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Supreme Court Constitution Bench Hearing on Demonetization Was Valid or Not? Detail Report

On 24 November 2022, the Supreme Court hearing on the demonetization of Rs 500 and 1000 notes took place in front of a five-constitution bench. On October 16, the Centre Government had to file an affidavit before the next hearing. On the failure to do so, it asked for an extension on the 9th of November. In the affidavit, the Central Government claimed that the idea of demonetization was well-considered and positively affected the nation.

Former Finance Minister and senior advocate P. Chidambaram has argued against demonetization and blamed the Central Government and RBI for not disclosing the information related to the consequences of it in court. This article will discuss the Supreme Court hearing on demonetization in detail.

The Supreme Court Hearing on Demonetization

At the time of demonetization, 58 petitions were filed challenging demonetization. The Union Government, in response to the filled petition, filed an affidavit. The first hearing of the case was held on 16 December 2016, where the then judge T.S. transferred the case to a bench of five judges, which include S.A. Nazeer, A.S. Bopanna, B.R. Gavai, B.V. Nagarathna, and V. Ramasubramanian. The Supreme Court hearing on demonetization was held on 24 November 2022.

Supreme Court Constitution Bench Hearing on Demonetization Was Valid or Not? Detail Report

Arguments of P. Chidambaram

P. Chidambaram has argued against demonetization and explained why a moral law should prevent the Central Government from making such decisions. He claimed neither the RBI nor the Central Government has any information about the consequences of demonetization. Eighty-six percent of the total currency has been withdrawn.

He added that not a single citizen was left who did not face the challenges proposed by demonetization. He requested the bench to bring a moral law or a procedure that could stop the government from repeating this blunder. Otherwise, nothing can stop it from taking such steps.

The image has been taken from Bar and Bench.

Section 26(2) of the RBI Act does not permit demonetization, primarily when carried out without proper approaches. Mr. Chidambaran said that the case is very significant as it violated the Indian Constitution. He accused the government of violating the constitution of India, where it is written that the government cannot demonetize all RBI notes without a proper procedure and the way the Central Government did so was unconstitutional.

What Centre has Said

In response to P. Chidambaran, the Centre has made various responses in its affidavit. According to it, the decision for demonetization was an economic decision that was taken in accordance with the Parliament Act (RBI Act 1934).

In response to this, P. Chidambaran argues that the demonetization that happened in 1946 and 1978 was implemented through different acts and debated by the Parliament. On the contrary, the 2016 demonetization happened under RBI Act 1934 just by a notification.

While defending the demonetization decision, the center has claimed that it has combated against black money, tax aversion, and illegal funding. Moreover, it said that the decision was not of the Centre alone and that the RBI recommended the withdrawal of the existing series of Rs 500 and Rs 1000 notes. The decision was made after the proper consultation with the RBI and has followed the RBI Act, said the affidavit.

The RBI Take on the Matter

According to the affidavit filed by the Central Government, RBI has suggested the withdrawal of Rs 500 and Rs 1000 series of notes. For that, it has also proposed a draft, which was considered by the government affirmatively. Based on the proposed draft, notification was published declaring the specified shall cease to be legal.

However, it is essential to determine whether RBI was aware of demonetization. According to the Right to Information application accessed by the RTI activist Venkatesh Nayak, it was confirmed that there was a discussion between RBI and the Central Government regarding several financial issues, including demonetization. However, it was just a mere discussion between them.

As mentioned above, in its affidavit, the Union Government said that demonetization had been a practical step for eliminating black money, fake money, terror funding, and tax eversion. However, RBI said most black money is held in the form of assets like gold and real estate and not in cash. And the move did not affect these assets.


The summary of the Supreme Court hearing on Demonetization with a constitutional bench of five judges heard the petition on demonetization. P. Chidambaran, who was speaking against demonetization, said it had adversely affected the lives of Indian citizens. On the contrary, Union Government claimed that demonetization fought against black money, fake money, terror funding, and tax eversion.


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