The Delhi High Court has stayed the penalty of Rs 96 lakhs on ‘PayPal Payments Private Limited ‘ imposed by the Financial Intelligence Unit for violation under the Prevention of Money Laundering Act while directing its Managing Director to furnish an undertaking that it would abide by the Courts order.
The Court has further directed it to maintain records of all transactions under Section 12(1)(a) of the PML Act, in electronic form on a secure server, located in India, for the same to be retrieved, if required, subject to the orders of the Court. Further the Court also directed it to furnish a bank guarantee, to the satisfaction of the Registrar General of the Court, for sum of Rs 96 lakhs within two weeks.
A single-judge bench headed by Justice Pratibha M Singh has opined that the question as to whether a business like the Petitioner’s, which is of recent origin in India, ought to fall within the ambit of a ‘payment system’ and whether the Petitioner would be a ‘payment system operator’ and a ‘reporting entity’, requires consideration.
The Court said, a substantial legal issue has arisen in this petition, while issuing notice to the Financial Intelligence Unit India, Ministry of Finance, Government of India.
The Court also perused the affidavit of the RBI relied upon by the petitioner where the stand of the RBI is that the ‘PayPal’ would not be attracted by the Payments and Settlements Scheme, under the PSS Act.
The Court noted that there is no other payment gateway entity which has been brought under the PML Act. Therefore it directed petitioners to implead Reserve Bank of India as Respondent No.2.
The Court directed, “The RBI and Union of India ought to take a clear stand after due consultation as to whether they consider platforms such as that of the Petitioners as being within the purview of the PML Act. Accordingly, the Secretary, Ministry of Finance, is directed to constitute a Committee with a nominee of the RBI and the Ministry of Finance, to clarify their position as to whether companies like the Petitioners who claim to be facilitators of monetary transactions, both in foreign exchange and in Indian Rupees, ought to be categorised as “payment system operators” and hence “reporting entities” under the PML Act. Let the Committee meet within ten days and the conclusion of the Committee be filed, by way of an affidavit, within two weeks thereafter.”
The Court was hearing the petition filed by ‘PayPal Payments Private Limited’ challenging the Orders passed by the Financial Intelligence Unit India, Ministry of Finance, Government of India, by which it held ‘PayPal’ a “reporting entity” and a “payment system operator”, under Section 2(1)(wa) and Section 2(1)(rc) of the Prevention of Money Laundering Act, 2002. The Financial Intelligence Unit had further held ‘PayPal’ guilty of violations under the provisions of the PML Act and had imposed a penalty amounting to Rs 96 lakhs. It also directed ‘PayPal’ to register itself as a “reporting entity” with the Financial Intelligence Unit-India as well as to appoint a Principal Officer and Communicate the name, designation and address.
The Court will hear the matter next on 26th February 2021.
Read the order here;