Demonetisation helped convert black money to white, says Justice Nagarathna

Justice BV Nagarathna — the sole judge to differ in the Supreme Court’s 4:1 verdict upholding the Union government’s controversial decision to demonetise currency notes of Rs 500 and Rs 1,000 — said on Saturday, March 30, that she “had to dissent” in the judgement because she was stirred by the “common man's predicament.” Speaking at an event organised by the NALSAR University of Law in Hyderabad, she said though demonetisation was introduced with the aim of eradicating black money, it inadvertently provided a mechanism to convert black money into white. 

“We all know what happened on November 8, 2016. 86% of the currency was 500 and 1,000 notes, which I think the [Union government] lost sight of. Imagine a labourer who had to get his notes exchanged for daily essentials,” she said. She also pointed out that up to 98% of the currency had come back to the Reserve Bank of India (RBI) after the demonetisation process, and questioned how this decision achieved black money eradication. 

Prime Minister Narendra Modi had taken the country by surprise on November 8, 2016, when he made an out-of-the-blue television announcement that the banknotes of Rs 500 and Rs 1,000 will be “just worthless pieces of paper” with immediate effect. New notes of Rs 2,000 and Rs 500 were introduced for public circulation instead. Over the next few weeks, long lines in front of the ATMs and the banks became the new normal. Dozens of deaths due to exhaustion among other reasons were reported across India every week – with nearly 100 people dying in the 45 days after demonetisation was announced.

Nagarathna said the manner in which demonetisation was implemented was not correct. “There was no decision-making process, which was in accordance with the law. The haste with which it was done… some people say even the then Finance Minister did not know about it. The communication went on one evening and the Demonetisation happened the next day. If India wanted to go from paper currency to plastic currency, surely, the Demonetisation was not also a reason for that,” she said, as per a report by Live Law.

During her speech, the SC judge also criticised the Governors of states for getting involved in litigation before the constitutional courts, “because of either omission in assenting to bills or other actions which they would take.” Stating this was not a healthy trend, she called for Governors to act in line with the Constitution, rather than having to be told what to do and what not to.