Supreme Court accepts Petition Regarding Axis Bank’s Refusal to Accept Demonetised Notes

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The Supreme Court entertained a petition one-and-a-half years after validating the Union government’s decision to demonetise Rs 1,000 and Rs 500 currency notes. The petition was filed by a company alleging that Axis Bank had refused to accept demonetised notes worth Rs 3.2 crore, breaching RBI guidelines.

Argument Before the Bench:

Advocate Nalin Kohli, representing the company, argued before a bench of Justices B R Gavai and K V Viswanathan that the company was not challenging the decision to demonetise certain currency notes but was aggrieved by the bank’s arbitrary decision not to accept the deposit of Rs 3.2 crore in violation of RBI orders related to demonetisation, despite the company being KYC compliant.

RBI’s Response:

Senior advocate Jaideep Gupta, representing RBI, stated that it was for Axis Bank to explain its refusal to accept the demonetised notes in December 2016. The November 8, 2016, notification had allowed deposition of demonetised currency notes in banks until December 30, 2016. Another notification issued on December 31, 2016, made it an offence to hold demonetised currency notes after December 30, with the holder being liable for a penalty.

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Obligations of Axis Bank and RBI:

Kohli argued that the bank was obliged to receive demonetised currency notes presented before it by the KYC-compliant company. Additionally, he asserted that it was obligatory for RBI to ensure that the company received the amount in exchange for valid currency notes, as each demonetised note contained a written promise by the RBI governor to pay the bearer an amount specified on the currency note.

Court’s Decision:

The bench issued a fresh notice to Axis Bank and asked it to respond within three weeks after RBI counsel stated that the court would have to hear the bank and find out whether it had a valid reason not to accept the demonetised notes. A bench of Justices S Abdul Nazeer, Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna had, by a four to one majority on January 2, 2023, validated the November 8, 2016, demonetisation decision carried out through an ordinance, with Justice Nagarathna dissenting.

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2 COMMENTS

  1. The November 8, 2016, notification had allowed deposition of demonetised currency notes in banks until December 30, 2016. Another notification issued on December 31, 2016, made it an offence to hold demonetised currency notes after December 30, with the holder being liable for a penalty.

    Then under which rules any Bank or RBI may accepts demonetised notes from a company.
    why the aforesaid company delayed to deposit demonetised currency notes within time bound period.
    Kohli argument ” contained a written promise by the RBI governor to pay the bearer an amount specified on the currency note” would valid subject to any currency of any country has legal tender but after 30 Dec 2016 it was an.offence to have demonetised currency.

    Hence, in my opinion the contention of Axis Bank that not to accept demonetised currency notes is absolutely right after time line.

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