Civil courts have the jurisdiction to determine the status of currency notes; prescribed officers' discretion is not absolute and must conform to statutory definitions.

1. This revision application has been filed under the provisions of S.25 of the Provincial Small Cause Courts Act and is directed against the decree dated 28th of May, 1956, passed by Sri P. C. Rastogi, Judge Small Cause Court, Chandausi, decreeing a suit filed by the opposite party Sri Ram Kumar Varshney for the recovery of a sum of Rs.193/- against the applicant the Reserve Bank of India on the finding that the Currency Officer was not justified in refusing to make payment in respect of certain currency notes presented to him on the allegation that they were mutilated or imperfect.

2. I have heard Mr. T. N. Sapru for the Reserve Bank of India and Mr. D. Sanyal for Sri Ram Kumar Varshney the plaintiff opposite party. Mr. Sapru has made the following three submissions before me.
(1) Whether or not payment should be made in connection with a note presented at the currency office is in the sole discretion of the prescribed officer and the matter is not justiciable;
(2) The currency notes presented by the opposite party were mutilated or imperfect within the definition of those expressions in the Reserve Bank of India Act and the rules framed thereunder; and
(3) The learned Judge failed to consider the question whether or not the notes presented for enactment or payment were imperfect notes.

3. I will take the three submissions seriatim.

4. Before I examine the correctness or otherwise of the first submission it appears to me necessary to give in brief the history of paper currency legislation in India. Up to the year 1861 the three Presidency Banks i.e., of Bengal, Bombay and Madras under the Acts of 1809, 1840 and 1843 used to issue currency notes. A few other private Banks were also issuing notes but neither the notes issued by the Presidency Banks of Bengal, Bombay and Madras nor by private banks were legal tenders. On March 1, 1862 the Paper Currency Department of the Government of India was established in exercise of the authority conferred by Act No. 19 of 1861 and with effect from that date all the banks were prohibited from issuing notes payable on demand. By Act No. 20 of 1882 paper currency was extended to Burma in that year. On the requisition of the Comptroller General, notes could also be issued against gold bullion and gold coin which were legal tenders in that circle only but from 1903 onwards paper currency was gradually universalised. In that year five rupee notes were made universal legal tender except in Burma. This restriction was removed in 1909. Notes of the denominations of Rs.10 and Rs.50 were universalised in 1910, of Rs.100 in 1911 and of Rs.500 and Rs.1,000 in 1931. Up to 1905 the Government securities in the Paper Currency Reserves consisted only of the rupee security. By means of the 1905 Act the securities of United Kingdom and Ireland were also included. With the foundation of the Reserve Bank of India on 1st of April, 1935, the sole right to issue bank notes was conferred upon that bank under S.22 of the Reserve Bank of India Act , 1934. Thenceforward the Reserve Bank commenced issuing its own notes. The high denomination notes of Rs.1,000, Rs.5,000 and Rs.10,000 were introduced on 1st of April, 1954. In 1956 the was amended and the State was equipped with larger reserves.

5. That the notes presented at the currency office for payment in this case were legal tender is a matter of admission between the parties. The question for consideration is whether the liability for the acceptance of a legal tender can be repudiated by the currency office. Mr. Sapru has placed reliance upon the provision of S.28 of the Reserve Bank of India Act which