SC's Decision Upholding Modi Government's DeMo Was The Only Logical One

The Supreme Court’s 4:1 decision upholding the Narendra Modi government decision to demonetise Rs 1,000 and Rs 500 notes in November 2016 is the right one.

The only surprise is why the court even bothered to take up an issue which is already done and dusted, and where there was no question of a reversal possible without causing massive economic damage.

A five-judge bench comprising justice S Abdul Nazeer, B R Gavai, B V Nagarathna, A S Bopanna and V Ramasubramanian came to this obvious conclusion for three simple reasons: one, courts should not sit in judgement on economic decisions; second, the Centre has executive powers over the Reserve Bank of India, and it only had to consult the latter before taking major decisions; and, three, no purpose would be served in repudiating demonetisation (DeMo) six years after the event.

The last point was, in fact, made by Justice Nagarathna, who was the dissenting judge, and called the decision “unlawful”.

But, she argued correctly, that “status quo ante cannot be restored at this point of time. What relief can be given now? Relief needs to be moulded.”

The real issue is actually simpler: an elected government’s decisions on economic matters cannot be questioned in courts, and the only thing courts can decide is whether laws were actually broken while taking any decision.

The correctness or otherwise of any economic decision cannot be questioned even if the premises on which a decision was based turn out, in retrospect, to have been flawed.

For example, a government may decide to raise taxes for everybody to extortionate levels, but just because it results in negative outcomes (like more tax evasion and slower growth), it cannot be junked legally.

Governments are elected to take such decisions, even if they are unpalatable to a large number of people. If the people decide that the decision was wrong, they can always vote the government out when they get the chance.

In the case of demonetisation, where the short-term economic impact on cash-based sectors was negative, every election that followed gave the Modi government positive endorsement.

In other words, even though the poor were badly impacted by the decision, they supported it for their own reasons.

The bench’s decision in this case should, in fact, lead to more circumspection on the part of the court when injecting themselves into cases involving executive power, especially in economic decisions.

In the 2G and coal block allocation cases, the courts rightly looked at the processes followed and came to the conclusion that they were arbitrary.

But, in deciding to cancel all licences, the courts exceeded their brief, for it was difficult to assume that all allottees had broken the law. It was government and the bureaucracy that needed to be taken to task, not the alleged beneficiaries of its arbitrary policies.

Only beneficiaries who could be proven to have obtained unjust allotments for a consideration needed to be penalised.

The DeMo decision is a wake-up call to future benches to not encroach on executive or economic terrain except when illegalities are alleged. Policies like DeMo are for politicians to fight over, not courts.