Bombay HC Directs RBI to Accept ₹20 Lakh Demonetized Currency due to Seizure by Income Tax Department Prior to Bank Deposit Deadline [Read Order]

In a significant ruling, the Bombay High Court directed the Reserve Bank of India (RBI) to accept and exchange ₹20 lakh in demonetized currency notes held by a Kolhapur resident since their cash was seized by the Income Tax Department prior to the December 30, 2016 deadline for bank deposit of the now-demonetized ₹500 and ₹1000 currency notes.

The decision was rendered by the Bombay High Court in a Writ Petition filed by Ramesh Bapurao Potdar and seven of his family members against the Union of India and constituents of the Revenue and RBI praying that the demonetized currency notes amounting to ₹20 Lakh be accepted by the RBI owing to their seized status during the period prior to the deadline for bank deposit.

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Advocates Udaya Sankar Samudrala, Sujit Upadhyay, and Shivesh Upadhyay appearing for the Petitioners contended before the Bombay High Court that the specified bank notes silver ingots worth ₹26.99 lakh had been seized from the Petitioner before 30th December, 2016 and was retained in police custody until 10th January, 2017. The amounts were returned only on 14th January, 2017 when the Income Tax Authorities clarified that they did not intend to seize the cash in the beginning. 

The petitioners subsequently approached the RBI’s Department of Currency Management in Mumbai, seeking to deposit the old notes, but were denied on procedural grounds.

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Meanwhile, Senior Advocate Venkatesh Dhond, Dhaval Patil, D.P. Singh, Shreyas Menkudale and Arjun Gupta appeared for the respondents. 

Senior Advocate Dhond argued that the Specified Bank Notes (Cessation of Liabilities) Act, 2017, and a May 12, 2017, notification required petitioners to furnish serial numbers of the seized notes to qualify for an exchange. They maintained that, in the absence of such details, the RBI was legally barred from accepting the demonetized currency.

The division bench of Justice A.S. Chandurkar and Justice M.M. Sathaye observed that the Petitioner had been prejudiced by the Department’s continued retention of the seized bank notes prior to and during the the deadline date for bank deposit.

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Noting that the specified currency notes bearing the corresponding serial numbers satisfies the requirement of Rule 2(a) of the Rules of 2017, the Bench proceeded to allow the prayer and directed the RBI to accept the specified bank notes for the value of ₹20 Lakh bearing the annexed serial numbers.

The Bombay High Court directed the petitioners to deposit the specified bank notes with serial numbers listed in their affidavit within one week with the Reserve Bank of India (RBI). 

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The RBI was directed to verify the notes and release an equivalent amount in legal tender to petitioner no.1 on behalf of all petitioners. Additionally, petitioner no.1 was directed to indemnify the RBI against any future claims from the other petitioners, and this process was required to be completed within seven days of receiving the specified bank notes.

To Read the full text of the Order CLICK HERE

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