Court rules RBI's measures as consistent, legal, and non-discriminatory, dismissing petitions challenging demonetisation-related restrictions.
In a significant ruling, the Rajasthan High Court has upheld the Reserve Bank of India's (RBI) circulars that restricted District Central Co-operative Banks (DCCBs) and Primary Agricultural Credit Societies (PACS) from accepting or exchanging specified bank notes during the 2016 demonetisation exercise. The decision, delivered by the bench comprising Justices Dr. Pushpendra Singh Bhati and Anuroop Singhi, dismissed the batch of writ petitions filed by Dudhu Gram Seva Shakari Samiti Ltd. and others challenging these circulars.
The petitions contended that the RBI's circulars dated 14th and 17th November 2016, which prevented DCCBs and PACS from dealing with demonetised notes, were arbitrary and discriminatory, arguing that these measures violated the petitioners' fundamental rights under Articles 14, 19(1)(g), and 300-A of the Constitution of India. The petitioners claimed that the restrictions led to financial hardships, as they were unable to deposit Rs. 16,17,500 in demonetised currency held in the ordinary course of their operations.
However, the court found that the RBI's actions were within its statutory powers under the Reserve Bank of India Act, 1934, and were consistent with the government's demonetisation notification dated 8th November 2016. The bench emphasized that these measures were necessary to address vulnerabilities related to audit mechanisms, technological preparedness, and financial integrity during the unprecedented monetary transition.
The court noted that the notification did not confer an absolute right to all institutions to deposit or exchange demonetised notes and that the RBI's regulatory authority allowed it to issue circulars to operationalize the demonetisation scheme effectively. The restriction on DCCBs and PACS was based on intelligible differentia and rational nexus, intended to prevent misuse and ensure financial stability.
Furthermore, the court highlighted the high degree of judicial deference accorded to economic and monetary policy decisions, stressing that such decisions should not be interfered with unless proven to be palpably arbitrary or unconstitutional. The court stated that the circulars did not amount to hostile discrimination and were uniformly applicable to all similar entities, dismissing the petitions as devoid of merit.
This judgment reinforces the legality of the RBI's regulatory framework during the demonetisation period and underscores the judiciary's stance on deferring to policy decisions in extraordinary economic circumstances.
Bottom Line:
Demonetisation - Restrictions on District Central Co-operative Banks and Primary Agricultural Credit Societies for accepting or exchanging specified bank notes upheld - Circulars issued by RBI in furtherance of demonetisation policy not arbitrary, illegal or violative of constitutional provisions.
Statutory provision(s): Reserve Bank of India Act, 1934 Section 26(2), Constitution of India, 1950 Articles 14, 19(1)(g), 300-A
Dudhu Gram Seva Shakari Samiti Ltd. v. Union of India, (Rajasthan)(DB) : Law Finder Doc Id # 2824827
