Pilgrim's Cash Saved: Bombay HC Orders RBI to Swap Seized Demonetised Notes

In a relief to a Maharashtra businessman caught in the 2016 demonetisation dragnet, the Bombay High Court Nagpur Bench has directed the Reserve Bank of India (RBI) to accept and exchange ₹2 lakh in demonetised ₹500 notes. The division bench of Justices Urmila Joshi-Phalke and Nivedita P. Mehta ruled on April 22, 2026, that Girish Rameshchandra Malani cannot be penalised for the police's delay in returning his legitimate cash, seized just weeks before the deposit deadline.

As reported in contemporary coverage, the court emphasised preventing injustice from procedural lapses by authorities, marking another win against rigid enforcement of demonetisation rules.

Road to Renuka Devi: The Unlucky Interception

On December 1, 2016, Malani was en route to the Renuka Devi Temple in Mahur, carrying ₹2 lakh in 400 ₹500 notes—perfectly legal cash, as later cleared by Income Tax authorities. Amid municipal elections, police at Keroli Naka intercepted his vehicle, seized the cash as a precaution, and deposited it at Mahur Police Station. The seizure was intimated to tax officials, who found no issues.

The cash was returned on December 31, 2016—one day after the December 30 deadline for depositing specified bank notes (SBNs), as per the November 8, 2016 notification demonetising ₹500 and ₹1,000 notes. The Specified Bank Notes (Cessation of Liabilities) Act, 2017, then barred further deposits except under strict conditions.

Malani approached RBI Nagpur in January 2017 for exchange, citing the seizure, but was rebuffed. Repeated pleas, including references to a May 12, 2017 Ministry of Finance notification allowing seized SBNs under conditions, went unheeded—prompting Writ Petition No. 647 of 2018.

The core questions: Can RBI refuse exchange of pre-deadline seized notes returned post-deadline? Does the petitioner's lack of fault override mandatory rule requirements like law enforcement noting serial numbers and court directions?

Petitioner's Plea: "Authorities' Delay Isn't My Crime"

Malani's counsel, C.N. Deshpande, argued the cash's legitimacy was undisputed, seized before the cutoff due to police action during his temple pilgrimage. The delay was "entirely beyond the control of the petitioner," depriving him of deposit opportunity.

He invoked the 2017 notification permitting tendering of pre-December 30 seized SBNs at RBI offices, subject to conditions. Citing precedents like Sunny s/o Ratansingh Mago (WP 507/2021), Kishor Ramesh Sohoni v. Union of India (2022 SCC OnLine Bom 629), and Ramesh Bapurao Potdar (WP 2926/2017), he stressed courts have directed exchanges where authorities held notes, shielding innocents from penalisation.

An affidavit with serial numbers was filed to meet tracing needs.

RBI's Stand: "Statute Trumps Sympathy"

RBI's counsel, R.M. Bhangde, countered via affidavit, insisting on strict compliance with the Specified Bank Notes (Deposit of Confiscated Notes) Rules, 2017. Rule 2 requires serial numbers noted by police and in court directions for seized SBNs.

No such records existed; Malani's affidavit didn't suffice as it wasn't police-authenticated. RBI cited Supreme Court's Vivek Narayan Sharma v. Union of India (2023) 3 SCC 1, affirming the 2017 Act as a "complete code" barring RBI from independent acceptance powers. Without compliance, refusal was lawful.

Parsing the Law: Equity Over Rigidity

The bench dissected the 2017 Act: Section 3 ended RBI's liability for SBNs, but Section 4(2) allowed credits for genuine non-deposit reasons post-verification. Rules demanded serial notations by enforcers and courts—absent here due to election-time seizure.

Yet, the court refused "rigid" application: "The requirement of compliance... cannot be applied... where such compliance itself was rendered impossible due to the act of the authorities." Malani's affidavit supplied serials, addressing Rule 2(a).

Precedents reinforced: In Potdar , Sunny , and Sohoni , courts granted relief for custodial delays. Vivek Sharma limited RBI discretion but didn't bar writ equity for no-fault holders.

The early interim order noted RBI's failure to assist, a "creation of the hostile treatment," though later clarified.

Key Observations

"The petitioner, therefore, had no control over the said amount during the relevant period... The petitioner cannot be placed in a disadvantageous position on account of an act for which he is not responsible."

"In view of the availability of such particulars [serial numbers], the objection... with regard to non-compliance... does not survive."

"Where the specified bank notes were seized prior to the prescribed date and were returned thereafter, the petitioner therein could not be denied the benefit of exchange merely on account of such circumstances."

Victory at the Vault: RBI Must Pay Up

Rule made absolute: Malani must tender the notes (serial details in his March 20, 2026 affidavit) to RBI within one week. RBI verifies and credits equivalent legal tender within eight weeks.

This nuanced ruling balances demonetisation's anti-black money intent with Article 226 equity, potentially aiding others with similar seizures. No costs ordered.

For Malani, pilgrimage cash turns to justice—nine years later.