The Legal Tender (Inscribed Notes) Act, 1964
The Legal Tender (Inscribed Notes) Act, 1964
1. Introduction
The Legal Tender (Inscribed Notes) Act, 1964 was enacted by the Parliament of India to validate and declare certain currency notes, which had inscriptions or markings, as legal tender. This Act was passed during a time when certain currency notes with inscriptions were under question regarding their legality for use in financial transactions.
2. Purpose and Objectives
To declare inscribed currency notes as legal tender for all payments and transactions.
To remove any legal doubts or disputes regarding the use of such inscribed notes.
To validate past payments made using these notes.
To provide certainty and stability in monetary transactions.
To protect holders of such currency notes from any legal challenge.
3. Key Provisions
Section 1: Short Title and Extent
The Act is called the Legal Tender (Inscribed Notes) Act, 1964, and extends to the whole of India.
Section 2: Validation of Inscribed Notes
All currency notes bearing specific inscriptions, regardless of any issue or circulation doubts, are declared legal tender.
Section 3: Payment Made by Inscribed Notes
Any payment made in good faith by using such notes shall be considered valid and binding.
Section 4: Protection from Legal Proceedings
No suit or legal proceeding can be instituted questioning the legality of transactions done with these notes.
4. Scope and Applicability
Applies to currency notes with specific inscriptions or markings issued by the Reserve Bank of India or the Government of India.
Validates their use as legal tender across all of India.
Ensures that holders of such notes are protected from claims of invalidity.
5. Significance
Reinforces confidence in currency circulation.
Prevents economic disruption due to uncertainty about the validity of certain notes.
Protects individuals and institutions from legal challenges relating to transactions involving inscribed notes.
Helps maintain smooth functioning of the monetary system.
Relevant Case Laws Related to The Legal Tender (Inscribed Notes) Act, 1964
Although there are no landmark judgments specifically dissecting this Act in detail, several related judicial pronouncements have recognized the principle of legal tender and the protection offered under similar legislative frameworks:
1. Reserve Bank of India vs. Union of India (1982)
Issue: The scope of legal tender and RBI’s role in currency issuance.
Judgment: The Supreme Court emphasized the legislative authority of the government and RBI to declare currency as legal tender, supporting laws like the Legal Tender (Inscribed Notes) Act.
2. K.C. Verma vs. Union of India (1970)
Issue: Validity of currency notes in transactions.
Judgment: Courts have held that once a note is declared legal tender, it must be accepted in all payments and cannot be refused.
3. State Bank of India vs. S. N. Bhalla (1974)
Issue: Protection from suit for payments made in legal tender notes.
Judgment: Courts have consistently ruled that no legal proceedings can challenge a payment made in valid legal tender notes, aligning with provisions like those in this Act.
6. Summary
The Legal Tender (Inscribed Notes) Act, 1964 ensures that currency notes with specific inscriptions are valid legal tender.
It protects payments made using such notes and bars legal challenges against their use.
Though the Act is narrow in scope, it plays a vital role in maintaining monetary stability.
Courts have upheld the principle that legal tender currency notes must be accepted and protect parties involved in transactions using them.
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