Synopsis: The Supreme Court has entertained a petition from a company alleging that Axis Bank refused to accept Rs. 3.2 crore in demonetised notes, violating RBI guidelines. The RBI, represented by senior advocate Jaideep Gupta, stated that Axis Bank must explain its refusal. Despite a notification allowing the deposition of demonetised notes until December 30, 2016, and the company being KYC compliant, the bank allegedly did not accept the notes.
The Reserve Bank of India (RBI), represented by senior advocate Jaideep Gupta, stated that Axis Bank must explain its refusal to accept demonetised notes in December 2016.
The November 8, 2016, notification allowed the deposition of demonetised currency notes in banks until December 30, 2016.
A year and a half after validating the Union government's decision to demonetise Rs. 1,000 and Rs. 500 notes, the Supreme Court has accepted a petition from a company alleging that Axis Bank refused to accept Rs. 3.2 crore in demonetised notes, violating RBI guidelines.
Advocate Nalin Kohli, representing the company, argued before Justices B R Gavai and K V Viswanathan that the issue was not the demonetisation decision but the bank's arbitrary refusal to accept the deposit despite the company being KYC compliant.
RBI, through senior advocate Jaideep Gupta, reiterated that Axis Bank must provide an explanation for its actions in December 2016.
The November 8, 2016, notification had allowed the deposition of demonetised notes until December 30, 2016.
A subsequent notification on December 31, 2016, made holding demonetised notes after December 30 an offense subject to penalties.
Kohli argued that the bank was obligated to accept the demonetised notes from the KYC-compliant company and that the RBI was responsible for ensuring the company received valid currency in exchange, as each demonetised note bore the RBI governor's promise to pay the specified amount.
The bench issued a fresh notice to Axis Bank, requiring a response within three weeks.
The RBI counsel indicated that the court must hear the bank's reasons for refusing the notes.
On January 2, 2023, a bench of Justices S Abdul Nazeer, Gavai, A S Bopanna, V Ramasubramanian, and B V Nagarathna, by a majority of four to one, upheld the November 8, 2016, demonetisation decision. Justice Nagarathna dissented.
In conclusion, the Supreme Court's decision to entertain the petition highlights the ongoing legal complexities surrounding the demonetisation process.
Axis Bank is now required to justify its refusal to accept demonetised notes, a move that raises questions about adherence to RBI guidelines and the responsibilities of financial institutions.
This case underscores the importance of transparent banking practices and regulatory compliance, as well as the judiciary's role in addressing grievances related to significant economic policies.
The outcome of this case could set a precedent for how similar disputes are resolved in the future.
