Seized specified bank notes may be deposited and refunded where law enforcement seizure is duly authorised under the statutory exception.

Specified bank notes seized by a law enforcement agency before the appointed day, after completion of proceedings under the Income-tax Act, 1961, were treated as covered by proviso (d) to Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017. The note explains that the statutory bar on holding or transferring such notes does not prevent return of seized cash where seizure was made on proper authorisation and the prescribed procedure was completed. On that basis, the court-directed deposit of the notes with the Reserve Bank of India was permissible, and refund of the equivalent amount could not be denied merely because the notes had been demonetised.

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Issues: Whether the petitioner was entitled to return of the cash seized from his vehicle, and whether the Reserve Bank of India could be directed to accept the specified bank notes for deposit and enable refund of the equivalent amount.

Analysis: Cash was seized before the appointed day under the Income-tax Act, 1961, and the statutory proceedings under Sections 131, 132 and 132B were completed. The amount was thereafter treated as additional income and tax with interest was paid. The statutory bar under Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 was read with proviso (d), which permits holding, transfer or receipt of specified bank notes when the seizure is at the instance of a law enforcement agency on production of the requisite authorising documents. On that basis, the direction sought was held to be covered by the proviso, and the petitioner could not be denied return of the amount merely because the notes were demonetised.

Conclusion: The petitioner was held entitled to refund of the seized amount, and the Reserve Bank of India was directed to accept the specified bank notes and facilitate deposit so that the amount could be returned to the petitioner.

Ratio Decidendi: Where specified bank notes are seized by a law enforcement agency before the appointed day and the statutory seizure procedure is completed, proviso (d) to Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 permits court-authorised deposit and consequent refund of the equivalent amount.

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