RBI ‘within its power’ to withdraw Rs 2,000 notes, decision ‘part of currency management system’: Delhi HC

Referring to various decisions of the apex court which have settled the “scope of judicial interference in matters relating to economic policy”, the bench while dismissing the plea observed that the RBI is “well within its power to issue the notification in question which is only a part of the currency management system”.

On the petitioner’s contention 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”, the bench said the same is not applicable in the present case.
The HC said that the May 19 notification is a direction to banks not to issue notes of Rs 2,000 denomination to its customers and information of the public to exchange notes of Rs 2,000 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 2,000 denomination will continue to be a legal tender. The press release only states that the members of the public may deposit Rs 2,000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch….” the high court noted.

The bench further observed that till the time Rs 2,000 bank notes continue to be a legal tender, it can’t be said that the directions issued by the RBI is a decision to “demonetise Rs 2,000 banknotes” and that the decision is taken to only “manage the currency notes which are under circulation”.

“The RBI has only instructed the banks not to issue to its customers notes of Rs 2,000 denomination in order to ensure that Rs 2,000 banknotes are not in circulation though they remain to be legal tender. The fact that the permission to exchange Rs 2,000 notes is available only till 23.09.2023 does not mean that RBI has issued a direction that from 23.09.2023 Rs 2,000 banknotes will be demonetised,” the HC said, adding that the body had not exceeded its powers conferred under the RBI Act or has violated the Banking Regulation Act.