As promised elsewhere, here's my answer to Rob's question(s)
. There are two parts of it: First not exactly what Rob wanted to know, second, some recent developments after the demonetization decision by the government.
The petition in the MP high court has nothing to do with demonetization, government asking people to pay some particular amount in case they want to deal in (high amount) of cash. The petition was filed much before demonetization was announced.
At one of the coin exhibition in Indore, someone saw dealers selling fancy number banknotes and commemorative coins (both legal tender) for a premium. He was curious to know if it was legal, and hence he approached RBI and also filed a complaint in police. It eventually resulted in a court case, proceedings of which are now with us.
The case itself has nothing related to government's role in distributing cash, charging for it etc. It solely deals with whether it is allowed to sell legal tender currency for a premium or not, if not, what's the punishment.
After the demonetization decision was announced on November 8 of last year, there was an acute shortage of cash in the entire country, as almost 86% of the total cash became illegal tender. Indian currency presses did not have enough printing capacity to meet with the demand, which resulted in some undesirable consequences (discussed elsewhere already).
When the situation became bad, government suddenly started promoting cashless economy, which later turned into a less cash economy kind of thing.
Now comes the answer to your question.
Before demonetization, most of the banks (except a few private banks) did not charge any commission for withdrawing any amount from the bank (ATM or at the counter). Nor there was any restriction on cash transaction. Post demonetization, situation has changed significantly. Many private banks have increased transaction cost for high amount withdrawals (typically if the amount is above ₹150,000) from the counter. Also, the budget which was presented a couple of weeks back has imposed a 100% fine on cash transactions above ₹300k. When asked about how it is going to be implemented, the finance minister told that the receiver of the cash (more than ₹300k) will pay 100% fine in case found with dealing in excessive cash. For example, if a builder asks me to pay ₹1000k in cash and he's caught, he will have to pay a fine of ₹1000k to the government. The loophole in this system is that government relies entirely on the person who is giving him cash. Which means, if I register a complaint against the builder, then only IT department will take up the matter. If both the parties are fine with dealing in any amount of cash, then there's nothing which can really stop you from doing so.
So to me, it appears that the new law will not be very successful in reducing cash transactions.
Hope that somewhat answers your question?