REVISITING DeMo
The Supreme Court verdict on demonetisation of currencies has drawn afresh the line in the sand as it were between the government and judiciary. EPISODE #107
Dear Reader,
A very Happy Monday to you.
Last week the Supreme Court announced its verdict on the appeal claiming the government decision in 2016 to demonetise high value currencies was illegal. In short it dismissed the appeal with a majority vote of 4-1.
The subtext of this judgement is very significant: It redraws the line in the sand as it were about the division of powers between the state and the judiciary.
Going forward, given the contentious trade-offs that need to be undertaken to pursue development and the fractious state of Indian politics, the judiciary will be often dialled to act as the referee. So this week I put the spotlight on this ruling of the Supreme Court and its ramifications. Do read and share your feedback.
The cover picture is is taken by Manyu Varma and sourced from Unsplash
A big shoutout to Balesh, Gautam, GS, Niranjan, Premasundaran, Vandana, Kapil and Rajiv for your informed responses, kind appreciation and amplification of last week’s column. Once again, grateful for the conversation initiated by readers. Gratitude also to all those who responded on Twitter and Linkedin. Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊
JUDGEMENT DAY
I still recall the evening of 8 November 2016 so vividly.
At that time I was part of a newsroom, scrambling like everyone else in the industry, to make sense of Prime Minister Narendra Modi’s address on national television for readers. Between the end of the PM’s dramatic announcement on demonetisation of high value currencies and the rush to catch the newspaper’s deadline—an hour away—I forgot to visit the ATM. I never regretted an oversight as much.
For a month thereafter all of us struggled to access cash to undertake our basic livelihood transactions. Remember those were the heady days of a cash economy. The idea of a Unified Payments Interface (UPI), which would enable digital transactions, had just been seeded with very few takers; I am sure you have more compelling stories to share from that period six years ago.
The political opposition viewed this as the moment to dent the social capital of the Modi regime. They turned it into their political agenda ahead of the crucial elections to the Uttar Pradesh assembly in 2017. If the electoral results—a record majority for the Bharatiya Janata Party (BJP)—are any measure of public approval, then it was evident that the opposition’s gambit had failed miserably.
Sections of the opposition, particularly the Congress, which had suffered its most humiliating defeat in the 2014 general election refused to give up. Combining with sections of civil society they mounted a legal challenge, which eventually found its way to the Supreme Court.
The apex court dismissed the petition last week. The only source of cheer for the appellants was the lone dissenting judge. But the sum and substance was that an overwhelming majority of the bench believed that the government—which has been restored for a second successive term—had not violated the law.
More importantly, it framed its ruling in a very important context: That it was not for the judiciary to assess the efficacy of an administrative decision.
Laxman Rekha
The significance of this verdict in my view is in its subtext: It drew afresh the line in the sand as it were defining the division of power between the judiciary and the government. The scope of the former is limited to examining whether the law of the land has been violated.
In effect it was serving a reminder to everyone that there are limits to judicial reach. In practice this is a delicate feat to pull off as there is but a fine line preventing judicial overreach. Hence it is always prudent to frequently restate the boundaries—crucial for good governance in a democracy.
Citing past judgements the apex court’s majority verdict averred:
“The duty of the court is to confine itself to the legality.”
And further (the bold text is my doing):
“It is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair.
It is only concerned with the manner in which those decisions were taken.”
And, then added (the bold text is my doing):
“The courts do not 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.”
Applying these principles derived from previous judgements to the demonetisation case, the apex court maintained that the “scope of interference (by the court) would be still narrower.”
Accordingly it arrived at its conclusion—after perusing the letter proposing demonetisation sent by the finance secretary in the ministry of finance, minutes of the subsequent RBI’s central board meeting and the decision of the Union cabinet—on the claim that due process had not been followed in implementing the policy of demonetisation:
“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.”
Thereafter, citing past judgements once again, the majority ruling held:
“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 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 monetisation.”
This is by far the best formal articulation of the distribution of powers between the judiciary and the state as defined in the Constitution of India.
At one level, the escalation of a policy dispute to the level of the apex court for political objectives seems to be a waste of precious time of the judiciary. But at another level it also cleared the air about the distribution of powers.
This is hugely significant, as demonetisation will not be the last policy decision to be challenged before the apex court. Most recently the court has already had to weigh in on the purchase of Rafale fighter aircraft and the alleged use of Pegasus software to hack phones.
Going forward India will address several trade-offs—like environment vs development—as it embarks on an ambitious growth path. All of them will entail policy decisions disturbing status quo, wherein someone will lose out.
Together with the fractious political discourse, especially given that the opposition is unable to dent the social capital of the Modi regime so far, it is very likely that most disputes will eventually end up with the apex court.
Indeed if the apex court does weigh in it is important that it operates within the boundaries defined by the Constitution of India. And in this context the latest ruling of the Supreme Court is immensely significant as it restates the contours for judicial interventions.
Recommended Viewing
Sharing the latest post of Capital Calculus on StratNews Global. After the hiatus of one week, I return with a new format for the show—your feedback will be appreciated.
Over the last six months and more, almost everyone that matters globally—World Bank, International Monetary Fund, investment banks like Morgan Stanley and most recently Satya Nadella, the Microsoft boss—are talking up Digital Public Goods (DPGs), which use open digital ecosystems to deliver public good at scale. Going by the buzz DPGs are the innovation of 2022.
However, in India it is par for the course. Since the launch of Aadhaar in 2009 India has moved from strength to strength in its rollout of DPGs like Unified Payments Interface (UPI), One Nation, One Ration Card, CoWin and so on.
To understand the recent buzz around DPGs, India’s pioneering work in this space and more I spoke to Sharad Sharma, tech evangelist and co-founder of iSPIRT.
With fascinating examples and insights Sharad unpacked the entire phenomenon. Do listen in.
Sharing the link below:
Till we meet again next week, stay safe.
Anil the judgement is in line with the past judgements of the Apex Court , drawing clear distinctions between the responsibilities of Legislature, Judiciary and Executive. What is important to note here is that the Judgement has brought out , that a difficult policy decision was taken without compromising on the norms of propriety. Going beyond the judgement, it is important to note that certain policy decisions in spite of all thought process behind them may result in unindented inconvenience ( long ques at ATMs ) yet taken with boldness and fairness will be appreciated by the public at large ( UP Election Results ) . To refer to another event mentioned by you viz Covid Pandemic , again a bold decision of Total Lockdown may have caused certain noticeable inconvenience yet India is being cited today as a Success Story . Therefore it cannot be denied that certain costs entailed by bold policy decisions may be far better than to have policy paralysis !!
One more topical issue picked up promptly for discussion in Capital Calculus; one that was in the eye of the storm for years for all economic woes that was faced by the nation and raised the hackles of all opposition political parties in India. My take was that the election fighting funds of the opposition parties took a body blow and agitated them like nothing else could. More than the verdict of the court, it was the people's verdict in many subsequent elections that guaged the mood of the majority who backed the decision for reasons ranging from weeding out counterfeit currency, hoarding of unaccounted money and checking of terrorism by putting a curb on the funding. The court verdict has made it clear that the judiciary will limit itself to the role of ensuring that the legal process is correctly followed. A very important article Anil, considering the number of matters that are being referred to the judiciary by the legislature. Interesting read.