[Cites 9, Cited by 0]
Rajasthan High Court - Jodhpur
Purava Gram Seva Sah. Smiti vs Union Of India And Ors on 19 December, 2025
Author: Pushpendra Singh Bhati
Bench: Pushpendra Singh Bhati
[2025:RJ-JD:54051-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 3331/2017
Dudhu Gram Seva Shakari Samiti Ltd. Through Its Manager
Vyavasthapak Deramaram Sharma S/o Chokha R, Village Dudhu,
Branch Dhorimanna, Dist. Barmer. Raj.
----Petitioner
Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai-400001.
3. The National Bank For Agriculture And Rural Development
Through Its Chief General Manager, Plot No.c-24, G-Block,
Bandra Kurla Complex, Bkc Road, Bandra East, Mumbai
Maharashtra-400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.-302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj..
6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj..
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Driector, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur-302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
Raj.- 344001.
----Respondents
Connected With
D.B. Civil Writ Petition No. 3272/2017
Bamnor Gram Seva Shakari Samiti Ltd., Through Its Manager
Vyvasthapak Thakra Ram S/o Teja Ram, Aged About 39 Years,
Village- Bamnor, Branch Dhorimanna, Dist. Barmer. Raj.
----Petitioner
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Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai- 400001.
3. The National Bank For Agriculture And Rural Development
Through Its Chief General Manager, Plot No. C-24, G-
Block, Bandra Kurla Complex, Bkc Road, Bandra East,
Mumbari Maharshtra- 400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.- 302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj..
6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj.
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Director, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur- 302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
Raj.-344001.
----Respondents
D.B. Civil Writ Petition No. 3273/2017
Bisarniya Gram Seva Shakari Ltd. Through Its Manager
Vyavasthapak Surta Ram S/o Gamda Ram, Village Bisarniya,
Branch Dhorimanna, Dist. Barmer. Raj.
----Petitioner
Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai-400001.
3. The National Bank For Agriculture And Rural Development
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Through Its Chief General Manager, Plot No.c-24, G-Block,
Bandra Kurla Complex, Bkc Road, Bandra East, Mumbai
Maharashtra-400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.-302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj..
6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj..
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Driector, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur-302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
Raj.- 344001.
----Respondents
D.B. Civil Writ Petition No. 3274/2017
Khudala Gram Seva Shakari Samiti Ltd., Through Its Manager
Vyvasthapak Taja Ram S/o Virdha Ram, Aged About 56 Years,
Village- Khudala, Branch Sindhari, Dist. Barmer. Raj.
----Petitioner
Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai- 400001.
3. The National Bank For Agriculture And Rural Development
Through Its Chief General Manager, Plot No. C-24, G-
Block, Bandra Kurla Complex, Bkc Road, Bandra East,
Mumbai Maharshtra- 400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.- 302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj..
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6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj..
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Director, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur- 302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
Raj.- 344001.
----Respondents
D.B. Civil Writ Petition No. 3276/2017
Purava Gram Seva Shakari Samiti Ltd., Through Its Manager
Vyvasthapak Gordhan Ram S/o Banka Ram Araniyali, Aged
About 58 Years, Village- Purava, Branch Dhorimanna, Dist.
Barmer Raj.
----Petitioner
Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai- 400001.
3. The National Bank For Agriculture And Rural Development
Through Its Chief General Manager, Plot No. C-24, G-
Block, Bandra Kurla Complex, Bkc Road, Bandra East,
Mumbari Maharshtra- 400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.- 302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj..
6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj..
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Director, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur- 302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
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Raj.- 344001.
----Respondents
D.B. Civil Writ Petition No. 3286/2017
Bhimthal Gram Seva Shakari Samiti Ltd. Through Its Manager
Vyvasthapak, Chaina Ram S/o Bhoma Ram, Aged About 29
Years, Village Bhimthal, Branch Dhorimanna, Dist. Barmer Raj.
----Petitioner
Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi.
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai-400001.
3. The National Bank For Agriculture And Rural Development
Through Its Chief General Manager, Plot No. C-24, G-
Block, Bandra Kurla Complex, Bkc Road, Bandra East,
Mumbai Maharashtra-400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.-302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj.
6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj.
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Director, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur-302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
Raj.-344001.
----Respondents
D.B. Civil Writ Petition No. 3328/2017
Mangta Gram Seva Shakari Samiti Ltd. Through Its Manager
Vyavasthapak Bhura Ram S/o Khema Ram, Village Mangta,
Branch Dhorimanna, Dist. Barmer. Raj.
----Petitioner
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Versus
1. The Union Of India Through The Principal Secretary To
The Ministry Of Finance Economic Affairs, Central
Secretariat, North Block, New Delhi.
2. The Reserve Bank Of India, Through Its Governor, Central
Office, 4Th Floor, Amar Building, Sir Pm Road, Pb No.
1379, Mumbai-400001.
3. The National Bank For Agriculture And Rural Development
Through Its Chief General Manager, Plot No.c-24, G-Block,
Bandra Kurla Complex, Bkc Road, Bandra East, Mumbai
Maharashtra-400051.
4. The Reserve Bank Of India Through Its Deputy General
Manager, Regional Office, Tonk Road, Rambagh, Jaipur
Raj.-302052.
5. The State Of Rajasthan, Through Its Secretary, Co-
Operative Department, Jaipur Raj..
6. The Co-Operative Department Through Its Registrar,
Nehru Sehkar Bhawan, Bhawani Singh Road, Jaipur Raj..
7. The Apex Central Co-Operative Bank Ltd. Through Its
Managing Driector, Dc-1, Opposite Nehru Balodyan, Tonk
Road, Jaipur-302015 Raj.
8. The Barmer Central Co-Operative Bank Ltd., Through Its
Managing Director, Head Office, Mahaveer Nagar, Barmer
Raj.- 344001.
----Respondents
For Petitioner(s) : Mr. A.K. Choudhary
For Respondent(s) : Mr. Sanjay Srivastava
Mr. Nimesh Suthar
HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI
HON'BLE MR. JUSTICE ANUROOP SINGHI
Judgment
1. Date of conclusion of arguments 07.10.2025
2. Date on which judgment was reserved 07.10.2025
3. Whether the full judgment or only the operative part is
pronounced: Full judgment
4. Date of pronouncement 19.12.2025
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Reportable
Per Dr. Pushpendra Singh Bhati, J:
1. At the outset, it is clarified that the instant D.B. Civil Writ
Petition No. 3331/2017 (Dudhu Gram Seva Sahakari Samiti
Ltd. vs. Union of India & Ors.) along with the connected D.B.
Civil Writ Petition Nos. 3272/2017, 3273/2017,
3274/2017, 3276/2017, 3286/2017 and 3328/2017 arise
out of identical facts and circumstances. The issues involved, the
challenge laid, and the reliefs claimed in all the writ petitions
being similar in nature, the same are being decided by this
common judgment. For the sake of convenience and to avoid
repetition D.B. Civil Writ Petition No. 3331/2017 (Dudhu
Gram Seva Sahakari Samiti Ltd. vs. Union of India & Ors.) is
taken as the lead case, and the decision rendered herein shall
govern the remaining connected matters as well.
1.1. The present D.B. Civil Writ Petition No. 3331/2017 has been
preferred claiming the following reliefs:
"It is, therefore, humbly and respectfully prayed that this
writ petition may kindly be allowed and by an appropriate
writ, order or direction:
a. The circulars dated 14/11/2016 and 17/11/2016
(Annexures-6 & 7), so far it prohibit the District Central
Co-operative Bank from accepting deposits of specified
Bank Notes i.e., Rs.500/- and Rs.1000/-, may kindly be
quashed and set aside after declaring it illegal and
ultravires of the Reserve Bank of India Act-1934, and it is
further prayed that, RBI may kindly be directed to accept
deposit of SBN of Rs.16,17,500/- available in the
petitioner society.
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b. Without prejudice to above prayer, it is further prayed
that if the Hon'ble Court comes to the conclusion that RBI
has not authorised the DCCB or PACS from accepting
specified bank notes vide the notification dated
08/11/2016 or circular dated 08/11/2016 then, it is
humbly prayed that the notification dated 08/11/2016
and the circular dated 08/11/2016 (Annexures-02 & 03)
may kindly be declared illegal and ultravires so far it not
included the District Central Co-operative Banks and
PACS for accepting deposit of specified Bank note of Rs.
500/- & 1000/-.
c. The respondent NABARD may kindly be directed to
scrutinise the SBN available in the petitioner-society and
it may kindly be further directed to make arrangement
for legal disposal of SBN available in the society so that
society may not face financial loss.
d. Any other relief, which this Hon'ble Court may deem fit
kindly be granted in favor of the petitioner and writ
petition may kindly be allowed with cost."
2. Brief and undisputed facts, as borne out from the record, are
that the petitioner is a Primary Agricultural Credit Co-operative
Society registered under the relevant Co-operative Societies Act
and functions at the village level within the three-tier co-operative
credit structure comprising Primary Agricultural Credit Societies,
District Central Co-operative Banks and the Apex Co-operative
Bank, with financial support and regulatory oversight by the
National Bank for Agriculture and Rural Development.
2.1. The record reflects that on 08.11.2016, the Ministry of
Finance, Department of Economic Affairs, Government of India
issued a notification under Section 26(2) of the Reserve Bank of
India Act, 1934, declaring specified bank notes of denominations
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of Rs.500/- and Rs.1000/- to cease to be legal tender with effect
from 09.11.2016, subject to the conditions stipulated therein.
2.2. It emerges from the pleadings that pursuant to the said
notification, the Reserve Bank of India issued certain circulars on
08.11.2016, followed by further communications dated
14.11.2016 and 17.11.2016, regulating the manner in which
specified bank notes could be accepted, deposited or exchanged
by various categories of banks, including co-operative banks.
2.3. According to the petitioner, as on 08.11.2016, the petitioner-
society was holding specified bank notes amounting to
Rs.16,17,500/-, comprising denominations of Rs.500/- and
Rs.1000/-, which had been received in the ordinary course of its
functioning as a Primary Agricultural Credit Society.
2.4. The material placed on record indicates that while District
Central Co-operative Banks were initially permitted to accept
deposits of specified bank notes, subsequent circulars issued by
the Reserve Bank of India restricted such acceptance, resulting in
the petitioner-society being unable to deposit the specified bank
notes held by it with the District Central Co-operative Bank.
2.5. The pleadings further disclose that the petitioner-society
addressed representations to the District Collector, the concerned
District Central Co-operative Bank, and other authorities seeking
permission for deposit or lawful disposal of the specified bank
notes held by it. However, no final resolution of the issue was
communicated to the petitioner-society.
2.6. It is in the aforesaid factual backdrop that the petitioner has
approached this Court by way of the present writ petition,
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questioning the validity of the circulars dated 14.11.2016 and
17.11.2016, and seeking appropriate directions with regard to
acceptance, scrutiny and disposal of the specified bank notes held
by the petitioner-society.
3. Learned counsel for the petitioner submitted that the
petitioner is a duly registered Primary Agricultural Credit Co-
operative Society functioning at the grass-root level under the
three-tier co-operative credit structure comprising PACS, District
Central Co-operative Banks and the Apex Co-operative Bank, with
financial linkage and regulatory supervision of the National Bank
for Agriculture and Rural Development. It is submitted that the
petitioner-society was, in the ordinary course of its statutory and
functional activities, holding specified bank notes as on
08.11.2016.
3.1. It was contended that the notification dated 08.11.2016,
issued by the Ministry of Finance under Section 26(2) of the
Reserve Bank of India Act, 1934, expressly contemplated deposit
and remittance of specified bank notes through banking channels,
including co-operative banks as clarified by the corrigendum dated
09.11.2016. Learned counsel submits that District Central Co-
operative Banks, being licensed banking entities under the
Banking Regulation Act, were squarely covered within the
permissible framework for acceptance and remittance of specified
bank notes.
3.2. Learned counsel further submits that the circular dated
08.11.2016 issued by the Reserve Bank of India permitted Urban
Co-operative Banks and State Co-operative Banks to accept
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deposits and exchange specified bank notes. It is argued that
District Central Co-operative Banks, which are similarly regulated
and licensed, could not have been arbitrarily excluded, particularly
when several such banks had, in fact, accepted deposits during
the initial window period.
3.3. It was the specific contention of the petitioner that the
subsequent circulars dated 14.11.2016 and 17.11.2016, whereby
District Central Co-operative Banks were restrained from accepting
or exchanging specified bank notes, are directly inconsistent with
and repugnant to the earlier statutory notification dated
08.11.2016 and the clarificatory corrigendum dated 09.11.2016.
Learned counsel submits that an executive circular cannot
override, dilute or nullify the effect of a statutory notification
issued under Section 26(2) of the RBI Act.
3.4. Learned counsel argues that the impugned circulars operate
arbitrarily and discriminatorily, inasmuch as several similarly
situated co-operative societies were able to deposit specified bank
notes prior to 14.11.2016, while the petitioner-society, despite
being identically placed, was deprived of such opportunity. This,
according to learned counsel, results in hostile discrimination,
violative of Article 14 of the Constitution of India.
3.5. It was further submitted that the petitioner-society was left
remediless despite repeated representations made to the District
Collector, the District Central Co-operative Bank and other
authorities. Learned counsel submitted that the petitioner even
attempted to comply with subsequent directions to deposit the
specified bank notes through commercial banks; however,
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commercial banks refused to open accounts for the petitioner-
society, thereby rendering compliance impossible.
3.6. Learned counsel submits that the failure of NABARD to
undertake scrutiny of the specified bank notes held by the
petitioner-society, despite issuing communications for inspection
and verification, has further aggravated the hardship. It was
contended that the petitioner has maintained complete records
evidencing the legitimate source of the specified bank notes, and
there exists no allegation of illegality or impropriety against the
petitioner-society.
3.7. It is lastly submitted that denial of permission to deposit or
otherwise lawfully dispose of the specified bank notes has resulted
in freezing of the petitioner-society's working capital, thereby
adversely affecting its statutory functions of extending agricultural
credit, and consequently infringing the petitioner's rights under
Articles 19(1)(g) and 300-A of the Constitution of India.
3.8. On the aforesaid submissions, learned counsel prays that the
impugned circulars dated 14.11.2016 and 17.11.2016 be
declared illegal and ultra vires, and appropriate directions be
issued for acceptance, scrutiny and lawful disposal of the specified
bank notes held by the petitioner-society.
4. Per contra, learned counsel appearing on behalf of the
respondents submitted that the impugned circulars dated
14.11.2016 and 17.11.2016 were issued by the Reserve Bank of
India in lawful exercise of its statutory powers under the Reserve
Bank of India Act, 1934, and in furtherance of a nation-wide
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monetary policy decision taken in exceptional circumstances in the
larger public interest.
4.1. It was submitted that the notification dated 08.11.2016
issued under Section 26(2) of the Reserve Bank of India Act,
1934, merely declared specified bank notes to cease to be legal
tender and authorised the Reserve Bank of India to regulate the
manner and mode of deposit, exchange and remittance thereof.
The said notification, according to learned counsel, did not confer
an absolute or indefeasible right upon every category of institution
to accept or deposit specified bank notes.
4.2. Learned counsel submitted that the Reserve Bank of India,
being the country's central banking authority, was empowered to
issue operational and regulatory circulars from time to time, based
on evolving ground realities, enforcement inputs and risk
assessments, and such circulars formed an integral part of the
implementation mechanism of demonetisation.
4.3. It was contended that District Central Co-operative Banks and
Primary Agricultural Credit Societies do not stand on the same
regulatory footing as commercial banks, Urban Co-operative
Banks or State Co-operative Banks, and their exclusion from
acceptance or exchange of specified bank notes was based on
objective considerations, including supervisory control, audit
infrastructure, technological preparedness and the need to prevent
misuse of demonetised currency.
4.4. Learned counsel submitted that the circular dated
14.11.2016, followed by the clarificatory circular dated
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17.11.2016, was issued after due deliberation and was intended to
plug vulnerabilities and prevent laundering or diversion of
specified bank notes through channels considered susceptible
during the demonetisation exercise.
4.5. It was further submitted that economic and monetary policy
decisions, particularly those taken during extraordinary situations
such as demonetisation, are entitled to a high degree of judicial
deference, and unless shown to be manifestly arbitrary, mala fide
or unconstitutional, such policy decisions ought not to be
interfered with in exercise of writ jurisdiction under Article 226 of
the Constitution of India.
4.6. Learned counsel argues that the petitioner-society does not
possess any vested or fundamental right to insist that specified
bank notes be accepted by a particular category of bank. The
restrictions imposed by the impugned circulars were regulatory in
nature, temporary, and uniformly applicable to all similarly
situated institutions.
4.7. As regards the plea of discrimination, it was submitted that
mere differential impact does not constitute hostile discrimination.
The fact that certain institutions were able to deposit specified
bank notes prior to issuance of the circular dated 14.11.2016 does
not confer an enforceable right upon others to claim identical
treatment after the regulatory framework was modified in public
interest.
4.8. Learned counsel for respondent submitted that NABARD's role
is essentially supervisory and facilitative, and it does not possess
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authority to override or dilute binding directions issued by the
Reserve Bank of India. Any inspection or scrutiny contemplated by
NABARD was subject to the regulatory regime framed by the
Reserve Bank of India.
4.9. It was further submitted that the petitioner was advised to
explore alternative lawful avenues, including opening accounts
with commercial banks, and the respondents cannot be held
responsible for independent decisions taken by third-party banking
institutions.
4.10. Learned counsel submitted that the impugned circulars do
not violate Articles 14, 19(1)(g) or 300-A of the Constitution of
India, as the restrictions imposed were reasonable, proportionate
and directly connected with the legitimate objective of ensuring
financial stability, transparency and prevention of illicit financial
activity.
4.11. On the aforesaid submissions, learned counsel for the
respondents prayed that the writ petition be dismissed as being
devoid of merit.
5. Heard learned counsel for the parties and perused the
material available on record.
5.1. At the outset, it is clarified that the present batch of writ
petitions does not assail the policy decision of demonetisation per
se. The constitutional validity of demonetisation and the decision-
making process leading thereto stand conclusively upheld by the
Constitution Bench of the Hon'ble Supreme Court in Vivek
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Narayan Sharma vs. Union of India (W.P. (C) No. 906 of
2016, decided on 02.01.2023).
5.1.1 This Court is guided by the settled principles governing
judicial review in matters of economic and monetary policy, as
authoritatively expounded by the Hon'ble Supreme Court in Vivek
Narayan Sharma (supra). The Hon'ble Supreme Court, after
surveying earlier Constitution Bench and larger Bench precedents,
observed as under:
"225. It is not the function of this Court or of any
other Court to sit in judgment over such matters of
economic policy and they must necessarily be left
to the Government of the day to decide since in
such matters, with regard to the prediction of
ultimate results, even the experts can seriously err
and doubtlessly differ. The Courts can certainly not
be expected to decide them without even the aid of
experts.
Therefore, while exercising the power of judicial
review in a matter like the present one, the scope
of interference would be still narrower. The inquiry
has to be limited only to find out as to whether
there is an illegality in the decision-making process,
i.e. whether the decision-makers have understood
the law correctly which regulates the decision-
making power and as to whether the decision-
making process is vitiated by irrationality, i.e. the
Wednesbury principles. The test that would have to
be applied is whether the decision is such that no
authority properly conducting itself on the relevant
law and acting reasonably could have reached
thereat, or whether there has been a procedural
impropriety."
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5.1.2. The Hon'ble Supreme Court reiterated that economic and
fiscal regulatory measures warrant a high degree of judicial
deference, and that courts are concerned with the legality of the
policy and not with its wisdom, soundness or desirability.
Interference is justified only where the action of the executive is
shown to be palpably arbitrary, mala fide, or violative of
constitutional or statutory provisions.
5.2. This Court is, therefore, conscious of the settled limits of
judicial review in matters of economic and monetary policy,
wherein courts neither substitute their own wisdom for that of
expert bodies nor sit in appeal over policy choices taken in public
interest. Judicial interference is warranted only where the
decision-making process or its implementation is shown to be
arbitrary, irrational, discriminatory, or contrary to statutory or
constitutional provisions.
5.3. The inquiry before this Court is thus narrowly circumscribed
and confined to examining whether the impugned circulars dated
14.11.2016 and 17.11.2016, in their application to District Central
Co-operative Banks and Primary Agricultural Credit Societies, are
consistent with the parent statutory notification and the governing
legal framework, or whether they suffer from legal infirmity at the
level of implementation.
5.4. This Court notes that the notification dated 08.11.2016 was
issued by the Central Government in exercise of powers conferred
under Section 26(2) of the Reserve Bank of India Act, 1934,
declaring specified bank notes of denominations of Rs.500/- and
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Rs.1000/- to cease to be legal tender with effect from 09.11.2016,
subject to the conditions stipulated therein.
5.5. The said notification, inter alia, contemplated:
• submission of returns by banking companies and
Government Treasuries in respect of specified bank notes
held by them; and
• exchange or deposit of specified bank notes by persons
through designated banking channels, in accordance with the
regulatory instructions issued by the Reserve Bank of India.
5.6. Pursuant thereto, the Reserve Bank of India issued a circular
dated 08.11.2016 prescribing the operational modalities for
exchange and deposit of specified bank notes through various
categories of banks, including Urban Co-operative Banks and State
Co-operative Banks.
5.7. Subsequently, the Reserve Bank of India issued the circular
dated 14.11.2016, specifically addressing the applicability of the
demonetisation scheme to District Central Co-operative Banks,
clarifying that while such banks could permit limited cash
withdrawals by their existing customers, they were restrained
from accepting or exchanging specified bank notes. This position
was reiterated by the circular dated 17.11.2016.
5.8. This Court notes that the Reserve Bank of India is the
statutory authority entrusted with regulation, supervision and
control of the banking system, and is empowered to issue
circulars, directions and instructions to operationalise monetary
policy decisions, including demonetisation.
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5.9. The notification dated 08.11.2016 did not, by itself, confer an
unqualified or indefeasible right upon every category of institution
to accept or exchange specified bank notes. Rather, the manner,
mode and mechanism of such exchange and deposit were
expressly left to be regulated by the Reserve Bank of India.
5.10. The issuance of circulars dated 14.11.2016 and 17.11.2016
must, therefore, be examined as part of the implementation
architecture of demonetisation, framed in response to evolving
circumstances, supervisory assessments and risk considerations.
5.11. This Court finds that the exclusion of District Central Co-
operative Banks from acceptance or exchange of specified bank
notes was not introduced in isolation, nor without rationale. The
material placed on record indicates that the said restriction was
imposed to address perceived vulnerabilities relating to audit
mechanisms, technological preparedness, supervisory reach and
the risk of misuse of demonetised currency during an
unprecedented monetary transition.
5.12. The contention of the petitioner that the impugned circulars
override or nullify the notification dated 08.11.2016 cannot be
accepted in its absolute form. The circulars do not dilute the
declaration of cessation of legal tender; rather, they regulate the
channels through which specified bank notes could thereafter be
dealt with, which squarely falls within the regulatory domain of the
Reserve Bank of India.
5.13. As regards the plea of discrimination, this Court is of the
view that differential treatment, founded on intelligible differentia
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and having a rational nexus with the object sought to be achieved,
does not amount to hostile discrimination. The fact that certain
institutions may have deposited specified bank notes prior to
issuance of the circular dated 14.11.2016 does not create a vested
or enforceable right in favour of others to claim identical
treatment after the regulatory regime was modified in public
interest.
5.14. The restrictions imposed were uniformly applicable to all
similarly situated District Central Co-operative Banks, and directly
connected with the overarching objective of ensuring financial
integrity during demonetisation. Mere hardship or inconvenience,
howsoever genuine, cannot by itself be a ground for invalidating
regulatory measures taken in furtherance of a legitimate economic
objective.
5.15. This Court also finds no merit in the submission that
NABARD was obliged to independently permit scrutiny or disposal
of specified bank notes contrary to the binding directions issued
by the Reserve Bank of India. NABARD's role is supervisory and
facilitative, and it operates within the regulatory framework laid
down by the Reserve Bank of India.
5.16. The plea of violation of Articles 19(1)(g) and 300-A of the
Constitution of India is also untenable. The impugned restrictions
do not amount to deprivation of property, nor do they impose an
unreasonable restriction on the petitioner's right to carry on its
activities. The measures were regulatory, proportionate, and
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enacted in larger public interest during an extraordinary monetary
exercise.
5.17. In view of the foregoing discussion, this Court is of the
considered opinion that the impugned circulars dated 14.11.2016
and 17.11.2016 do not suffer from arbitrariness, illegality or
constitutional infirmity so as to warrant interference under Article
226 of the Constitution of India.
6. In view of the above and reasons recorded hereinabove, this
Court finds no merit in the present batch of writ petitions.
Accordingly, D.B. Civil Writ Petition No. 3331/2017 (Dudhu Gram
Seva Sahakari Samiti Ltd. vs. Union of India & Ors.) along with
connected D.B. Civil Writ Petition Nos. 3272/2017, 3273/2017,
3274/2017, 3276/2017, 3286/2017 and 3328/2017 are hereby
dismissed.
6.1. All pending applications, if any, stand disposed of.
(ANUROOP SINGHI),J (DR. PUSHPENDRA SINGH BHATI),J
SKant/-
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