Bombay High Court directed Reserve Bank of India to exchange demonetized notes seized earlier. Bench of Urmila Joshi-Phalke and Nivedita Mehta held petitioner not at fault.
The Bombay High Court has ordered the Reserve Bank of India (RBI) to exchange demonetised Rs 500 notes worth Rs 2 lakh that were seized from a man during the demonetization period and later handed back to him after the exchange deadline.
In its order issued on Wednesday, the bench comprising Justices Urmila Joshi-Phalke and Nivedita Mehta held that the petitioner could not be blamed because the notes were confiscated by the police before the cut-off date and remained in police custody until after the window for exchange had closed.
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The RBI was directed to take the necessary steps on a petition filed by Girish Malani.
The court said,
“The petitioner cannot be placed in a disadvantageous position on account for an act for which he is not responsible,”
According to Malani, he was travelling towards Mahur on December 1, 2016, carrying 400 currency notes of Rs 500 each, when the police seized the money. He stated that his vehicle was intercepted by a police patrol team due to municipal election arrangements, and the cash was seized as a precaution and deposited at Mahur police station. Malani further said that the seizure was reported to the Income Tax department, which later concluded that the money was legitimate and that no further action was required.
Malani received the returned notes on December 31, 2026. The court noted that the Government of India had, on November 8, 2016, declared Rs 500 and Rs 1,000 notes as not legal tender. The notification allowed citizens to deposit those notes for exchange at banks up to December 30, 2016.
In January 2017, Malani approached the RBI to seek exchange, but his request was rejected. In his petition, he argued that the funds were lawfully his and that he had been deprived of the opportunity to deposit the demonetized notes and get them exchanged for legal tender within the prescribed period.
The plea stated that, under the notification, demonetized currency notes seized by law enforcement agencies on or before December 30, 2016 could be tendered to the RBI, subject to certain conditions. Malani said that despite meeting the relevant requirements, the RBI refused to accept his notes and provide an exchange facility.
The RBI opposed the petition, contending that the condition requiring the serial numbers of the currency notes to be recorded by the law enforcement agency was not complied with in this case.
The High Court, however, rejected a rigid approach, observing that conditional compliance should not be insisted upon in the same manner where the lapse is not attributable to the petitioner.
Adding that he could be allowed to deposit the amount and request exchange from the RBI, the High Court said,
“The petitioner (Malani), therefore, had no control over the amount during the relevant period,”
The bench directed Malani to submit the demonetised notes to the RBI within one week. The RBI was then asked to verify the notes and process the legal exchange within seven weeks thereafter.