The commission, led by presiding member AVM J Rajendra and judicial member Anoop Kumar Mendiratta, gave the ruling while hearing an appeal filed by Procure Logistics Services Pvt Ltd against the private lender.

In an order dated March 10, the commission said, "The bank clearly failed by repeatedly disallowing the complainant to deposit the notified cash into its own KYC-compliant account, despite multiple requests and persisted with this till the entire timeline lapses."

The case centred on allegations that the bank refused to accept the notes during the limited period permitted by the government following the demonetization announcement on November 8, 2016.

The commission observed that there were no grounds for the bank to reject the cash, noting that it should have accepted the deposit and reported the transaction to the relevant authorities if it suspected any irregularities.

"If the transactions appeared suspicious, the bank was required to monitor and report them to the competent authorities. The statutory framework did not empower the bank to unilaterally refuse acceptance of deposits in a KYC-compliant account during the permitted window," the commission said.

The commission's ruling emphasised that the bank's outright denial deprived the complainant of their only legal opportunity to deposit the discontinued currency within the government's notified period.

Due to the refusal, the company suffered a direct and irreversible loss as the specified bank notes in its possession became worthless after the deadline expired, the commission observed.

"This clearly constitutes 'deficiency in service' as defined under Section 2(1)(g) of the Consumer Protection Act, 1986. This is independent of the legality or otherwise of the regulatory framework governing the demonetisation processes," it said.

The commission reiterated that accepting deposits into duly maintained accounts is a fundamental, undisputed core banking service that obligates banks to operate strictly according to the law.

"If any transaction, which is otherwise permitted, is to be refused, the same shall be based on cogent reasons duly communicated and supported by applicable regulatory norms," the commission's order stated.

It then ordered Axis Bank to pay Procure Logistics Services Pvt Ltd Rs 3.19 crore with simple interest at 6 per cent per annum from December 30, 2016, till the date of payment.

The commission said that the amount must be settled within two months. Failing, the bank will be liable for an increased interest rate of 9 per cent per annum for the delayed period.

(With PTI inputs)

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