Petition regarding tenability of restrictions imposed on over the counter cash withdrawals via Central Notification dated 08.11.2016, dismissed

Delhi High Court: While considering the present petitions regarding the tenability of the restrictions imposed on over the counter cash withdrawals via Central Notification dated 08.11.2016 (which furthermore banned the use of 500 and 1000 rupee notes as legal tenders), the Division Bench of G. Rohini, C.J. and V. Kameswar Rao, J., dismissed the petitions for want of merit, stating that the restriction imposed under Clause 2(vi) of the Notification is only with regard to cash withdrawal from a bank account over the counter. There are no restrictions or limits for operating the bank account by non-cash method.

The petitioners contended that the impugned Notification immobilizes bank transactions of the money deposited prior to 08.11.2016, which is illegal. It was further contended that the Central Government is not empowered under the Reserve Bank of India Act, 1934 to restrict cash withdrawal from a bank account over the counter. Perusing the contentions, the Bench observed that the Notification dated 08.11.2016 has been made in exercise of the powers conferred by Section 26(2) of the Reserve Bank of India Act, 1934 and the question related to its validity is currently being considered by the Supreme Court. However the Court stated that Clause 2(vii) of the impugned Notification provides that there are no restrictions on the use of any non-cash method of operating the bank account by using cheques, demand drafts etc. Thus, the contention of the petitioner that Clause 2(vi) infringes the right of the account holder to withdraw from his account on demand is incorrect.

Further rejecting the petitioner’s contention that the impugned Notification immobilizes bank transactions of the money deposited prior to 08.11.2016, the Court stated that, “no such distinction can be drawn between the bank deposits of the period prior to 8.11.2016 and after 8.11.2016 since the whole purpose of the restrictions imposed on cash withdrawal up to 30.12.2016 appears to be to meet the demand of liquid cash in circulation in the light of the ban imposed on the bank notes of the denominations of Rs. 500 and Rs. 1000”. The Court further reiterated the settled position of law that a policy decision by the government is beyond the scope of judicial review. [Ashok Sharma v. Union of India, 2016 SCC OnLine Del 6173, decided on 02.12.2016]

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