Nearly nine years after the 2016 demonetisation exercise, the Rajasthan High Court has firmly refused to allow the exchange or deposit of old ₹500 and ₹1,000 currency notes, declaring them completely valueless. The ruling came in connection with petitions involving demonetised currency worth ₹3.5 crore held by cooperative societies in Rajasthan.
In a reportable judgment delivered on December 19, the Jodhpur Bench comprising Justice Dr. Pushpendra Singh Bhati and Justice Anurup Singhi dismissed seven writ petitions seeking permission to exchange or deposit demonetised notes.
Petitions Filed by Cooperative Societies and PACS
The petitions were filed by Dudhu Gram Seva Cooperative Society, Barmer, along with six other Primary Agricultural Credit Cooperative Societies (PACS) operating through District Central Cooperative Banks (DCCBs). Collectively, these societies claimed possession of demonetised currency amounting to ₹3.5 crore.
The Dudhu Cooperative alone stated that it had ₹16.17 lakh in old ₹500 and ₹1,000 notes at the time demonetisation was announced on November 8, 2016.
Challenge to RBI Circulars of November 2016
The petitioners challenged RBI circulars dated November 14 and 17, 2016, which prohibited District Central Cooperative Banks (DCCBs) from accepting demonetised currency. They argued that:
- The funds belonged to farmers and rural residents
- The money was collected through legitimate transactions
- Other similarly placed societies were allegedly allowed to deposit old notes
- The denial was discriminatory and violative of Section 26(2) of the RBI Act, 1934
Alternatively, the societies sought a direction for NABARD to examine and legally dispose of the demonetised notes.
RBI and Centre Defend Policy Decision
Opposing the petitions, lawyers representing the Union Government and the Reserve Bank of India (RBI) submitted that the restrictions were imposed to prevent the conversion of unaccounted money into white money during demonetisation.
They pointed out that:
- DCCBs and PACS have a structure different from commercial banks
- There were serious deficiencies in audit systems and technical preparedness
- Allowing deposits through cooperative banks posed risks of misuse
- RBI’s decision was taken in larger public interest
The counsels emphasized that courts should exercise judicial restraint in matters involving economic and monetary policy.
High Court Relies on Supreme Court’s Demonetisation Verdict
The Rajasthan High Court relied heavily on the Constitution Bench judgment of the Supreme Court in Vivek Narayan Sharma vs Union of India (January 2, 2023), which upheld the validity of demonetisation.
The court reiterated that judicial interference in economic policy is permissible only if the decision is arbitrary, unconstitutional, or irrational—conditions not met in the present case.
Old Notes Cannot Be Exchanged or Deposited: Court
The Bench categorically held that:
“Mere difficulty or inconvenience, no matter how real it may be, cannot be the basis for declaring regulatory measures taken to fulfill any legitimate economic objective as illegal.”
The court ruled that old ₹500 and ₹1,000 notes can neither be exchanged nor deposited, rendering them legally worthless.
It further clarified that NABARD has only a supervisory role and does not have the authority to override binding directives issued by the RBI.
All Petitions Dismissed
Based on these findings, the High Court dismissed petitions filed by:
- Dudhu Gram Seva Cooperative Society
- Bamanor
- Bisarnia
- Khudala
- Purava
- Bhimthal
- Mangta Gram Seva Cooperative Societies
The ruling puts a final legal seal on the fate of demonetised currency still held by cooperative institutions years after the 2016 exercise.