Bombay High Court Directs RBI To Accept ₹2 Lakh In Demonetised Notes Seized By Police, Preventing Timely Exchange

The Bombay High Court on Wednesday (April 22) directed the Reserve Bank of India (RBI) to exchange the 'demonetised' Rs 500 notes of a man totalling to Rs 2 lakh and provide him with the equivalent amount within eight weeks. 

A division bench of Justice Urmila Joshi-Phalke and Justice Nivedita Mehta noted that the amount owned by one Girish Malani was seized by the local police while he was travelling towards the famous Renuka Devi Temple. The amount comprised of Rs 500 notes. The police suspected that the amount could be misused by Malani as the local body elections, were then, underway. Therefore, the amount was seized. 

The bench noted that after being informed by the police, the Income Tax Authorities in its enquiry, concluded that the amount was legitimate and did not find it necessary to take any further action with regard to the said amount and thus, the amount was returned to Malani on December 31, 2016.

Notably, the Central government by virtue of a notification issued on November 8, 2016 had demonetised the Rs 500 and Rs 1000 notes and the cut-off date to exchange the same was held to December 30, 2016. 

Since the authorities returned the amount a day after the cut-off date, Malani approached the RBI to exchange the said notes only to get no relief. The RBI cited the provisions of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 read with the Notification issued on November 12, 2017, which laid certain conditions and limited circumstances for exchange of the notes after the cut-off date. He therefore, petitioned the High Court.

After noting the facts of the case, the judges opined that Malani was not at fault as nothing was under his control.

"The amount in question was seized by the authorities prior to the cut-off date and remained in their custody till after the expiry of the prescribed period. The petitioner, therefore, had no control over the said amount during the relevant period. The requirement of compliance with the conditions prescribed under the Rules cannot be applied in a rigid manner where such compliance itself was rendered impossible due to the act of the authorities. The petitioner cannot be placed in a disadvantageous position on account of an act for which he is not responsible," the judges observed. 

The bench therefore, granted a week's time to Malani to approach the RBI seeking exchange of the notes in the prescribed manner. The RBI has been further directed to exchange the demonetised notes and return the equivalent amount (i.e. Rs 2 lakhs) within a period of eight weeks. 

Opinion On RBI's Failure Modified

Interestingly, the very matter was previously heard by another bench of Justice Anil Pansare sitting with Justice Mehta, which on April 1, 2026 passed an order stating that it was because of the 'failure' of the RBI that the issue in the present case arose as neither law enforcement agencies nor the persons like the petitioner were aware as to what they were supposed to do in case of seizure of notes, which were demonetised. The said bench had had noted that the RBI issued a circular only in November 2017 directing the Law Enforcement Agencies to deposit the amount, so seized, with the RBI on or before December 31, 2016.

In that order, the bench had then observed, "Thus, it appears that neither the petitioner nor the Law Enforcement Agency is responsible for the situation that arose in the intervening period. In such circumstances, it was the duty of the RBI to extend necessary assistance to the petitioner, which it has failed to extend."

While making the above observation, the bench had also granted time for the RBI to file its affidavit. 

Thus, in the new order pronounced on April 22 (today) the bench of Justices Joshi-Phalke and Mehta, 'modified' the 'prima facie' view voiced by Justice Pansare's bench. 

The judgment authored by Justice Mehta states, "It may be noted that, at an earlier stage of the proceedings, this Court had prima facie observed that the petitioner's grievance appeared to have arisen on account of failure on the part of the Reserve Bank of India to extend necessary assistance. However, the RBI has tendered affidavit-in-reply. In view of the said clarifications, the earlier prima facie observation stands modified accordingly and is not treated as a final expression and the case will be decided on the merits."

Appearance:

Advocate CN Deshpande appeared for the Petitioner. 

Advocate RM Bhangde represented the RBI.

Advocate AJ Gilda represented the Central Government.

Assistant Government Pleader SS Hulke represented the State.

Case Title: Girish Rameshchandra Malani vs Reserve Bank of India (Writ Petition 647 of 2018)

Citation: 2026 LiveLaw (Bom) 204

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