The Nagpur Bench of the Bombay High Court has directed the Reserve Bank of India (RBI) to exchange demonetised currency notes worth Rs 2 lakh for a petitioner, Girish Malani. The court held that a citizen cannot be penalized for a delay caused by the custody of law enforcement agencies. The ruling emphasizes that procedural conditions for exchanging old notes cannot be applied “rigidly” when the individual is not at fault for missing the deadline.
The legal battle stems from the 2016 demonetisation policy, which declared Rs 500 and Rs 1,000 notes as no longer legal tender. On December 1, 2016—during the prescribed window for currency exchange—Girish Malani was traveling toward Mahur with 400 notes of Rs 500 denomination.
In light of ongoing municipal elections, a police patrol team intercepted his vehicle and seized the Rs 2 lakh as a “precautionary measure.” The cash was deposited at the Mahur police station, and the seizure was reported to the Income Tax Department. While the Income Tax authorities eventually concluded the money was legitimate and required no further action, the currency remained in police custody.
By the time the notes were returned to Malani, the December 30, 2016, deadline for bank deposits and the subsequent exchange windows had closed. When Malani approached the RBI in January 2017, the central bank refused his request for an exchange.
The Petitioner’s Stance: Malani argued that the money lawfully belonged to him and that he was deprived of the opportunity to deposit the currency because it was in the state’s custody. He highlighted that government notifications allowed for the exchange of notes seized by law enforcement on or before December 30, 2016, provided certain conditions were met. He maintained that since the seizure was legitimate and the money cleared by the Income Tax department, he was entitled to legal tender.
The RBI’s Opposition: The RBI opposed the plea on technical grounds. The central bank claimed that the specific condition requiring law enforcement agencies to record the serial numbers of the seized currency notes had not been complied with in Malani’s case. Consequently, the RBI maintained it was not obligated to provide an exchange.
The division bench of Justices Urmila Joshi-Phalke and Nivedita Mehta scrutinized the circumstances under which the petitioner lost control of his funds. The court noted that the notes were seized before the cut-off date and remained in police custody until long after the exchange window had shut.
Regarding the RBI’s technical objection, the court observed:
“The petitioner cannot be placed in a disadvantageous position on account for an act for which he is not responsible.”
The bench further noted that the compliance of procedural conditions “cannot be applied in a rigid manner where the fault does not lie with the person but with the authorities.” The court found that Malani had no control over the amount during the relevant period and therefore could not be held responsible for the lack of recorded serial numbers or the missed deadline.
The High Court ruled in favor of Malani, asserting that he must be permitted to deposit the amount and seek an exchange from the RBI.
The bench directed the petitioner to deposit the demonetised notes with the RBI within one week. The RBI has been ordered to verify the notes and provide the legal exchange within seven weeks thereafter.
