Alcoholic Patriotism : Economic Analysis of two judgments of the Supreme Court


This post seeks to analyse the two judgments passed by the Supreme Court through the lens of law and economics. These two judgments are:

  • Shyam Narayan Chouksey v. Union of India (National Anthem in Cinemas Case)
  • K. Balu v. Union of India (Liquor Vends on Highways Case)

Critical Introduction

The progress of the Law and Economics movement can best be attributed to the global advance in business, commerce, and trade-related transactions. Oliver Wendell Holmes’ prediction in his The Path of Law did not come to be interpreted as a mere truism, but s a guiding inspiration to imbibe in the reading and analysis of laws, a sense of inter-disciplinarily with economics. He remarked:

For the rational study of the law, the black letter man may be the man of the present, but the man of the future is the man of statistics and the master of economics.[1]

The extensive use of economic analysis in the study of the legal system helps in developing a unique understanding of the same; providing perspectives which are unknown and sometimes unthinkable for a lawyer who is usually uninterested much in economics.

In the recent times, a few judgments of the Supreme Court of India have been able to extensively capture the attention of mainstream news reporting, and editorial writing. Not that this does not happen very often. But, what is unique about these judgments (which are the focus of this paper) is the prima facie constitutional significance that they command; and the corresponding anxiety and tumult that that seem to have created in the public sphere.

Unlike legislative activity, which has an inherently engrained theoretical popular element, judicial activity in the form of litigation and consequent adjudication of disputes in courts of law, does not (on all occasions) makes national front-page headlines. The reason that lawyers attribute to this is that judicial function is not that of law-making, but that of law-interpreting on a case-to-case basis. Economists might argue that judges do not engage in macro-economic policy making; and engage with individuals and organizations at a micro-level. But, this is now true only in theory; with judges acting through instruments such as Public Interest Litigation (PILs), which some have called has Social Action Litigation,[2] courts have increasingly been able to command a significant amount of power at a the macro-level.

Murphy and Coleman have credited the law and economics movement as:

having sought to explore the extent to which virtually all areas of the law could be understood as the institutional embodiment of the principle of economic efficiency.[3]

They also go ahead to say that the subject matter in falling within the commonality of this interdisciplinary approach has both analytic and normative dimensions. The first one in the sense that questions of law and justice are quintessentially questions of economics such as allocation of resources, and of efficiency; while the latter as providing economically sound terms of reference for law-people to legislate, execute and adjudicate so as to further economic efficiency. I am of the opinion that the subject-matter also has a descriptive dimension in the sense that laws and precedents can describe how economic considerations have played a major role in the development of what has come to be called the “law.”

In this sense, courts of law have been modelled by Richard A. Posner as mimicking the market, and practicing something termed as the “jurisprudence of prudence”.[4] Nonetheless, the law and economics movement is not sans its criticisms. Since a market system predominantly works in the favor the of the rich, the law, in that sense cannot be partisan, and resound and reverberate the tilted balance of power prevailing in capitalist markets.

The National Anthem Case

Shyam Narayan Chouksey v. Union of India[6] was a petition moving the Supreme Court in the form of a public interest litigation, asking for placing “emphasis…on showing requisite and necessary respect when the National Anthem is sung or played”, and asserting “that it is the duty of every person to show respect when the National Anthem is played or recited or sung.” The petitioner was seeking the issuance of directions from the Court to effectuate the assertion, and provide for the fulfilment of the purported objects behind the enactment of Prevention of Insults to National Honour Act, 1971. On the 30th of November, 2016, the bench comprising of Justices Mr. Dipak Misra and Mr. Amita Roy issued interim directions, out of which, the following will be used for the purposes of this paper:

(d) All the cinema halls in India shall play the National Anthem before the feature film starts and all present in the hall are obliged to stand up to show respect to the National Anthem.

The bench went ahead and sought to explain theoretical underpinning for this direction in the concept of “constitutional patriotism” postulated by Jürgen Habermas, a German sociologist.[7] The judgment made national headlines. In a day or two, the newspapers were flooded by editorial writings by lawyers, law professors, civil society activists and sociologists; expressing solemn disapprobation of the aforesaid direction. However, some scholars like Professor Faizan Mustafa, went as far as to question the very theoretical grounding of the judgment by the judges, when he said:

Justice Misra used the term “constitutional patriotism”. Jurgen Habermas uses this term (verfassungspatriotismus) to argue for “individual autonomy” and “super-national identity”. For Habermas, the term is different from “aggressive nationalism,” based on majoritarinism; it is a compromise between nationalism and cosmopolitism.”[8]

The economic analysis is visible in the form of curtailment of individual freedom and liberty that is manifest in the compulsory nature of the direction. The dilution of freedom is an important corollary of going away from Adam Smith’s theory of Invisible Hand. Can we say that nations are held together by cohesive forces generated by something like the invisible hand, where the citizenry unconsciously (which need not be told to “show respect” to symbols) through its active participation at an individual level constitutes the nation? Aggressive tendencies to cause certain economic outcomes may, in fact be comparable to what, Harsh Mander, in an article in the Hindustan Times has said:

This ruling of India’s highest court, carrying the weight of law, troublingly mirrors the aggressive hyper-nationalism that is sweeping the country today. In this discourse, the nation, its leader, the government and the country’s religious majority all converge. Opposition to majoritarian politics and vigilantism, as much as dissent with central government policy and criticism of the Prime Minister, are all painted alike as impermissible disloyalty to the nation.[9]

Pratap Bhanu Mehta went on to the extent of saying that the judgment bespeaks of a court that has undone itself over the past few years with judgments such as these; and entails “biggest crisis of legitimacy” that the court is now facing since the times of National Emergency of 1975-1977.[10] His criticism comes from the libertarian perspective of the Rule of Law. The tall pillar of Indian legal academia, Professor Upendra Baxi came to the rescue of the Supreme Court who in his piece Unfair to Justices pointed at the slippery slope of Mehta’s argument that criticizing the entire court for decision by a bench of two was unfair and unwarranted overblowing.[11] The counter-intuitive nature of the direction is perhaps best captured by the term popcorn nationalism used by Bhairav Acharya, writing for The Wire.[12]

Also pertinent would be to reproduce what Shivam Vij of the Huffington Post has to remark on what he feels is judicial over-reach by the apex court judges:

With due respect to the honourable apex court, sometimes you wonder why they spend time on things best left to the government. Or, on really inconsequential things.[13]

This form of exercise of judicial power is comparable to the analysis by Richard A. Posner when he gives an economic understanding in terms of how a balance must be created in terms of high transaction costs and enhancement of efficiency when governmental powers are separated amongst the legislature, executive and the judiciary in Montesquieu’s terms. While separation of powers allows the government to exploit the economies of specialization, the breach of separations is not seen as substantive breaches of skill and ability, but of procedural limitations that go against the rules.

Alok Prasanna Kumar, in his article on First Post, brings home the point similar to what economists prefer in the making and interpretation of the laws: stability, coherence and consistency. He contends as follows:

In the next direction, demanding that entry and exit doors be closed while playing the National Anthem, the Supreme Court ignores its own earlier judgment in the Uphaar tragedy case[[14]] where the court, for good reasons, had held that under no circumstances should doors to a cinema be shut from the outside. Perhaps it should be considered that unlike laws written by institutions, the laws of physics can’t be suspended or struck down by a judicial order, and if a fire breaks out, all the patriotism in the world won’t save you from a horrible death in a closed room.[15]

In pure economic terms, let us now discuss as to what were the choices before the court. It had the absolute liberty to sit silent over the petition or dispose it of. It however, chose to pass a decision. This decision was to take effect in commercial establishments (cinema theatres and multiplexes) which run for profit maximization. The question now is, whether there were any costs involved in the implementation of such an order. From the perspective of the cinema theatres, the cost was negligible. They had to anyway screen the movies; and now had to precede the screening with the playing of the national anthem. From the side of the consumers of films in cinemas, for the viewers, the only cost was that of the physical cost of standing. The differently abled persons were exempted from this otherwise blanket requirement of standing erect in reverence of national anthem. Through this cost-based analysis, we may conclude that there was no economic impediment or restraint that was acting on the judges to not to pass the direction that they did pass.[16] It was thus, in the absence of such an economic restraint, that the criticism which the direction received, was more or less, only ideological in nature. This economic understanding is important to move on to discuss the next judgment, which is under consideration in this paper.

The Liquor Vends on Highways’ Case

From what some have remarked to be a “frivolous” petition moved by a person who had too much “time on his hands,”[17] we come to what seems to be actually a serious business Public Interest Litigation petition, now at the stage of a Special Leave before the Supreme Court. This SLP was being heard against the decisions rendered by the Madras High Court and Punjab & Haryana High Court while they were hearing two different PILs on a similar question. K. Balu was the petitioner at Chennai, while Arrive Safe Society had moved the Court at Chandigarh. The matter was being heard by Chief Justice Mr. T.S. Thakur, and Justices Mr. D.Y. Chandrachud, and Mr. L. Nageswara Rao. The call was whether to ban liquor vending outlets in and around National and State Highways. These roads carry the most burden of vehicular traffic as they serve long-distance travel in a seamless manner. It was brought out through ample statistics that drunken driving was one of the predominant curable causes behind accidents and deaths on roads.

The backdrop was the case was such that the court had to conduct a balancing act between the cost of human lives, and the commercial benefits arising out of revenue generation through liquor vends. It must also be borne in sight that for many a people, their livelihood is contingent on the functioning of these vends. In this regard, the court’s exercise of jurisdiction seems to resemble and resound the paternalistic notions of state responsibility.

Separation of powers between the legislature and judiciary is not a trite, it is a recurring theme in Indian constitutionalism due to the looseness of the concept in Indian terrain of law. It does increase the transaction costs since the number of agents (who have a say in the decision-making process) increases with the compartmentalisation of government, but the efficiency in governance is achieved due to the division in functional domains. If the court, as Advocate Gautam Bhatia has noted, loses sight of this important principle in a legal setup such as ours, the efficacy and true purpose for the establishment of courts of law, goes for a toss.[18] In economic analysis of law, efficacy of legal action does matter to a great extent.

It is also arguable that the principle of federalism, which implies separation of Centre’s powers from the states instils greater efficiency into the governmental process. Detailed inquiry has been attempted in this sphere in relation to the Constitution of the United States. In India, this division of is manifested in Schedule VII to the Constitution of India. However, as is not often observed in the context of the US, which is a totally federal polity, in India, the quasi-federal nature, and the unitary tendencies in India at times cause deadlock in the cooperation between the central government and the constituting states. This gives a whole new shape to the economic question in the Liquor Vends Case. It is stated on record that on the elapse of thirteen long years since the Union government first mooted the idea of banning liquor vends on national highways, nothing moved on ground due to state governments’ inaction. The subject-matter governing policy relating to excise on liquor falls within the ambit of the states. In this 2016 judgment, the Supreme Court paved the way for this plea to be given effect to, by observing the impediments imposed by federal nature of the question; and went ahead to do the job itself. States were unwilling to give effect to the Union government’s policy since they had an economic incentive in permitting liquor vends on highways; since they were the direct beneficiaries of consequent revenue collection out of the process. At a distinct yet relatable level, perhaps this points to a further understanding of judicial and legislative functions. Guidance to law-making is often sourced to public opinion prevailing at particular points of time. A.V. Dicey has pointed out how “judicial legislation” (judge-made law) which seems to have been the phenomenon in courts banning liquor vends is always guided by principles of coherence and consistency, as against legislative rule-making which is more often than not guided by lobbyists.[19] Perhaps, this might explain why the state governments were sitting silent on the Union government’s advisory to do what the apex court finally did in 2016!

A point to be noted from the commercial point of view is that there is no absolute bar on the presence of liquor vends on all kinds of roads. First limitation comes in when only state and national highways are selected of all. Second restraint is in the form of allowing liquor vends beyond a distance of 500 meters from the road. While the judgment makes it clear that the prohibition will apply even to sections of highways passing across towns, cities and within municipal limits, the ball is now in the court of state governments as to whether they will decide to de-notify certain sections of such highways so as to indirectly allow vending of liquor in certain parts of such roads.

Comparative Economic Analysis of the Judgments

The two judgments have both, similarities and differences. Both of them apply to commercial establishments operating for profit maximization: cinemas and liquor vends. However, in the Liquor Vends Case, there is a clear directive policy from the union executive, which the apex court ostensibly gives effect to; in the National Anthem Case, there is little basis in the law to allow for the direction that the court has issued.

Another interesting aspect that an economic analysis of the two judgments can look into is the weightage accorded to fulfilling and giving effect to the Directive Principles of State Policy (DPSPs) and enforcing Fundamental Duties. Both of these are non-justiciable and legally non-enforceable by courts of law. However, the recent trend followed by courts suggests slightly the otherwise. In the National Anthem Case, the Court relied on the following:

51A. Fundamental duties – It shall be the duty of every citizen of India – (a) to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem”.[20]

 It must be noted that there is no basis in law to pass such an order. Apparently, the court seems to read a few statutes together with a constitutional provision to come up with something absolutely new and alien to Indian law.

In the Liquor Vends Case, the following DPSP is quoted by the Court:

47. Duty of the State to raise the level of nutrition and the standard of living and to improve public health: The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the State shall endeavor to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health.[21]

The way the court goes on to place reliance on these two constitutional provisions is reflective and instructive to lawyers interested in economic analysis of the law. While the judges had to react to the jurisdiction invoking what they felt was a public interest matter, they did so in the ambit and scope defined by economic considerations. They did not absolutely placed prohibition on liquor vends on roads since they understood the potential economic repercussions of the measure. At the same time, they placed an absolute positive requirement on cinema theatres to play national anthem, and on viewers to stand while it played taking into account the low costs entailed in the execution of such measure. Therefore, the court showed a zero tolerance towards what was supposed to follow in cinema halls, while it was determined to reach a compromise on tolerating liquor vending on roads. Thus, the normative conclusion that is reached is that since all apparently purely legal doctrines also have underlying economic costs,[22] the court must estimate the same before delivering its verdict.

Analytical Conclusion : A Theory of Anticipatory Costs

Thus what seems to be the case through the two judgments which were the focus of this paper is that judges are guided not only by ideologies (which unlike economic principles) prima facie speak through their judgments, but also by principles of economics to minimize costs and maximize utility. In this, regard, they anticipate the costs inherent in any probable verdict that they would hand out.  The two judgments are perfect examples where the Supreme Court’s judgment varied with the length of its feet,[23] and its influence on the law of the land was in a sense, allowed (in the National Anthem Case) and limited (in the Liquor Vends Case) by market forces of demand and supply, which form the core of economic analysis.

Constitutional Economics in this sense perhaps also captured by Charles Evans Hughes’s famous statement when he said that a “constitution is what judges say it is,” where judges like all human beings are not absolutely immune from economic considerations, and what they will say, might at times be in consonance with what economists would also say.

[1] Oliver Wendell Holmes, Jr., The Path of the Law, 10 Harvard Law Review 457 (1897).  His ostensible object was “the prediction of the incidence of the public force through the instrumentality of the courts.

[2] Baxi, Upendra, Taking Suffering Seriously: Social Action Litigation in the Supreme Court of India, 4 Third World Legal Studies,108, 107-132 (1985).

[3] Jeffrie G. Murphy and Jules L. Coleman, Philosophy of Law, 181 (Oxford University Press, 1997).

[4] This is a major theme of the book Richard Posner, How Judges Think, (Harvard University Press, 2008).

[5] Richard A. Posner, Free Speech in an Economic Perspective, 20 Suffolk University Law Review 1 (1986).

[6] Writ Petition (Civil) Nos. 855 of 2016 in the Supreme Court of India; Reported as (2017) 1 SCC 423.

[7] Müller, Jan-Werner, A General Theory of Constitutional Patriotism, 6 (1) International Journal of Constitutional Law. 72–95. (2007).

[8] Faizan Mustafa, Making playing of national anthem mandatory goes against its spirit, The Indian Express, December 7, 2016. Available at

[9] Harsh Mander, SC order on national anthem in cinema halls mirrors aggressive hyper-nationalism, Hindustan Times, December 1, 2016. Available at

[10] Pratap Bhanu Mehta, Unconstitutional patriotism: Order on national anthem shows what is wrong with the Court, The Indian Express, December 3, 2016. Available at

[11] Upendra Baxi, Unfair to Justices, The Indian Express, December 12, 2016. Available at

[12] Bhairav Acharya, The National Anthem and the Supreme Court’s Popcorn Nationalism, The Wire, December 3, 2016. Available at

[13] Shivam Vij, Just Why should the National Anthem be Played in Cinema Halls?, The Huffington Post, December 30, 2016. Available at

[14] MCD v. Uphaar Tragedy Victims Association, (2011) 14 SCC 481.

[15] Alok Prasanna Kumar, Supreme Court’s National Anthem order mocks judicial process, Constitution, First Post, December 1, 2016. Available at

[16] Richard A. Posner, The Constitution as an Economic Document, 56 George Washington Law Review 4, (1987).

[17] Bhairav Acharya, The National Anthem and the Supreme Court’s Popcorn Nationalism, The Wire, December 3, 2016. Available at

[18] Gautam Bhatia, The Supreme Court’s Judgment on the Sale of Liquor along National Highways, Indian Constitutional Law and Philosophy, December 17, 2016. Available at

[19] This possibility is hinted in Why are States speaking the language of liquor vendors, asks SC, The Hindu, December 3, 2016. Available at For understanding the concept See A.V. Dicey, Law & Public Opinion in England, (Macmillan, 1905).

[20] Article 51A, Constitution of India.

[21] Article 47, Constitution of India.

[22] Maxwell L. Stearns, The Economics of Constitutional Law, in The Oxford Handbook of the U.S. Constitution (Mark Tushnet, Mark A. Graber, and Sanford Levinson ed., 2015).

[23] Reference is made to the comment made by John Selden, an eminent seventeenth century jurist to point to the inconsistency of decisions of the Equity/Chancery courts functioning in England: “Equity varies with the length of the Chancellor’s foot”.

Why demonetisation of Rupees 500 and 1000 Bank Notes is legally valid?

As a law student, Ms. Indira Jaising’s article in the National Herald comes to my aid in days when most debate surrounding this hyped issue takes place in economic terms. The need to comprehend or determine the legality of any governmental action is grounded in John Adams’ famous adage that we are ruled by a “government of laws, and not of men [or women].” Procedural soundness of any action increments to the aims sought to be achieved by that action.

Practical action in the field has also been witnessed in the form of a few petitions which challenge the move, filed in the Hon’ble Supreme Court, purportedly impugning the decision on the basis of “at least five significant legal grounds”.

On a closer reading, however, I strongly feel that the move is legally sound, and procedurally valid. Thus, in this post, I would proceed to show that (a) the government was competent to declare the cessation of legal tender character of high value denominations, and (b) that the action was legally covered and the power was exercised in furtherance of the law.

In this light, I somehow fail to digest the claims made by my very very senior in the field, Ms. Jaising vis-à-vis the legality of Central Government’s move to demonetize the denominations of Rupees 500 and 1000 bank notes in order to tackle the myriad and challenging problems such as black money, terrorism, corruption inter alia. I am in one way indebted and thankful to Ms. Jaising to have brought to the fore the issues of legality surrounding the government’s move. I shall be attempting to explain how the legality of the executive action is fairly covered within the contours of the law.

While I wish to express no reservations to the arguments concerning the nature of currency in our hands, I would straight away proceed to analyze the process entailing the issuance of notification by the Department of Economic Affairs of the Ministry of Finance New on the 8th November, 2016.

Firstly, it has been said that the notification exceeds the scope of the exercise of power provided for in Section 26 (2) of the RBI Act, 1934. The said section reads as follows:

“(2) On recommendation of the Central Board the [Central Government] may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender [save at such office or agency of the Bank and to such extent as may be specified in the notification].” (Emphasis supplied.)

It has been pointed out that the phrase “any series of bank notes” limits or restricts the scope of power to declare the cessation of legal tender character of bank notes to particular and definite series as against a denomination in its entirety. This seems to be a very restrictive interpretation conferred upon the statutory provision, with no clear backing from any legislative intent to that effect. My take on this is that the word “any” is very broad and wide in its ambit and import, in a sense of conferring a discretion onto the competent authority to declare any (which may mean all) legal tender to be illegal therefrom.

It does not mean that the government’s power is restricted to declare illegal only a particular series of currency at a particular point of time. Therefore, the statutory text places no restriction, and the power is of a very wide import to declare any and not only some of the series in currency. The Hon’ble Supreme Court in the case of Lucknow Development Authority v. M.K. Gupta, observed that “the word ‘any’ dictionarily means ‘one or some or all’. In Black’s Law Dictionary it is explained thus, “word any’ has a diversity of meaning and may be employed to indicate ‘all’ or every’ as well as ‘some’ or ‘one’ and its meaning in a given statute depends upon the context and the subject- matter of the statute”.

In Balaganesan Metals v. M.N. Shanmughan, it observed that the “word “any” has a diversity of meaning and may be employed to indicate “all” or “every” as well as “some” or “one” and its meaning in a given statute depends upon the context and the subject matter of the statute.” Thus, there is no substance in the argument that the government cannot subject all series of bank notes to the incident of Section 26 (2).

The second point which has been made relates to the modus operandi followed to declare the move. It has been said that, as has been done in the past (in the form of The High Denomination Bank Notes (Demonetisation) Act, 1978), the power under Section 26 (2) can only be exercised through an act of the parliament (or an ordinance to be followed by a legislation, when the legislature is not in session), and not through an executive notification in the gazette. My response to this is two fold: firstly, that the express words used in Section 26 (2) allow for the ‘Central Government’ to take such a move via a notification in the gazette, and secondly, that the precedent is inapplicable to the situation as it persists for now, since the statute of 1978 created criminal offences (See its Section 10) for usage of the currency notes as tenders by persons, as against the current notification dated 8th November 2016. Therefore, the court as of now, before at least 30th December (till the point I think there can be a legislation passed in the winter session), pronounce the petitions filed as premature of cause of action.

Interestingly, reliance has been placed upon the Supreme Court’s judgment in Jayantilal Shah v. Reserve Bank of India, wherein it had been held that cessation of currency results in “extinguishment” of a debt owed to the bearer by the government, resultant into a deprivation of property that could be carried out but by a “law”. Then again, it must be remembered that the right guaranteed by Article 300A is not a fundamental right as it was when Jayantilal (supra) was decided. Further, since the definition of law in Article 12 of the Constitution is broad enough to include within the law, which is what one must rely on while challenging the decision on grounds of being violative of fundamental rights; the exercise of power seems grounded in constitutional authority.

As to why the ordinance route was not taken up becomes a redundant question, if one sees the legislative majority of the ruling political party in the Lok Sabha. This should be enough of any realpolitik explanation to the raised eyebrows on the government’s decision to choose the notification path in the interests of secrecy and efficiency. Even then, Section 43A of the RBI Act should come to the rescue, which seeks to protect the Bank for anything done in furtherance of good faith. It is most reasonable to believe that elimination of black money, curbing terrorism, and tackling counterfeit currencies are necessarily beyond doubt objectives in line with good faith, and public interest. This should be the guiding factor for the court to consider the merit of the move, and decide the issue accordingly.

Further, there are catena of cases where it has been held by the apex court, that matters of policy which are distinctively within the domain of the executive should remain outside the purview of the courts. Thus, it is my sincere opinion and expectation that courts, as partners in progress and good governance, ought to exercise mindfulness of exercising their powers to review official action at times. And this i, just one such point in time.

Thus, the governmental action, in my opinion fails to fall short of legal requisites. And, is therefore, within the four corners of the law.