Rajneesh Bhaskar Gupta v. Reserve Bank of India & Anr

6. Please acknowledge receipt. Yours faithfully (Suman Ray) Chief General Manager in-Charge Encl: As above”

3. The RBI has also brought out a press release of even date and the same reads as under: “The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of RBI Act, 1934, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. The objective of introducing ₹2000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of ₹2000 banknotes was stopped in 2018-19.

2. About 89% of the ₹2000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. The total value of these banknotes in circulation has declined from ₹6.73 lakh crore at its peak as on March 31, 2018 (37.3% of Notes in Circulation) to ₹3.62 lakh crore constituting only 10.8% of Notes in Circulation on March 31, 2023. It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public.

3. In view of the above, and in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw the ₹2000 denomination banknotes from circulation.

4. The banknotes in ₹2000 denomination will continue to be legal tender.

5. It may be noted that RBI had undertaken a similar withdrawal of notes from circulation in 2013-2014.

6. Accordingly, members of the public may deposit ₹2000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch. Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions.

7. In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of ₹2000 banknotes into banknotes of other denominations can be made upto a limit of ₹20,000/- at a time at any bank starting from May 23, 2023.

8. To complete the exercise in a time-bound manner and to provide adequate time to the members of public, all banks shall provide deposit and/or exchange facility for ₹2000 banknotes until September 30, 2023. Separate guidelines have been issued to the banks.

9. The facility for exchange of ₹2000 banknotes upto the limit of ₹20,000/- at a time shall also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments[1] from May 23, 2023.

10. The Reserve Bank of India has advised banks to stop issuing ₹2000 denomination banknotes with immediate effect.

11. Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange the ₹2000 banknotes. A document on Frequently Asked Questions (FAQs) in the matter has been hosted on the RBI website for information and convenience of the public. (Yogesh Dayal) Chief General Manager Press Release: 2023-2024/257”

4. Along with the press note, the RBI has also issued Frequently Asked Questions (FAQ) regarding the press note and the same reads as under:

2. What is Clean Note Policy? It is a policy adopted by RBI to ensure availability of good quality banknotes to the members of public.

3. Does the legal tender status of ₹2000 banknotes remain? Yes. The ₹2000 banknote will continue to maintain its legal tender status.

4. Can ₹2000 banknotes be used for normal transactions? Yes. Members of the public can continue to use ₹2000 banknotes for their transactions and also receive them in payment. However, they are encouraged to deposit and/or exchange these banknotes on or before September 30, 2023.

5. What should the public do with the ₹2000 denomination banknotes held by them? Members of the public may approach bank branches for deposit and/or exchange of ₹2000 banknotes held by them. The facility for deposit into accounts and exchange for ₹2000 banknotes will be available at all banks until September 30, 2023. The facility for exchange will be available also at the 19 Regional Offices (ROs) of RBI having Issue Departments[1] until September 30, 2023.

6. Is there a limit on deposit of ₹2000 banknotes into a bank account? Deposit into bank accounts can be made without restrictions subject to compliance with extant Know Your Customer (KYC) norms and other applicable statutory / regulatory requirements.

7. Is there an operational limit on the amount of ₹2000 banknotes that can be exchanged? Members of the public can exchange ₹2000 banknotes upto to a limit of ₹20,000/- at a time.

8. Can ₹2000 banknotes be exchanged through Business Correspondents (BCs)? Yes, exchange of ₹2000 banknotes can be made through BCs upto a limit of ₹4000/- per day for an account holder.

9. From which date will the exchange facility be available? To give time to the banks to make preparatory arrangements, members of the public are requested to approach the bank branches or ROs of RBI from May 23, 2023 for availing exchange facility.

10. Is it necessary to be a customer of the bank to exchange ₹2000 banknotes from its branches? No. A non-account holder also can exchange ₹2000 banknotes up to a limit of ₹20,000/- at a time at any bank branch.

11. What if someone needs more than ₹20,000/- cash for business or other purposes? Deposit into accounts can be made without restrictions. The ₹2000 banknotes can be deposited into bank accounts and cash requirements can be drawn thereafter, against these deposits.

12. Is there any fee to be paid for the exchange facility? No. The exchange facility shall be provided free of cost.

13. Will there be special arrangements for senior citizens, persons with disabilities, etc. for exchange and deposit? Banks have been instructed to make arrangements to reduce inconvenience to the senior citizens, persons with disabilities, etc., seeking to exchange/deposit ₹2000 banknotes.

14. What will happen if one cannot deposit / exchange ₹2000 banknote immediately? To make the entire process smooth and convenient for the public, a period of over four months has been given for deposit and/or exchange of ₹2000 banknotes. Members of the public, are therefore, encouraged to avail this facility at their convenience within the allotted time.

15. What will happen if a bank refuses to exchange / accept deposit of ₹2000 banknote? For redress of grievance in case of deficiency of service, the complainant / aggrieved customer may first approach the concerned bank. If the bank does not respond within a period of 30 days after lodging of the complaint or if the complainant is not satisfied with the response/resolution given by the bank, the complainant can lodge the complaint under the Reserve Bank - Integrated Ombudsman Scheme (RB-IOS), 2021 at the Complaint Management System portal of RBI (cms.rbi.org.in).”

5. Mr. Sandeep P Agrawal, learned Senior Counsel appearing for the Petitioner, contends that the Notification in question has been purportedly issued in pursuance to the clean note policy of the RBI but is actually contrary to the purpose for which the clean note policy has been framed by the RBI. It is contended that the RBI does not have the power to issue any directions regarding discontinuance of banknotes which the Notification in question purports to do. It is the contention of the learned Senior Counsel for the Petitioner that by way of the Notification in question, the RBI has withdrawn the circulation of Rs.2000 denomination notes, which it cannot. It is contended that the power to issue banknotes or to withdraw the same is within the domain of the Central Government and the RBI does not have the power to issue any such directions. He states that under Section 27 of the Reserve Bank of India Act, 1934 (hereinafter referred to as „the RBI Act‟), a direction from the RBI not to re-issue banknotes can only be given for such notes which are torn, defaced or excessively spoiled. He placed reliance on Dharani Sugars and Chemicals Ltd. v. Union of India, (2019) 5 SCC 480, contending that Court must strike down the directions issued by RBI for which it does not have any power. In Dharani Sugars and Chemicals Ltd. v. Union of India, (2019) 5 SCC 480, the Apex Court has held as under:

6. Per contra, Mr. Parag Tripathi, learned Senior Counsel appearing for the RBI, contends that another Writ Petition, being W.P.(C) 7129/2023, had been filed against the Notification in question. He states that the said Writ Petition was dismissed by an Order dated 29.05.2023 and repeated public interest litigations cannot be filed on the same subject. Mr. Tripathi relies on the Judgment of the Apex Court in State of Karnataka v. All India Manufacturers Organisation, (2006) 4 SCC 683, to substantiate his contention. He further states that the notification in question is regarding the currency and currency management system is within the domain of the RBI. He relies on the Judgment of the Apex Court in Vivek Narayan Sharma (Demonetisation Case-5 J.) v. Union of India, (2023) 3 SCC 1, to contend that the RBI Act was enacted to regulate the issue of banknotes and that it was constituted for the purpose of taking over the management of currency from the Central Government. He further submits that the decision of the RBI to withdraw the circulation of Rs.2000 note is a part of the currency management system which is the domain of the RBI. He submits that the present decision is not one of demonetization of currency note of Rs.2000 denomination as it continues to be legal tender. He states that the purpose of the circular is only for the purpose of exchange of Rs.2000 denomination notes. Mr. Tripathi draws the attention of this Court to the Notification in question and submits that Rs.2000 denomination notes continues to be a legal tender. He states that Section 35A of the Banking Regulation Act, 1949 gives power to the RBI to give such directions. He further states that the direction to the Banks not to issue Rs.2000 denomination notes does not mean discontinuance of the said notes. He states that the term ‘issue‟ in the notification has to be understood in the context that a direction has been issued to the Banks not to circulate Rs.2000 denomination notes to its customers and the same is a part of the currency management system of the RBI.

7. Learned Senior Counsel appearing for the Petitioner in rejoinder submits that W.P.(C) 7129/2023 was filed on entirely different context. He states that the challenge in that Writ Petition was to the policy by which exchange of Rs.2000 denomination notes was permitted without obtaining any requisite slip and identity proof and it did not deal with the power of the RBI to issue directions for discontinuance of bank notes of Rs.2000 denomination. He reiterates that the direction to the banks not to issue notes of Rs.2000 denomination is in reality a direction to discontinue notes which is not within the domain of the RBI.

8. Heard learned Counsels for the parties and perused the material on record.

9. A perusal of the Notification in question gives the background as to why the said Notification was issued. It is stated in the said Notification that Rs.2000 denomination notes were introduced in November 2016 primarily to meet the immediate currency requirement of the economy after demonetization of Rs.500 and Rs.1000 banknotes which were in circulation at that time. Notes of Rs.500 and Rs.1000 denomination ceased to be legal tender thereupon. The Notification further states that the objective of introducing Rs.2000 bank notes has been achieved and the bank notes of other denomination are available in adequate quantity. The Notification also notes that printing of Rs.2000 bank notes was stopped in 2018-19 and a majority of the Rs.2000 denomination notes were issued prior to March 2017 and have completed their estimated lifespan and are not commonly used for transactions anymore. It is in this background that the Notification dated 19.05.2023 was issued.

10. A perusal of the Notification in question shows that the RBI has not taken any decision for discontinuance of Rs.2000 bank notes. It is not a decision to demonetize Rs.2000 bank notes and this circular is only a direction to the banks to desist from issuing Rs.2000 denomination notes to its customers and to ensure that no withdrawal of Rs.2000 denomination notes is allowed from the banks holding currency chests.

11. As contended by Mr. Tripathi this decision is a part of the currency management system which is in the domain of the RBI. The RBI Act was brought in to regulate the issue of bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency any credit system of the country to its advantage. The contention of the learned Counsel for the Petitioner that a direction from the RBI not to re-issue bank notes can only be given for such notes which are torn, defaced or excessively spoiled is not applicable in the facts of the present case. As stated above, the Notification in question is a direction to the banks not to issue notes of Rs.2000 denomination to its customers and information of the public to exchange the notes of Rs.2000 denomination to currency notes of other denominations. The Notification in question and the press release state in no uncertain terms that the bank notes of Rs.2000 denomination will continue to be a legal tender. The press release only states that the members of the public may deposit Rs.2000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch. The press release further states that deposit of Rs.2000 bank notes into bank accounts can be made in the usual manner, that is, without restrictions subject to instructions and other applicable statutory provisions. It is stated that in order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of Rs.2000 banknotes into banknotes of other denominations can be made up to a limit of Rs.20,000/- at a time at any bank starting from 23.05.2023.

12. The contention of Mr. Tripathi that the Judgment dated 29.05.2023, passed by this Court in W.P.(C) 7129/2023, titled as Ashwini Kumar Upadhyay v. Union of India & Ors. will operate as res judicata cannot be accepted as has rightly been pointed out by the learned Counsel for the Petitioner that the said Writ Petition was filed challenging the notification which permits exchange of Rs.2000 notes without obtaining any requisition slip or without any identity proof. The judgment passed by the Apex Court in State of Karnataka (supra) is not applicable to the present case because in that case a second PIL had been filed on the very same grounds seeking the same relief which is not the case in the present case.

13. Reliance placed by the learned Senior Counsel appearing for the Petitioner on Dharani Sugars (supra) is misplaced and is not applicable to the present case. In that case challenge was made to the constitutional validity of Sections 35-AA and 35-AB of the Banking Regulation Act, 1949 which was introduced by way of amendment with effect from 4-5-2017 and the challenge therein was to a Circular issued by the RBI on 12-2-2018 promulgating a revised framework for resolution of stressed assets. In the present case the question is whether the Notification in question, which has been issued by the RBI to the banks directing them not to issue Rs.2000 banknotes to its customers, as a part of its currency management system, is valid or not and could the RBI issue such circulars.

14. Till the time Rs.2000 banknotes continues to be a legal tender, it cannot be said that the directions issued by the RBI to various banks not to issue Rs.2000 banknotes from its currency chests or a request to the public to deposit Rs.2000 banknotes in their accounts in as much quantity without their being any restriction, is a decision to demonetize Rs.2000 banknotes. The said decision by the RBI is only to manage the currency notes which are under circulation.

15. The Apex Court in Vivek Narayan Sharma (supra) has analysed the statutory scheme of the RBI Act and has observed as under:

16. As pointed out by the Apex Court in paragraph No.104 of the abovementioned judgment, RBI has the sole right to issue bank notes in India. The RBI has, therefore, the right to advise banks not to circulate notes of a particular denomination for the purpose of currency management. Undoubtedly, the Apex Court has held that it is only the Central Government, on the recommendation of the Central Board, can direct for issuance or discontinuance of banknotes. The term ‘non-issue’ occurring in Section 24(2) of the RBI Act is the issuance of notes from the currency note printing presses where notes are printed and are then circulated to the banks. The RBI has only instructed the banks not to issue to its customers notes of Rs.2000 denomination in order to ensure that Rs.2000 banknotes are not in circulation though they remain to be legal tender. The fact that the permission to exchange Rs.2000 notes is available only till 23.09.2023 does not mean that RBI has issued a direction that from 23.09.2023 Rs.2000 banknotes will be demonetized. The RBI has, therefore, not exceeded the powers conferred to it under the RBI Act or has violated the Banking Regulation Act, 1949.

17. The scope of judicial interference in matters relating to economic policy has been settled in a number of judgments passed by the Apex Court. The Apex Court in Prag Ice & Oil Mills v. Union of India, (1978) 3 SCC 459, has held as under:

18. In R.K. Garg v. Union of India, (1981) 4 SCC 675, the Constitution Bench of the Apex Court has observed as under:

19. Again, the Constitution Bench of the Apex Court in Shri Sitaram Sugar Co. Ltd. v. Union of India, (1990) 3 SCC 223, has observed as under:

20. Similarly, the Apex Court in BALCO Employees' Union (Regd.) v. Union of India, (2002) 2 SCC 333 has observed as under:

21. The Apex Court in Directorate of Film Festivals v. Gaurav Ashwin Jain, (2007) 4 SCC 737 has observed as under:

22. In Small Scale Industrial Manufactures Assn. v. Union of India, (2021) 8 SCC 511, the Apex Court has observed as under:

23. As stated earlier, the RBI was well within its power to issue the Notification in question which is only a part of the currency management system. The Notification in question is only a direction to the banks not to issue Rs.2000 banknotes which is well within the right of the RBI. The Circular in question is not a direction to print or discontinue to print Rs.2000 banknotes which is the domain of the Central Government and Courts generally do not interfere in policy matters unless the decision is completely arbitrary.

24. In view of the above, the Writ Petition is dismissed, along with the pending application(s), if any.

SATISH CHANDRA SHARMA, CJ SUBRAMONIUM PRASAD, J JULY 03, 2023