What is the legal process to recover seized currency notes?

Recovery from police custody

BNSS Section 106 (equivalent to old CrPC Section 102) provides that when police seize property, the magistrate before whom the case is produced can direct return of the property to the person from whom it was seized if no proceedings are pending or if the proceedings conclude in acquittal or discharge. If no criminal proceedings are registered, the collector can apply directly to the magistrate for return of seized property under BNSS Section 106(3).

If the collector believes the seizure was illegal or without proper authority, a writ petition to the High Court under Article 226 of the Constitution is the remedy. The High Court can review the legality of the seizure and direct return. The Malani case (Nagpur Bench, Bombay HC, 2026) was exactly this — a writ petition challenging the consequence of a police seizure that made exchange deadline compliance impossible.

Recovery from Income Tax custody

Notes seized by the Income Tax Department under Section 132 are retained pending completion of the assessment. During assessment, the collector must provide documentation explaining the source of the funds or the acquisition cost of the notes. If the IT officer accepts the explanation, the notes are released. If the assessment results in a demand, the collector can pay the demand and seek release, or challenge the assessment before the Income Tax Appellate Tribunal (ITAT) and seek an interim stay on further action pending appeal.

The Potdar case (Bombay HC, 2025) shows what happens when the assessment completes but the notes cannot be exchanged because the deadline has passed — the court directed RBI to accept them regardless. The lesson: preserve the IT department's seizure memo and return acknowledgement as critical evidence, because these documents proved the state caused the deadline non-compliance.

Recovery from Customs custody

Notes seized by customs are subject to the adjudication process under the Customs Act 1962. A show cause notice is issued by the customs authority, explaining why the goods should be confiscated. The collector has an opportunity to respond and present their case — including documentation that the notes are legitimate collectibles, not smuggled goods or prohibited imports. If the adjudication results in confiscation, the collector can appeal to the Commissioner (Appeals), then to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), and ultimately to the High Court.

Time is of the essence — seek legal help immediately

The most critical advice for any collector whose notes have been seized is to engage a lawyer immediately. Each recovery route has specific timelines — for filing applications, responding to notices, and pursuing appeals. Missing these timelines can result in permanent forfeiture. A lawyer who handles criminal matters, tax matters, or customs matters (depending on the seizing authority) will know the correct procedural route and the applicable deadlines.

Notes can be recovered. The process is not easy and it is not fast. But the law provides mechanisms for every seizing authority. The collector who acts quickly, documents thoroughly, and seeks professional help has a real chance of recovery. The collector who waits and hopes does not.

Laws & authorities referenced in this chapter

BNSS 2023 — §106 (return of seized property; magistrate's power; no proceedings pending)

Constitution of India — Article 226 (High Court writ jurisdiction; challenge to illegal seizure)

Income Tax Act 1961 — §132 (search and seizure; §153A assessment; ITAT appeal)

Customs Act 1962 — §111 (confiscation); §124 (show cause notice); §128 (appeal to Commissioner Appeals); §129A (appeal to CESTAT)

Ramesh Potdar v. UoI (2025) + Girish Malani v. UoI (2026) — courts direct RBI exchange for state-caused deadline non-compliance