Rs 2,000 Note Withdrawal Within RBI's Power, Part Of Currency Management System: Delhi HC

The Delhi High Court said the RBI has only instructed the banks not to issue its customer's notes of Rs 2,000 denomination to ensure they are not in circulation though they remain legal tender

The Delhi High Court on Monday dismissed a public interest litigation (PIL) challenging the RBI's withdrawal of Rs 2,000 denomination banknotes from circulation saying that it is well within the central bank's power to issue the notification, which is only a part of the currency management system, and the notification is merely a direction to banks to not issue Rs 2,000 currency notes. 

The Delhi high court, as per PTI, said the Reserve Bank of India (RBI) has only instructed the banks not to issue its customer's notes of Rs 2,000 denomination to ensure they are not in circulation though they remain legal tender.

“The fact that the permission to exchange Rs 2,000 notes is available only till September 23, 2023 does not mean that RBI has issued a direction that from September 23, Rs 2,000 banknotes will be demonetised. The RBI has, therefore, not exceeded the powers conferred to it under the RBI Act or has violated the Banking Regulation Act, 1949,” a bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said, as per the order which was passed on Monday, however, only became available in the public domain on Tuesday. 

The high court decision came in a PIL filed by Rajneesh Bhaskar Gupta, which said that the RBI does not have the authority to withdraw Rs 2,000 currency notes from circulation. It claimed that such power only remains with the central government. The petitioner argued that RBI does not possess the autonomous authority to control the non-issuance or discontinuation of banknotes of any denomination. According to the petitioner, this power is exclusively vested in the central government under section 24 (2) of the RBI Act, 1934.

In response, the RBI countered the plea, stating that the withdrawal of Rs 2,000 notes from circulation is simply a "currency management exercise" and falls under the purview of economic policy.

“The circular is not a direction to print or discontinue to print Rs 2,000 banknotes which is the domain of the Central Government and courts generally do not interfere in policy matters unless the decision is completely arbitrary. In view of the above, the writ petition is dismissed,” the court order said, as per the report. 

The high court said that as long as the Rs 2,000 banknotes remain legal tender, it cannot be considered as a demonetisation of these banknotes when the RBI instructs banks not to issue them from their currency chests or requests the public to deposit them in their accounts without any restrictions. The court clarified that the RBI's decision is solely aimed at managing the currency notes currently in circulation.

The Delhi high court has previously rejected a plea filed by lawyer Ashwini Kumar Upadhya, which argued that the notifications issued by the RBI and SBI allowing the exchange of Rs 2,000 banknotes without identity proof were arbitrary and violated laws aimed at combating corruption. The HC, however, rejected the argument saying that the decision was made to minimise inconvenience to citizens and that it cannot act as an appellate authority over policy decisions.

The high court maintained that the government's decision cannot be considered perverse, arbitrary, or supportive of black money, money laundering, profiteering, or corruption. However, as per the petitioner of the case, the RBI notification provided no explanation other than the "clean note policy" for the "significant arbitrary decision" to withdraw Rs 2,000 banknotes from circulation without considering the potential impact on the general public.

On May 19, the RBI announced the withdrawal of Rs 2,000 currency notes from circulation. The existing Rs 2,000 notes could be either deposited in bank accounts or exchanged until September 30. The central bank said that the Rs 2,000 denomination banknotes would remain legal tender. 

To ensure operational convenience and prevent disruption of regular banking activities, the RBI specified that the exchange of Rs 2,000 notes for banknotes of other denominations could be conducted up to a limit of Rs 20,000 at a time, starting from May 23, at any bank.

Later, State Bank of India,  in a communique to the chief general managers of its local head offices, said that the exchange facility, up to a limit of Rs 20,000 at a time, would be available without the requirement of a requisition slip or identity proof.