rural Banks, Urban Cooperative Banks and State
Cooperative Banks for a period up to and including the 30th
December, 2016, subject to the following conditions,
namely:—
(i) the specified bank notes of aggregate value of G
Rs.4,000/- or below may be exchanged for any
denomination of bank notes having legal tender
character, with a requisition slip in the format
specified by the Reserve Bank and proof of identity;
H
174 SUPREME COURT REPORTS [2023] 1 S.C.R.

A (ii) the limit of Rs.4,000/- for exchanging specified bank
notes shall be reviewed after fifteen days from the
date of commencement of this notification and
appropriate orders may be issued, where necessary;
(iii) there shall not be any limit on the quantity or value of
B the specified bank notes to be credited to the account
maintained with the bank by a person, where the
specified bank notes are tendered; however, where
compliance with extant Know Your Customer
(KYC) norms is not complete in an account, the
maximum value of specified bank notes as may be
C deposited shall be Rs.50,000/-;
(iv) the equivalent value of specified bank notes tendered
may be credited to an account maintained by the
tenderer at any bank in accordance with standard
banking procedure and on production of valid proof
D of Identity;
(v) the equivalent value of specified bank notes tendered
may be credited to a third-party account, provided
specific authorisation therefor accorded by the third
party is presented to the bank, following standard
E banking procedure and on production of valid proof
of identity of the person actually tendering;
(vi) cash withdrawal from a bank account over the
counter shall be restricted to Rs.10,000/- per day
subject to an overall limit of Rs. 20,000/- a week
F from the date of commencement of this notification
until the end of business hours on 24th November,
2016, after which these limits shall be reviewed;
(vii) there shall be no restriction on the use of any non-
cash method of operating the account of a person
G including cheques, demand drafts, credit or debit cards,
mobile wallets and electronic fund transfer
mechanisms or the like;
(viii) withdrawal from Automatic Teller Machines
(hereinafter referred to as ATMs) shall be restricted
H to Rs.2,000/- per day per card up to 18th November,
VIVEK NARAYAN SHARMA v. UNION OF INDIA 175
[B. V. NAGARATHNA, J.]

2016 and the limit shall be raised to Rs.4,000/- per A
day per card from 19th November, 2016;
(ix) any person who is unable to exchange or deposit the
specified bank notes in their bank accounts on or
before the 30th December, 2016, shall be given an
opportunity to do so at specified offices of the Reserve B
Bank or such other facility until a later date as may
be specified by it.
3. (1) Every banking company and every Government
Treasury referred to in sub-paragraph (1) of paragraph 1
shall be closed for the transaction of all business on 9th C
November, 2016, except the preparation for implementing
this scheme and remittance of the specified bank notes to
nearby currency chests or the branches or offices of the
Reserve Bank and receipt of bank notes having legal tender
character.
D
(2) All ATMs, Cash Deposit Machines, Cash Recyclers and
any other machine used for receipt and payment of cash
shall be shut on 9th and 10th November, 2016.
(3) Every bank referred to in sub-paragraph (1) of paragraph
1 shall recall the specified bank notes from ATMs and replace E
them with bank notes having legal tender character prior to
reactivation of the machines on 11th November, 2016.
(4) The sponsor banks of White Label ATMs shall be
responsible to recall the specified bank notes from the White
Label ATMs and replacing the same with bank notes having F
legal tender character prior to reactivation of the machines
on 11th November, 2016.
(5) All banks referred to in sub-paragraph (1) of paragraph
1 shall ensure that their ATMs and White Label ATMs shall
dispense bank notes of denomination of Rs.100/- or
G
Rs.50/-, until further instructions from the Reserve Bank.
(6) The banking company referred to in sub-paragraph (1) of
paragraph 1 and Government Treasuries shall resume their
normal transactions from 10th November, 2016.
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176 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 4. Every banking company referred to sub-paragraph (1) of
paragraph 1, shall at the close of business of each day
starting from 10th November, 2016, submit to the Reserve
Bank, a statement showing the details of specified bank
notes exchanged by it in such format as may be specified
by the Reserve Bank.
B
[F.No.10/03/2016-Cy.I]
Dr. SAURABH GARG, Jt. Secy.”

(underlining by me)
The said Notification was thereafter followed by an Ordinance
C issued by the President on 30th December, 2016 and subsequently an
Act of Parliament namely,the 2017 Act.
The Actual Controversy:
12. The contention of the leaned senior counsel for the petitioners
D is two-fold: firstly, that sub-section (2) of Section 26 of the Act cannot
be interpreted as having a very wide import as it would then be lacking
in guidance and being unchanneled, would bearbitrary and in violation of
Article 14, and hence, unconstitutional. It was further contended that if
the provision has to be saved from being declared unconstitutional, then
the same has to be “read down” which means that a restrictive
E interpretation must be given to the words of the provision. The second
contention is with regard to the exercise of power by the Central
Government by issuance of the Notification dated 8th November, 2016
and the manner in which such power was exercised and the procedure
followed. The aforesaid two contentions shall be dealt with together as
F they are intertwined.
The Reserve Bank of India: Bulwark of the Indian Economy:
13. Before considering the aforesaid two contentions, it would be
useful to discuss the unique position that the Reserve Bank of India
holds in the Indian economy.
G
13.1 Shri Chidambaram cited a recent judgment of this Court in
the case of Internet & Mobile Assn. of India vs. RBI
(2020) 10 SCC 274 (“Internet and Mobile Assn. of
India”) wherein one of us, V. Ramasubramanian, J. while
dealing with the regulation of crypto-currency and virtual
H currency (VC) highlighted the importance of the Reserve
VIVEK NARAYAN SHARMA v. UNION OF INDIA 177
[B. V. NAGARATHNA, J.]

Bank of India in the Indian economy. The salient A
observations made in the said judgment may be culled out
as under:
a) That the Bank, established for the objects spelt out under
Section 3(1) of the Act, is vested with the duty tooperate
the monetary policy framework in India; take over the B
management of currency from the Central Government and
carry on the business of banking, in accordance with the
provisions of the Act.
b) That with a view to enable the Bank to perform the role
spelt out above, the Act authorises it to carry on and transact C
businesses, as enlisted under Section 17 of the Act; confers
under Section 22, sole and exclusive right on the Bank to
issue bank notes in India, except in relation to notes of
denomination, Rs.1; recognises under Section 26 (1) that
every note issued by the Bank shall be a legal tender; vests
with the Central Board of the Bank the power to recommend D
to the Central Government to declare any series of Bank
notes of any denomination, to cease to be legal tender, under
Section 26 (2) of the Act; prohibits under Section 38 any
money from being put into circulation by the Central
Government, except through the Bank. In short, it was held E
that the operation/regulation of the credit/financial system
of the country rests, almost entirely, on the Bank.
c) That the Bank is the sole repository of power for the
management of currency in India. As regards the nature,
amplitude and inalienability of the power that the Bank wields F
in the field of currency management, it was observed that
what the Bank can do in this regard, the executive acting
de-hors the aid of the Bank, is not adequately equipped to
do. Recognising the importance of the role played by the
Bank in matters pertaining to currency management, this
Court declared that any observations/recommendations G
made by the Bank to the Central Government in this regard,
have to be accorded due deference. The pertinent
observations of the Court on this aspect have been usefully
extracted hereinunder:
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178 SUPREME COURT REPORTS [2023] 1 S.C.R.

A “192. But as we have pointed out above, RBI is not just
any other statutory authority. It is not like a stream which
cannot be greater than the source. The RBI Act, 1934
is a pre-constitutional legislation, which survived the
Constitution by virtue of Article 372(1) of the
Constitution. The difference between other statutory
B
creatures and RBI is that what the statutory creatures
can do, could as well be done by the executive. The
power conferred upon the delegate in other statutes
can be tinkered with, amended or even withdrawn.
But the power conferred upon RBI under Section
C 3(1) of the RBI Act, 1934 to take over the management
of the currency from the Central Government, cannot
be taken away. The sole right to issue Bank notes in
India, conferred by Section 22(1) cannot also be taken
away and conferred upon any other Bank or authority.
RBI by virtue of its authority, is a member of the Bank
D
of International Settlements, which position cannot be
taken over by the Central Government and conferred
upon any other authority. Therefore, to say that it is just
like any other statutory authority whose decisions cannot
invite due deference, is to do violence to the scheme of
E the Act. In fact, all countries have Central Banks/
authorities, which, technically have independence from
the Government of the country. To ensure such
independence, a fixed tenure is granted to the Board of
Governors, so that they are not bogged down by political
expediencies. In the United States of America, the
F
Chairman of the Federal Reserve is the second most
powerful person next only to the President. Though the
President appoints the seven-member Board of
Governors of the Federal Reserve, in consultation with
the Senate, each of them is appointed for a fixed tenure
G of fourteen years. Only one among those seven is
appointed as Chairman for a period of four years. As a
result of the fixed tenure of 14 years, all the members
of Board of Governors survive in office more than three
Governments. Even the European Central Bank
headquartered in Frankfurt has a President, Vice-
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 179
[B. V. NAGARATHNA, J.]

President and four members, appointed for a period of A
eight years in consultation with the European Parliament.
Worldwide, central authorities/Banks are ensured an
independence, but unfortunately Section 8(4) of the RBI
Act, 1934 gives a tenure not exceeding five years, as
the Central Government may fix at the time of
B
appointment. Though the shorter tenure and the choice
given to the Central Government to fix the tenure, to
some extent, undermines the ability of the incumbents
of office to be absolutely independent, the statutory
scheme nevertheless provides for independence to the
institution as such. Therefore, we do not accept the C
argument that a policy decision taken by RBI does not
warrant any deference.”
d) This Court acknowledged the pivotal position of the Bank
in the economy of the country. That the powers of the Bank,
may be exercised by way of preventive as well as curative D
measures. That such powers may be exercised to take pre-
emptive action. However, such measures must be
proportional and must be prompted by some semblance of
any damage suffered by its regulated entities. The relevant
observations have been reproduced as under:
E
“224. It is no doubt true that RBI has very wide powers
not only in view of the statutory scheme of the three
enactments indicated earlier, but also in view of the
special place and role that it has in the economy of the
country. These powers can be exercised both in the form
of preventive as well as curative measures. But the F
availability of power is different from the manner and
extent to which it can be exercised. While we have
recognised elsewhere in this order, the power of RBI to
take a pre-emptive action, we are testing in this part of
the order the proportionality of such measure, for the G
determination of which RBI needs to show at least some
semblance of any damage suffered by its regulated
entities. But there is none. When the consistent stand of
RBI is that they have not banned VCs and when the
Government of India is unable to take a call despite
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180 SUPREME COURT REPORTS [2023] 1 S.C.R.

A several committees coming up with several proposals
including two draft Bills, both of which advocated exactly
opposite positions, it is not possible for us to hold that
the impugned measure is proportionate.”
13.2 Shri Jaideep Gupta appearing for the Bank has brought to
B our notice the following decisions to emphasize on the
importance of the Reserve Bank of India:
a) In Joseph Kuruvilla Vellukunnel vs. The Reserve
Bank of India AIR 1962 SC 1371, this
Courtobserved that the most important function of
C the Bank is to regulate the banking system. The Bank
has been described as a Banker’s Bank. Under the
Act, the scheduled banks maintain certain balances
and the Bank can lend assistance to those banks as
a “lender of the last resort”. The Bank has also been
given certain advisory and regulatory functions, but
D in its position as a central bank, it acts as an agency
for collecting financial information and statistics. The
Bank is also entrusted with the role of advising the
Government and other banks on financial and banking
matters, and for this purpose, the Bank keeps itself
E informed of the activities and monetary position of
scheduled and other banks and inspects the books
and accounts of Scheduled banks and advises the
Government after inspection of the said books and
accounts as to whether a particular bank should be
included in the Second Schedule or not. That the Bank
F has been created as a central bank with powers of
supervision, advice and inspection, over banks,
particularly those desiring to be included in the Second
Schedule or those already included in the Schedule.
The Reserve Bank thus, safeguards the economy
G and the financial stability of the country. This Court
in the said case also sounded a caveat in stating that
it cannot be said that the Reserve Bank can never
act mistakenly or even negligently.
b) Subsequently, in Peerless General Finance and
H Investment Co. Ltd. vs. Reserve Bank of India
VIVEK NARAYAN SHARMA v. UNION OF INDIA 181
[B. V. NAGARATHNA, J.]

(1992) 2 SCC 343 this Court once again recognized A
the status of the Reserve Bank in the Indian economy.
In the said case it was observed that the Reserve
Bank of India is a Banker’s Bank and a creature of
statute. That the Reserve Bank of India has a large
contingent of expert advice relating to the matters
B
affecting the economy of the entire country. It was
further observed that the Reserve Bank has an
important role in the economy and financial affairs
of India and one of its many important functions is to
regulate the banking system in the country.
The aforesaid discussion is relevant for the purpose of interpreting C
sub-section(2) of Section 26 of the Act.The said provision clearly states
that it is only on the recommendation of the Central Board of the Bank,
that any series of bank notes of any denomination shall be declared to
have ceased to be legal tender.
Economic/Fiscal Policies: Interference by Courts D

13.3 Before proceeding to interpret the said provision, it would
be necessary to consider another aspect of the matter which
has been emphasized by the learned Attorney General,i.e.,
with regard to the Court’s deference to the economic and
monetary policies of the government and restraint that the E
Court must exercise in interfering with the said policies,
unless the same are so irrational or unreasonable, so as to
be declared to be unconstitutional.
The above submission was made in the context of the
contention of the petitioners, that the decision-making F
process in the present case was deeply flawed as it was
contrary to the scheme and procedure contained in sub-
section (2) of Section 26 of the Actand hence, this Court
may review the same and declare it to be in contravention,
inter-alia, of statutory provisions of the Act.The aforesaid G
contention was vehemently opposed by learned Attorney
General who submitted that courts cannot sit in judgment
over economic policy matters of the Government. In this
regard the following discussions could be made.

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182 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Judicial Review of Economic Policy:
The Indian judiciary has consistently exercised restraint with
regard to judicial review of policy decisions. A few instances on which
such restraint has been demonstrated, have been discussed as under:
(a) In this regard reliance was placed by the learned Attorney
B General on a judgment of this Court in State of Tamil Nadu
vs.National South Indian River Interlinking
Agriculturist Association 2021 SCC OnLine SC 1114.
(b) In Rustom Cavasjee Cooper vs. Union of India AIR 1970
SC 565 (“Bank Nationalization Case”) it was observed
C that this Court was not the forum where conflicting policy
claims may be debated; it is only required to adjudicate the
legality of a measure which has little to do with relative
merits of different political and economic theories.
(c) This Court in the case of State of M.P. vs. Nandlal Jaiswal
D (1986) 4 SCC 566 observed that the Government, as laid
down in Permian Basin Area Rate Cases, 20 L Ed (2d)
312, is entitled to make pragmatic adjustments which may
be called for by particular circumstances. The court cannot
strike down a policy decision taken by the Government
merely because it feels that another policy decision would
E have been fairer or wiser or more scientific or logical. That
courts could interfere only if the policy decision is patently
arbitrary, discriminatory or mala fide.
(d) In Peerless General Finance and Investment Co. Ltd.
vs. RBI (1992) 2 SCC 343, this Court dithered to indulge
F itself with matters involving domains of the executive and
the legislature concerning economic policy or directions
given by Reserve Bank of India. This Court observed that
it is unbecoming of judicial institutions to interfere with
economic policy which is the prerogative of the Government,
G in consultation with experts in the field and that it is not the
function of the courts to sit in judgment over matters of
economic policy and it must necessarily be left to the expert
bodies.
(e) The validity of the decision of the Government to grant
licence under the Telegraph Act, 1885 to non-government
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 183
[B. V. NAGARATHNA, J.]

companies for establishing, maintaining and working of A
telecommunication system of the country pursuant to
government policy of privatisation of telecommunications
was challenged in Delhi Science Forum vs. Union of India
AIR 1996 SC 1356. It was contended that
telecommunications were a sensitive service which should
B
always be within the exclusive domain and control of the
Central Government and under no situation should be parted
with by way of grant of license to non-government
companies and private bodies. While rejecting this
contention, this Court observed that:
“... The national policies in respect of economy, C
finance, communications, trade, telecommunications and
others have to be decided by Parliament and the
representatives of the people on the floor of Parliament
can challenge and question any such policy adopted by
the ruling Government....” D
(f) The reluctance of the court to judicially examine the merits
of economic policy was again emphasised in Bhavesh D.
Parish vs. Union and India (2000) 5 SCC 471. This
Court opined that in the context of the changed economic
scenario the expertise of people dealing with the subject E
should not be lightly interfered with. The consequences of
such an interdiction can have large-scale ramifications and
can put the clock back for a number of years. That in dealing
with economic legislations, this Court, while not jettisoning
its jurisdiction to curb arbitrary action or unconstitutional
legislation, should interfere only in those few cases where F
the view reflected in the legislation is not possible to be
taken at all.
(g) Buttressing the same aspect, in Balco Employees’ Union
(Regd) vs. Union of India AIR 2002 SC 350, it was held
that in a democracy, it is the prerogative of each elected G
Government to follow its own policy. This Court observed
that often a change in Government may result in the shift in
focus or change in economic policies and any such change
may result in adversely affecting some vested interests.
Unless any illegality is committed in the execution of the H
184 SUPREME COURT REPORTS [2023] 1 S.C.R.

A policy or the same is contrary to law or malafide, a decision
bringing about change cannot per se be interfered with by
the court.
(h) In Directorate of Film Festivals vs. Gaurav Ashwin Jain
AIR 2007 SC 1640, it was observed that the scope of
B judicial review of governmental policy is now well defined
and the courts do not and cannot act as Appellate Authorities
examining the correctness, suitability and appropriateness
of a policy. ThisCourt was also of the view that Courts are
not Advisors to the executive on matters of policy which
the executive is entitled to formulate, thus, the scope of
C judicial review when examining a policy of the government
is to check whether it violates the fundamental rights of the
citizens or is opposed to the provisions of the Constitution,
or opposed to any statutory provision or manifestly arbitrary.
It was thus held that the Courts cannot interfere with policy
D either on the ground that it is erroneous or on the ground
that a better, fairer or wiser alternative is available. Legality
of the policy, and not the wisdom or soundness of the policy,
is the subject of judicial review.
(i) In the case of DDA vs. Joint Action Committee, Allottee
E of SFS Flats AIR 2008 SC 1343, the Supreme Court held
as under:
“An executive order termed as a policy
decision is not beyond the pale of judicial review.
Whereas the superior courts may not interfere with
F the nitty-gritty of the policy, or substitute one by the
other but it will not be correct to contend that the
court shall lay its judicial hands off, when a plea is
raised that the impugned decision is a policy decision.
Interference therewith on the part of the superior
court would not be without jurisdiction as it is subject
G to judicial review.”
“Broadly, a policy decision is subject to judicial
review on the following grounds:
(a) if it is unconstitutional;
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 185
[B. V. NAGARATHNA, J.]

(b) if it is dehors the provisions of the Act and the A
regulations;
(c) if the delegate has acted beyond its power of
delegation;
(d) if the executive policy is contrary to the statutory B
or a larger policy.”
(j) In Small Scale Industrial Manufacturers Association
(Regd.) vs. Union of India (2021) 8 SCC 511, a writ
petition was preferred under Article 32 of the Constitution
of India by the Small-Scale Industrial Manufactures C
Association, Haryana for an appropriate writ, direction or
order directing the Union of India and others to take effective
and remedial measures to redress the financial strain faced
by the industrial sector, particularly, MSMEs due to the
COVID-19 pandemic. This Court while considering the
submissions of the parties on the issue of whether economic D
and/or policy decisions taken by the Government in their
executive capacity are amenable to the jurisdiction of courts,
held that it was the legality of the policy, and not the wisdom
or soundness of the policy, that can be the subject of judicial
review. This Court observed that courts do not play an E
advisory role to Government and economic policy decisions
should be left to experts. This Court observed that it is not
normally within the domain of any Court to weigh the pros
and cons of the policy or to scrutinize it and test the degree
of its beneficial or equitable disposition for the purpose of
varying, modifying or annulling it, based on howsoever sound F
and good reasoning. It is only when a policy is arbitrary and
violative of any Constitutional, statutory or any other
provisions of law, that the Courts can interfere.
13.4 What emerges from an understanding of the decisions
G
referred to above on the subject of judicial review of
economic policy may be culled out as under:
i) That the court is not to sit in judgment over the merits
of economic or financial policy;
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186 SUPREME COURT REPORTS [2023] 1 S.C.R.

A ii) That the scope of interference by a court is limited
to instances where the impugned scheme or
legislation in the economic arena has been enacted
in violation of any Constitutional or statutory
provisions;
B iii) That the court may not undertake a foray into the
merits, demerits, sufficiency or lack thereof, success
in realising the objectives etc., of an economic policy,
as such an analysis is the prerogative of the
Government in consultation with experts in the field.
C 13.5 Being mindful of the limited scope of judicial review
permissible in matters concerning economic policy decisions,
I shall limit my examination of the matter to such extent as
is necessary for the purpose of determining whether the
process concluding in the issuance of the impugned
D notification was correct or as being contrary to sub-section
(2) of Section 26 of the Act and allied aspects of the case.
It may be stated at this juncture that the said aspect of the
matter is not one of form but of substance. Therefore,
examining this aspect of the matter would not amount to
interfering with, or sitting in judgment over the merits of the
E policy of demonetisation, and is therefore well within the
limits of the Lakshmanrekha that this Court has carefully
drawn for itself.
14. Bearing in mind the important role played by the Bank in shaping
the economy of the country, and also the principle that the Constitutional
F Courts should refrain from interfering in financial and economic policy
decisions of the government unless such policies are so irrational as to
warrant interference and also having regard to the provisions of the
Constitution, the relevant statutes, and considerations of public interest,
the two contentions raised by the petitioners shall now be considered in
G analysing and interpreting Section 26 (2) of the Act.
Section 26 of the Act: Interpretation:
15. With a view to lend perspective to the discussion to follow, a
bird’s eye view of my analysis and conclusions has been expressed in a
tabular form as under:
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 187
[B. V. NAGARATHNA, J.]

A

B

C

D

E

F

G

H
188 SUPREME COURT REPORTS [2023] 1 S.C.R.

A

B

C

D

E

F

G

H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 189
[B. V. NAGARATHNA, J.]

A

B

C

D

15.1 Section 26 of the Act deals with legal tender of notes. Sub-
E
section (1) of Section 26 declares that every bank note shall
be a 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. There are two
aspects to this provision: the first is, every bank note shall
be a legal tender in any place in India and, secondly, that F
the Central Government shall guarantee the amount
expressed on the bank note. The expression “bank note” is
defined in Section 2 (aiv) of the Act to mean, a bank note
issued by the Bank whether in physical or digital form, under
Section 22 of the Act. Section 22 of the Act categorically
G
states that the Bank has the sole right to issue bank notes in
India, on the recommendations of the Central Board of the
Bank. The provision further provides that the Bank has the
sole right to issue currency notes of the Government of
India. The provisions of the Act would be applicable in a
like manner, to all currency notes of the Government of H
190 SUPREME COURT REPORTS [2023] 1 S.C.R.

A India, issued either by the Central Government or by the
Bank, as if such currency notes were bank notes.
15.2 Further, it is only on the recommendation of the Central
Board of the Bank that the Central Government may direct
the non-issue or discontinuation of the issue of bank notes
B of such denominational value as it may specify in this behalf.
Even the design, form and material of bank notes has to be
approved by the Central Government, after considering the
recommendations made by the Central Board of the Bank.
Thus, the scheme of the Act envisages that the issuance of
the bank notes, the various denominations of the bank notes,
C the design and form of the bank notes, are all to be specified
by the Central Government only on the recommendation of
the Central Board of the Bank. Therefore, on perusal of
Sections 24, 25 and 26 of the Act, it is observed that it is
only on the recommendation of the Central Board of the
D Bank that the Central Government would actqua the
aforestated matters, on the strength of the respective
provisions. It need not be emphasised that the Bank, being
the only institution, which carries out the function of currency
management and formulates credit rules in the country, is
recognised as having a say in the issuance of currency notes,
E and also in specifying the denominations of the notes, as
well as the design and form of the bank notes.
15.3 Further, although, sub-section (1) of Section 26 states that
every Bank note shall be legal tender at any place in India,
it acquires legal sanctity because the Central Government
F has guaranteed the bank note which has legal tender. Thus,
a bank note statutorily has dual characteristics when it is
issued by the Bank, namely, being a legal tender coupled
with the guarantee of the Central Government and the said
qualities go hand in hand. This would mean that it is only
G when the Bank which has the sole right to issue a currency
note in India, issues the note and the same has been
guaranteed by the Central Government, that such a note is
legal tender. Therefore, the Issue Department of the Bank
is not subject to any liabilities other than the liabilities under
Section 34 of the Act. Section 34 of the Act states that an
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 191
[B. V. NAGARATHNA, J.]

amount equal to the total of the amount of the currency A
notes of the Government of India and bank notes for the
time being in circulation, would be the liability of the Issue
Department. This would imply that as long as the bank notes
issued by the Bank are in circulation, the liability of the
Government of India would continue. The said liability is
B
owing to the guarantee given by the Central Government in
sub-section(1) of Section 26 which is in the nature of a
statutory guarantee.
15.4 While considering sub-section (1) of Section 26 of the Act,
the first question that would arise is, whether, a bank note
which has ceased to be a legal tender on the issuance of a C
notification by the Central Government would also cease
to have the guarantee of the Central Government. In other
words, whether the guarantee by the Central Government,
would continue despite the bank note ceasing to be a legal
tender. The answer is in the affirmative, for, a bank note D
may cease to be a legal tender between citizens but cannot
cease to have the guarantee of the Central Government, so
long as the liability of the Issue Department continues. The
liability of the Issue Department of the Bank is co-extensive
with the time period within which a bank note which has
ceased to be a legal tender is exchanged at a notified bank. E
It is because of this reason that a bank note of any
denomination which is demonetised or is declared to have
ceased to be a legal tender, can be exchanged as indicated
in the notification issued by the Central Government so that
the bearer of the bank note receives an equivalent amount F
as that expressed in the note which has ceased to be a
legal tender or demonetised. Therefore, even though such
demonetised currency would cease to be legal tender, the
same could be exchanged in a bank specified by the Reserve
Bank owing to the guarantee of the Central Government.
If the guarantee of the Central Government ceases on G
demonetisation, then the same cannot be exchanged by the
bearer of such bank notes. This has also been the argument
of learned senior counsel Shri Shyam Divan.
15.5 Sub-section (2) of Section 26 of the Act states that on the
recommendation of the Central Board of the Bank, the H
192 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 193
[B. V. NAGARATHNA, J.]

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 C
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
D
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 F
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 G
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
194 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
G 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
H the power of the Central Government is not channelised or
VIVEK NARAYAN SHARMA v. UNION OF INDIA 195
[B. V. NAGARATHNA, J.]

restricted by reading down sub-section(2) of Section 26 of A
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 B
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
196 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
F 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
G 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 197
[B. V. NAGARATHNA, J.]

15.14 The Central Government, as already noted above, could A
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
B
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 C
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,
D
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 E
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 F
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 G
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
198 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 199
[B. V. NAGARATHNA, J.]

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 F
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 G
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
200 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
C 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
D 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 201
[B. V. NAGARATHNA, J.]

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 C
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 D
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
202 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
D 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
E 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 203
[B. V. NAGARATHNA, J.]

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 C
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 D
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 E
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 F
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 G
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
204 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C 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
D
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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 205
[B. V. NAGARATHNA, J.]

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 C
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 D
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 F
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 G
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
206 SUPREME COURT REPORTS [2023] 1 S.C.R.

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,
E 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
F 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.
VIVEK NARAYAN SHARMA v. UNION OF INDIA 207
[B. V. NAGARATHNA, J.]

[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 B
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 C
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 D
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 F
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 G
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
208 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C 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
D
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
F 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
G 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 209
[B. V. NAGARATHNA, J.]

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 B
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 C
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 F
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 G
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
210 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 211
[B. V. NAGARATHNA, J.]

the recommendation made by the Central Board of the Bank. That is, A
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
B
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 C
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
212 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
C 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
D
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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 213
[B. V. NAGARATHNA, J.]

demonetisation and directed that the same be A
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 B
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
214 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B
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
C 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
D 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 215
[B. V. NAGARATHNA, J.]

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
216 SUPREME COURT REPORTS [2023] 1 S.C.R.

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

Rs.1,000/-

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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 217
[B. V. NAGARATHNA, J.]

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 C
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 D
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 E
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 F
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
218 SUPREME COURT REPORTS [2023] 1 S.C.R.

A carrying out such act are expressly excluded; and the other principle is,
exercise of discretion which is awell known principle in Administrative
Law. The same would be discussed at this stage.
18.1 The first principle which is of relevance to the controversy
at hand is that, where a power is given to do a certain thing
B in a certain way, the thing must be done in that way or not
at all and other methods of performance are necessarily
forbidden vide, Taylor vs. Taylor (1875) 1 Ch D 426.
Hence, when a statute requires a particular thing to be done
in a particular manner, it must be done in that manner or not
at all and other methods of performance are necessarily
C forbidden, vide Nazir Ahmed vs. King Emperor (1936)
L.R. 63 I.A. 372.
18.2 This Court too, has applied this maxim in the following cases:
(i) Parbhani Transport Co-operative Society Ltd. vs.
The Regional Transport Authority, Aurangabad
D (1960) (3) S.C.R. 177: AIR 1960 SC 801, wherein
it was observed that the rule provides that an
expressly laid down mode of doing something
necessarily implies a prohibition of doing it in any
other way.
E (ii) In Dipak Babaria vs. State of Gujarat AIR 2014
SC 1972, this Court set aside the sale of agricultural
land, on the ground that the sale was not in compliance
with the statutory procedure prescribed in that regard
under the Bombay Tenancy and Agricultural Lands
(Vidarbha Region) Act, 1958. The matter was
F examined on the anvil of the aforestated maxim and
it was held that alienation of agricultural land by
adopting any alternate procedure to the one
prescribed under the Act, was necessarily forbidden.
(iii) In KamengDolo vs. Atum Welly AIR 2017
G SC 2859, election of an unopposed candidate was
declared as invalid on the ground that the nomination
of his opponent was not withdrawn as per the
procedure statutorily mandated. That the nomination
of the opposite candidate ought to have been
withdrawn in the manner provided for under the
H
VIVEK NARAYAN SHARMA v. UNION OF INDIA 219
[B. V. NAGARATHNA, J.]

relevant statute and withdrawing the same in any A
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
B
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
220 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
D 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
E 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
F 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
G
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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 221
[B. V. NAGARATHNA, J.]

...according to law and not humour. It is to be, not arbitrary, vague A
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 B
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 C
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
222 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
C 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
D
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
F 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
G 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 223
[B. V. NAGARATHNA, J.]

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 C
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 D
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 E
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
224 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 225
[B. V. NAGARATHNA, J.]

significance. It is necessary to examine the nature of relief A
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 B
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 C
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
226 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
E 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
F 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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 227
[B. V. NAGARATHNA, J.]

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 E
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
F
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 G
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
228 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
VIVEK NARAYAN SHARMA v. UNION OF INDIA 229
[B. V. NAGARATHNA, J.]

(viii) When the Central Government proposes demonetisation of A
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
B
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
230 SUPREME COURT REPORTS [2023] 1 S.C.R.

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
B 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
C 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
D 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)