District Collector Mahendra Kalyankar issued the notice based on the complaints made by several patients and has asked the hospital to file a reply by tomorrow.
The hospital's refusal came to light after a patient, Ratilal Shah, reported the matter to the Collector office.
According to Shah, at the time of his discharge from the hospital, he tried to settle his medical bill using Rs 500 and Rs 1,000 notes. However, the staff at the payment counter squarely refused to accept these notes.
Thereafter, Shah was discharged from the hospital.
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The notice, however, says that even after Shah's discharge, several other patients called up the Collectorate to complain that the hospital staff was insisting on payment through new notes.
"This (refusal to accept demonetised notes) will create law and order problem...Therefore, why action should not not be taken against the hospital under section 188 of the IPC and also Bombay Nursing Home Registration Act of 1949," the notice said.