How can I convert bitcoins into Rupees (Indian currency - INR) and get them in paper Rupee notes?
If someone will want to sell bitcoins for Rupees, they might list it on LocalBitcoins. It's a good start.
If you want physical cash without going through a bank then you'll find many individual traders here:
And there are offers to buy and sell posted in threads on the India board:
But as of December, 2012 there are no market exchanges that can do a domestic bank transfer, so cashing out bitcoins would incur costs as an international wire transfer.
There is an E-Currency exchange that will buy your coins (or sell bitcoins to you), including sending a bank transfer:
Here is a forum thread of one reputable trader who can also send INR as a bank transfer: