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 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 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 ‘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 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 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 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 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 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 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 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 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 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 at this point of time - Reserve Bank of India Act, 1934 - s.26 - 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. 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 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 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 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 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 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, 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 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 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.

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 - 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 - 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 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.

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 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.

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 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 “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 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, 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 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. 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 (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 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 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 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 – 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.

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 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 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 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.

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.

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 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 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, 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 subsection (2) of s.26 of the RBI Act are (i) recommendation by the 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.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.

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 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 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. 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 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 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 - 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 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.

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 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.)]: 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.

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 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 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 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 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.

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 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 connected to the fulfilment of that purpose - The third one is that the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation - Finally, the fourth one is that there needs to be a proper relation between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right - 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 taken away - The only restrictions were with regard to exchange of old notes with the new notes, which were also gradually relaxed from time to time - Insofar as deposit of the demonetized notes in banks is concerned, there was no limitation - If a citizen had a ‘Know Your Customer (KYC) compliant bank account’, he could deposit any amount and get to his credit the full value of legitimate currency - As such, the right to property in bank notes was not taken away - A full value of legitimate currency was entitled to be deposited in the bank account, however, up to a particular date - In any case, there was no restriction on non-cash transactions like debit card, credit card, net banking, online transactions etc. - The argument that the right to property was sought to be taken away is without substance - In any case, even if there were reasonable restrictions on the said right, the said restrictions were in the public interest of curbing evils of fake currency, black money, drug trafficking & terror financing - As such, applying the four-pronged test, the doctrine of proportionality was fully satisfied.

Demonetisation - Reserve Bank of India Act, 1934 - s.26 - Held [per B.V. Nagarathna, J.]: The Act does not envisage initiation of demonetisation of bank notes by the Central Government - Subsection (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 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 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, 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 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 subsection (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 – 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 “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 carried out by way of a plenary legislation – Non-applicability of subsection (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 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 [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 by the Central Government – The said provision does not apply to cases where the proposal for demonetisation originates from the Central Government and the same is not envisaged under the Act – Hence, issuance a notification to give effect to the Central Government’s proposal for demonetisation, was clearly based on an incorrect understanding of sub-section (2) of s.26 of the RBI Act – The Central Government did not follow the procedure contemplated under law to give effect to its proposal for demonetisation – This is not a matter of form but one of substance as in law, the powers of the Central Board of the RBI and the Central Government are totally distinct in the matter of demonetisation of bank notes.

Administrative Law – Exercise of discretion, when invalid – 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. Interpretation of Statutes – Words of a statute – Word “any” – Held [per B.R. Gavai, J. (for himself and for S. Abdul Nazeer, A.S. 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 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 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 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 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 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, 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 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 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.

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 – 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 – 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 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.

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 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.

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 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 “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 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, 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 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. 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 (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 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 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 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 – 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.

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 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 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 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.

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.

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 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 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, 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 subsection (2) of s.26 of the RBI Act are (i) recommendation by the 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.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.

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 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 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. 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 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 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 – 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 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.

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 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.)]: 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.

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 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 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 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 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.

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 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 connected to the fulfilment of that purpose – The third one is that the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation – Finally, the fourth one is that there needs to be a proper relation between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right – 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 taken away – The only restrictions were with regard to exchange of old notes with the new notes, which were also gradually relaxed from time to time – Insofar as deposit of the demonetized notes in banks is concerned, there was no limitation – If a citizen had a ‘Know Your Customer (KYC) compliant bank account’, he could deposit any amount and get to his credit the full value of legitimate currency – As such, the right to property in bank notes was not taken away – A full value of legitimate currency was entitled to be deposited in the bank account, however, up to a particular date – In any case, there was no restriction on non-cash transactions like debit card, credit card, net banking, online transactions etc. – The argument that the right to property was sought to be taken away is without substance – In any case, even if there were reasonable restrictions on the said right, the said restrictions were in the public interest of curbing evils of fake currency, black money, drug trafficking & terror financing – As such, applying the four-pronged test, the doctrine of proportionality was fully satisfied.

Demonetisation – Reserve Bank of India Act, 1934 – s.26 – Held [per B.V. Nagarathna, J.]: The Act does not envisage initiation of demonetisation of bank notes by the Central Government – Subsection (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 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 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, 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 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 subsection (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 – 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 “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 carried out by way of a plenary legislation – Non-applicability of subsection (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 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 [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 by the Central Government – The said provision does not apply to cases where the proposal for demonetisation originates from the Central Government and the same is not envisaged under the Act – Hence, issuance a notification to give effect to the Central Government’s proposal for demonetisation, was clearly based on an incorrect understanding of sub-section (2) of s.26 of the RBI Act – The Central Government did not follow the procedure contemplated under law to give effect to its proposal for demonetisation – This is not a matter of form but one of substance as in law, the powers of the Central Board of the RBI and the Central Government are totally distinct in the matter of demonetisation of bank notes.

Administrative Law – Exercise of discretion, when invalid – 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.