Bank Ordered to Pay Delhi Company After Refusing ₹3.2 Crore Deposit During Demonetisation
The National Consumer Disputes Redressal Commission (NCDRC) has ordered Axis Bank to pay more than ₹3.19 crore with 6% interest to a Delhi-based company after the bank refused to accept its cash deposit during the 2016 demonetisation period.
The Government of India had announced demonetisation in 2015. Rs.500 and Rs.1000 notes were withdrawn from circulation and people were given a limited time to deposit the old currency in banks.
Background of the Case
The complainant, Procure Logistics Services Private Limited, said it had ₹3.2 crore in cash that it wanted to deposit in its bank account during the demonetisation window. However, Axis Bank allegedly refused to accept the full amount.
According to the company, it managed to deposit about ₹1.3 crore on different dates during the permitted period. But the bank later prevented the firm from depositing the remaining cash.
As a result, the company was left holding old currency notes worth ₹3.2 crore that became invalid after the deadline.
What is Demonetisation?
Demonetisation is the process in which a government removes the legal status of a currency note or coin. This means that the currency can no longer be used for transactions or as legal tender in the country.
Demonetisation in India (2016)
On 8 November 2016, the Government of India announced the demonetisation of ₹500 and ₹1000 currency notes. These notes were withdrawn from circulation to tackle issues such as black money, counterfeit currency, and corruption.
Main Objectives
- Reduce black money in the economy
- Stop circulation of fake currency
- Promote digital payments
- Increase tax compliance
What Happened After Demonetisation?
- Old ₹500 and ₹1000 notes were deposited in banks.
- New ₹500 and ₹2000 notes were introduced.
- Digital payment systems like UPI and wallets saw rapid growth.
Bank’s Defence
Axis Bank argued that the deposit appeared suspicious. The bank claimed that due to concerns about the nature of the transaction, it treated the company’s account as high risk and therefore did not allow further deposits.
Commission’s Observation
The NCDRC bench, consisting of members J Rajendra and A K Mendiratta, rejected the bank’s justification. The commission said that even if the bank had doubts or suspicion about the cash, the correct legal step would have been to accept the deposit first and then report the matter to the relevant authorities for investigation.
According to the order, the bank acted unilaterally by labeling the account as high risk and denying the company the chance to deposit cash in its own KYC-compliant account during the crucial period.
The commission also noted that the company had cooperated with the bank and had provided all necessary documents. It had submitted audited balance sheets from previous years and disclosed the cash available with the firm as recorded in its accounts.
Findings of the Commission
The commission stated that correspondence between the company and the bank showed that the firm repeatedly tried to deposit the money during the permitted time window.
It further observed that the bank’s refusal was not based on any specific government notification, RBI rule, or any deficiency in the company’s KYC documents.
The order stated that the company’s loss occurred because of the bank’s unilateral decision rather than any legal determination by a competent authority.
Compensation Ordered
The commission concluded that the refusal caused the company an “irreversible loss” because the old currency notes eventually became worthless.
As a result, the NCDRC directed Axis Bank to compensate the company by paying ₹3,19,58,500 — the value of the unaccepted notes — along with 6% annual interest.
Significance of the Order
The ruling highlights that banks cannot arbitrarily refuse deposits during government-approved currency exchange periods if the customer is compliant with regulatory requirements. If there are suspicions about a transaction, banks are expected to accept the deposit and then report it to authorities for further investigation instead of denying the deposit outright.
The case is seen as an important example of consumer protection in the banking sector following the disruptions caused during the demonetisation period.
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