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The Vicissitude of Dissenting: The Demonetisation Judgement

Balram Pandey*


Professor Ronald Dworkin, in his classic ‘A Matter of Principle[1] speaking about judicial review, argues that the most fundamental issues of political morality will finally be set out and debated as an issue of principle and not of political power alone, a transformation that will fail, at least partially, if attempted under the current legislative structure. Therefore, the hierarchical division of powers and functions between the two most essential institutions of the political order- legislature and courts, in which the latter is reviewing and, to some extent, limiting the former, is constitutionally appropriate. This also coincides with the division between the form(s) of justification or reason conventionally cast by our founding fathers for these great constitutional institutions. The dissenting opinion of Justice B.V. Nagarathna in Vivek Narayan Sharma v. Union of India (“the demonetisation judgement”) misses upon this strategy while justifying the constitutional division of responsibility, which is very much congenial to the jurisprudence of judicial review.

In the first part, the article attempts to critically evaluate the opinion of Justice Nagarathna, by comparing the major and minor premise(s) of the judgement. In the second part, the article examines the essential characteristic principle(s) of judicial discretion, which forms the central pillar of judicial review. The analysis in this article is augmented by the assertion of Professor John Finnis in his paper entitled ‘The Forum of Principle[2], where it was argued that the courts defend their judgements by appealing to a principle and that arguments of principle are described as rights of individuals arguments, which form the foundation of every experiment in constitutionalism.

Finnis’ assertion applies squarely to the present scenario, as it is a settled position in the history of hard cases that legislatures rationalise their actions in a manner where principle plays a lower part if it is playing any role at all. For the most part, jurisprudence has advanced by paying attention not only to the external drives of configuration, practice(s), or even thought process, but also to the distinctive reasons people have for acting in ways that contribute to the formation of distinctive social phenomena, such as law and the various types of legal rule(s), standard(s), and institution(s). These kinds of reasons for choices are the province of the philosophy of law.

Factual Appraisal of the Demonetisation Judgement

The law laid down by the four Justices, which forms the majority, upholds the actions of the Reserve Bank of India (“RBI”) and the government in implementing demonetisation and concludes that all the required minimum legal formalities were followed. For the purposes of our analysis, let us start with the premise(s) of the dissenting opinion. At the onset, the dissenting judge, Justice Nagarathna, observes that the RBI did not make an independent decision to recommend the cancellation of all Rupee 500 and Rupee 1000 notes, as proposed by the Central Government. The proposal of demonetisation originated from the Central Government, according to her Ladyship, in the form of a letter dated 7 November, 2016, addressed to the bank. Under Section 26(2) of the RBI Act, the recommendation did not originate from the bank, instead, the approval was obtained from the bank by the Central Government. A proposal coming from the Central Government is not the same as the one coming from the RBI’s Central Board.

Justice Nagarathna further opined that the RBI’s approval of such a proposal could not be construed as a “recommendation” under Section 26(2) of the RBI Act. In arguendo, even if the RBI had such a power, Justice Nagarathna ruled that such a recommendation is invalid because the power under Section 26(2) can only be for a specific series of currency notes and not for the entire series of currency notes of a denomination. The dissent concluded that the phrase “any series” in Section 26(2) of the RBI Act could not be interpreted to mean “all series”, as the majority claimed.[3] This is the major premise of the dissenting judgement, as it forms the core of the reasoning. The tautology of this reason is what I will attempt to highlight in this article.

The Central Government’s decision to demonetise all series of notes is a far more serious issue than the bank’s decision to demonetise specific series. In the major premise, her Ladyship has finally held that demonetisation of all series of notes must be done through a legislation, rather than an executive notification, as the “Parliament is a miniature of the country.... Parliament which is the centre of democracy cannot be left aloof in a matter of such critical importance.[4] Now coming to the minor premise of the judgement which completes the syllogistic structure and which also makes it tautological, is reproduced hereunder:

Before parting, I wish to observe that demonetisation was an initiative of the Central Government, targeted to address disparate evils, plaguing the Nation’s economy, including, practices of hoarding “black” money, counterfeiting, which in turn enable even greater evils, including terror funding, drug trafficking, emergence of a parallel economy, money laundering including Havala transactions. It is beyond the pale of doubt that the said measure, which was aimed at eliminating these depraved practices, was well-intentioned. The measure is reflective of concern for the economic health and security of the country and demonstrates foresight.[5]

In short, what has been held in principle is that the act of demonetisation, as a whole, is violative of the procedural due process. Yet it is said that,“[A]t no point has any suggestion been made that the measure was motivated by anything but the best intentions and noble objects for the betterment of the Nation. The measure has been regarded as unlawful only on a purely legalistic analysis of the relevant provisions of the Act and not on the objects of demonetisation.

Critical Appraisal of the Minority Judgement

Firstly, the analysis of her Ladyship, when seen through the prism of logic narrated above, is problematic, as it has left the syllogistic structure of the judgement incomplete. Out of all the logical fallacies, the one which predicates this analysis is the logical fallacy of the “undistributed middle”. To elaborate, in standard form syllogisms, the one which naturally applies to judicial pronouncements, the error of an undistributed middle word is committed when the terms appearing in both the premise(s) of the judgement are detached or undistributed.

In order for there to be an instance of the aforesaid fallacy, the middle term has to be unequally distributed in not just one but both of the premise statements of the syllogism.[6] This is why, in the history of such logical fallacies, an undistributed middle word has occasionally been regarded as an example of equivocation (fallacia aequivocationis). This is apparently because the denotation of the term(s) differs, since these references of the term(s) are not always similar in the context of their usage. It is pertinent to mention that the proper joining of the major and minor premises is essential as this is what gives a logical conclusion to the judgement.[7]

Here, the major premise of the judgement puts forth a proposition that the power exercised by the Central Government was violative of the procedural due process, as the Union cannot demonetise the entire series of currency notes through an execute notification in the scheme of Section 26(2) of the RBI Act. However, the judgement suggests that the legislative route was ideal to do so, either through the parliament or by way of promulgation of an ordinance, if it was to be done on a short notice. This premise itself is tautological, as on the one hand, it suggests that the parliament route was the only appropriate method, thereby implying that the Central Government always had the substantive power to bring in demonetisation, and on the other hand, it is only the method of bringing it which is problematic.

Further, in the minor premise and conclusion, it was opined that it is beyond a shadow of a doubt that demonetisation, which was intended to eliminate a variety of economic maladies plaguing the nation, was well-intentioned. The measure has been deemed unlawful, solely on a legalistic analysis of the relevant provisions of the Act and not on the objectives of demonetisation. This last statement conclusively suggests that the act of the Central Government was not at all violative of the substantive due process. So, there is no connecting link between the major and minor premises of the judgement and the terms appearing in both the premises are undistributed.

Secondly, Justice Aharon Barak, the former President of the Supreme Court of Israel, in his famous treatise on Judicial Discretion,[8] says that in hard cases like the present one, the judge is faced with several possibilities, all of which are lawful within the context of the system. Judicial review of a policy decision, such as demonetisation, is very complex as the policy itself is a more theorised description of the intuition that implements social welfare rights. This makes it a perfect hard case which calls for a kind of judicial analysis, different from that associated with classical civil and political rights.

According to Justice Barak, what makes a case hard is the fact that it does not have one lawful solution, and only in hard cases, judicial discretion exists in its real sense. It is only in such cases, the choice is not between lawful and unlawful, but between lawful and lawful.[9] To be sure, the discretion is limited, and not absolute, and the judge is not entitled to weigh any factor of their liking. Yet within the framework of these limitations, and after they have been exhausted, there is a freedom of choice.[10] Justice Oliver Wendell Holmes eloquently calls this the “sovereign prerogative of choice”.[11]

This discretion, Justice Barak suggests, should also be limited by some methodological tool, which in the present case is the principle of proportionality. The majority in the present case has applied the four-fold test of proportionality as propounded by the Constitution Bench of the Supreme Court in the case of Modern Dental College and Research Centre v. State of Madhya Pradesh.The test as laid down by the Court there is reproduced hereunder:

60. [T]hus, 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 the balancing of fundamental right to carry on occupation on the one hand and the restrictions imposed on the other hand. This is what is known as “doctrine of proportionality”. Jurisprudentially, “proportionality” can be defined as the set of rules determining the necessary and sufficient conditions for limitation of a constitutionally protected right by a law to be constitutionally permissible. According to Justice Barak, there are four sub-components of proportionality which need to be satisfied, a limitation of a constitutional right will be constitutionally permissible if: (i) it is designated for a proper purpose; (ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose; (iii) 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; and finally (iv) there needs to be a proper relation (“proportionality stricto sensu” or “balancing”) between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right.[12]

The majority applied the above-mentioned four-fold test in their decision-making process in the following manner: Firstly, the court ruled that the decision to demonetise Rupees 500 and Rupees 1000 notes was made for a valid reason, namely to combat black money, terror financing, and counterfeit cash which thus fulfils the purpose test. Secondly, the court determined that the decision to demonetise high-value currency notes had a reasonable nexus to the aim for which this whole exercise was done. Thirdly, the court determined that demonetisation could not have been accomplished through any other means, thereby satisfying the necessity test. Finally, the majority ruled that there was a proper connection between the intended objective and the powers exercised by the Centre to that effect.[13]

The dissenting opinion of Justice Nagarathna, however, has missed upon this form of proportionality analysis, right or wrong, before reaching its conclusion. This, in turn, has led to the omission of the most cardinal principle of judicial review, i.e., the judge is bound by limitations, which is nothing but the formal analysis of the case on principle (in this case, it is proportionality). It is this analysis which leads to a manner in which they choose among the alternatives (procedural limitations) and the variables in making the selection (substantive limitation). And in reaching a conclusion in a hard case, the judge should not ignore the analysis of these limitations.

As Lord Mansfield wrote, discretion when applied to judicial review in policy matters means sound discretion guided by law and in the absence of principle.[14] Chief Justice John Marshall took a similar position concerning the discretion enjoyed by the judges. Justice Marshall says:

when the Judge has the scope of exercising this discretion, it is a legal discretion, a discretion to be exercised in discovering the route prescribed by law; and when that course is identified, it is the Court’s responsibility to follow it in its analysis. The object of judicial power is never to give effect to the judge’s will; it is always to give effect to the will of the legislator, or in other words, to the will of the law.[15]


In conclusion, when the process of the exercise of judicial discretion from the point of view of the judge is over, there exists only one lawful solution according to that judge, with respect to the facts that were before them. Each judge is convinced that such a lawful solution is appropriate (if they are in the majority), or it is inappropriate and there exists another appropriate solution (if they are in the minority). Any solution, other than that, at which the judge arrives is inappropriate. This inappropriateness is premised on the fact that the judge omits a part of the analysis or reaches a conclusion that is not in tandem with their analysis. The minority opinion, in the present case, not only suffers from the logical fallacy of an undistributed middle but also omits the proper proportionality analysis. It is also clarified that the author holds this view only qua, the dispersing premise(s) of the minority judgement.


* Balram Pandey is an Associate-cum-Law Clerk to Hon’ble Justice AK Sikri, International Judge, Singapore International Commercial Court (SICC) and Former Judge of the Supreme Court of India.

The views expressed above are the author's alone and do not represent the beliefs of Pith & Substance: The CCAL Blog.

[1] Ronald Dworkin, A Matter of Principle (Harvard University Press, 1986). [2] See John Finnis, Human Rights & Common Good: Collected Essays- Volume III (Oxford University Press, 2011), at 83. [3] Per Justice Nagarathna at ¶19.3. [4] Per Justice Nagarathna at ¶15.14. [5] Per Justice Nagarathna at ¶22. [6] See John Buridan, Treatise on Consequences (Stephen Read trans., Fordham University Press, 2014), at 121; See also, Henry Joseph Turrell, A Manual of Logic: Or a Statement and Explanation of the Laws of Formal Thought (London: Rivingtons, 1870), at 105. [7] See William Shakespeare, Love’s Labor Lost, Act IV Scene iii, ¶4. [8] Aharon Barak, Judicial Discretion (Hebrew Yadin Kaufmann trans., Yale University Press, 1987), at 41. [9] Witkon, “Some Reflections on Judicial Law Making”, 2 Is. L.R. 475 (1967), at 480 ; See also, Le Rude Vita, La Dolce Giustizia, “Or Hard Cases Can Make Good Law”, U Chi L Rev. 223 (1962), at 239. [10] N. MacCormick, Legal Reasoning and Legal Theory (Oxford University Press, 1978), at 250. [11] Oliver Wendell Holmes, Collected Legal Papers (New York: Harcourt, Brace and Howe, 1921), at 239. [12] Id. at ¶60; See also, Aharon Barak, Proportionality: Constitutional Rights and Their Limitation (Cambridge University Press, 2012). [13] Per Majority, at ¶¶271-278. [14] R v. Wilkes, (1779) 4 Burr. Rep. 2527, 2539. [15] Osborn v. The Bank of United States, 22 U.S. 738, 866 (1824).


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