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Constitutional Validity of Demonetisation

Constitutional Validity of Demonetisation

By Satvik Mishra

Fundamental Rights are an integral part of the Constitution because they safeguard the basic, natural and inalienable human rights. The human rights adoption of UDHR heavily influenced the view that India took on fundamental rights, and hence inherent dignity of the equal and inalienable rights of all members of the human family was declared as the foundation of freedom, justice, and peace in the world. These fundamental rights make the State accountable.

The Violation of Article 14 –

The classic nexus test for the permissible classification under the said right was enunciated by S.R. Das, J. in the Anwar Ali Sarkar case, thus:

In order to pass the test of permissible classification two conditions must be fulfilled viz.

(i) that ‘the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others left out of the group’, and

(ii) that the differentia must have a rational relation to the objects sought to be achieved by the Act. The differential which is the basis of the classification and the object of the Act are distinct and what is necessary is that there must be nexus between them."

In the case of Demonetization, as undertaken by the government of India, no proper reason was given for the classification of people on the basis of whether they had a bank account or not. Also, the cap on the withdrawal amount is Rs. 4000 was not backed by a legitimate reason.

As far as the rational relations are concerned, the goal of removing corruption with this sudden blow was a very far fetched one and the instant reaction was seen in the form of large scale hue and cry with people standing for hours in front of ATMs and banks in order to attain legitimate currency, hampering their day to day life. Thus, there was a gross violation of Article 14.

The Violation of Article 19(1)(g) –

Trade and commerce are defined by the Article 19(1)(g) of the constitution of India provides for the “freedom to practice any profession, or to carry on any occupation, trade or business”. Trade can be defined as ‘exchange of goods for goods or for money with the object of making profits in the widest sense, it includes any business carried on with a view to earning profit’ while ‘Business’ includes ‘any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.’ (13). The term includes every trade, occupation or profession. In Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, the Supreme Court observed that the word business connotes some real, substantial and systematic or organized center of activity or conduct. In the case of the Demonetisation that occurred, the sudden seizure of Rs. 500 and Rs. 1000 destabilized the organized structure of the business, mostly harming that section of the society which mostly dealt in cash, be it the daily wage laborers or small shop keepers who brought their supplies from the cash they saved. Thus, the unplanned move of demonetization grossly violated article 19(1)(g) of the Constitution of India.

The violation of Article 21 –

Article 21 of the Constitution provides that no person shall be deprived of his life and liberty except according to the procedure established by law. The fundamental right to life is the most precious human right and which forms the ark of all other rights. Right to life not only confirmed to physical existence, but it also includes within its ambit “right to live with dignity.”

In the landmark judgment of Olga Tellis v. Bombay Municipal Corporation, the Supreme Court rightfully welcomed the notion that “right to life which is conferred by Article 21 includes the right to livelihood” because no person can live without the means of living. The scope and ambit of right to life, as guaranteed under Article 21 of the Constitution of India, has been expanded time and again by the Hon'ble Supreme Court, taking into account the need of the hour. And in the case of M. Seeni Ahamed, it was quoted that “The action of the Government of not giving prior notice to the people, has caused unnecessary and unbearable hardship and thus, it violates Article 21 of the Constitution”.

The Violation of Provisions of Article 300(A) –

Article 300A of the Constitution provides: no person shall be deprived of his property save by the authority of law. ’Law’ here means ‘an Act of the Parliament or of a State Legislature, a rule or a statutory order, having the force of law, that is positive or State-made law.’

Right to property was given the widest connotation in Madan Mohan Pathak and Another v. Union of India & Others wherein the Supreme Court stated that ‘property includes ownership, estates, and interests incorporeal things, and also rights such as trademarks, copyrights, patents, and even rights in personam capable of transfer or transmission, such as debts.’ Thus, it was held that Public Debts are property and the extinguishment of such an obligation, the fulfillment of which is the duty of the state, amounts to compulsory procurement of that debt.

In 1952, the Supreme Court in the State of Bihar v. Maharaja Sir Kameshwar Singh held that “money and ‘chooses in action’ (debts or similar rights to claim money) could not be compulsorily acquired by the state through exercising this power.” This was reaffirmed by a five-judge bench of Supreme Court in 1968, in the State of Madhya Pradesh v. Ranojirao Shinde.

In the case of Demonetisation in context to India, the public debts were acquired by the State the moment it declared ceasing the usage of notes of Rs. 500 and Rs. 1000 as valid legal tender. No matter how much public welfare in the name of ‘removing terrorism and corruption with a single blow’ may be cited, as told in the aforementioned case, ‘that there could be no public purpose that accompanies the compulsory acquisition of money or chooses in action.’ Thus, the scheme of demonetization, as undertaken by the Government of India, grossly violates the provisions of Article 300(A).

With Fundamental Rights like Right to Equality (Article 14), Right to Freedom of Trade and Occupation (Article 19(1)(g)) and Right to life being violated, along with the violation of provisions of Constitutional Rights like the Right to Property (Article 300(A)), there can be no proper justification to term the demonetization legal

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