PAYPAL PAYMENTS PRIVATE LIMITED  Vs FINANCIAL INTELLIGENCE UNIT INDIA

W.P.(C) 138/2021 Page 1 of 6
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 12th January, 2021
+ W.P.(C) 138/2021
PAYPAL PAYMENTS PRIVATE LIMITED ….. Petitioner
Through: Mr. Mukul Rohatgi and Mr. Sajan
Poovayya Senior Advocates with Mr.
Anuj Berry and Mr. Shiv Johar,
Advocates. (M:98100 25473)
versus
FINANCIAL INTELLIGENCE UNIT INDIA ….. Respon dents
Through: Mr. Chetan Sharma, ASG with Mr.
Amit Mahajan, CGSC and Mr. Dhruv
Pande, Advocate.
CORAM:
JUSTICE PRATHI BA M. S INGH
Prathi ba M. Singh, J.(Oral )
1. This hearing h as been done by video conferencing.
CM APPLs. 42 2/2021 & CM APPLs. 4 23/2021 (for exemption)
2. Allowed, subject to all just exceptions. Applications are disposed of.
W.P.(C) 138/2021 & CM APPL. 421/2021 (for in terim r elief)
3. The Petitioner in the present petition challe nges the i mpugned order
dated 17th December, 2020 , passed by the Direct or, Financial Intelligence
Unit-India , Ministry of Finance, Government of India. By the impugned
order, the Petitioner has been h eld to be 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 (hereinafter , ‘PML Act’).
Further , the impugned order finds the Petitioner guilty of violations und er
the provisions of the PML Act, and has imposed a pen alty amounting to
Rs.96 Lakhs. Th e impugned order, thereafter, directs the Petitioner to
register itself as a “reporting entity ” with the Financial Intelligence Unit –
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W.P.(C) 138/2021 Page 2 of 6
India (hereinafter, “FIU-IND”) as well as to appoint a Princ ipal Officer and
communicate the name, designation and address thereof , within a period of
15 days of the receipt of the said order . The operative portion of the said
impugned order reads as under:
“52. In view of the above, I, in exercise of the powers
conferred upon me under Sect ion 13 (2)(d) of the
Prevention of Money Laundering Act, 2002 impose a
total fine of Rs. 96,00,000/ – (Rupees Ninety Six lakhs
only) on PayPal Payments Private Limited which will
be commensurate with the violations committed by it.
PayPal Payments Private Li mited shall pay the said
amount of fine within 45 days of receipt of this Order
by way of Demand Draft in favour of “Pay & Account
Officer, Department of Revenue” failing which the
provisions of Sec tion 69 of the Act shall apply.

53. Further, by virtue of power s conferred upon me
under Section 13(2)(b) of the Prevention of Money
Laundering Act, 2002, I, find it expedient to direct
PayPal Payments Private Limited to:
(a) register itself as a reportin g entity with FIU -IND
within 15 days of the receipt of thi s Orde r;
(b) appoint the Principal Officer and communicate the
name, designation and address
thereof within 15 days of the receipt of this order; and
(c) appoint the Designated Director and communic ate
the name, designation and address thereof within 15
days of the receipt of this order. ”

4. On behalf of the Petitioner, Mr. Rohatgi, ld. Senior Counsel and Mr.
Poovayya , ld. Senior Counsel appear and submit that the Petitioner is only a
facilitator platf orm which conducts two types of transactions . The first type
of transactions are transactions in foreign exchange , which are merely
facilitated between registered reporting entities. The second type o f
transactions are domestic transac tions in Rupees. It is submitted by Mr.
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Rohatgi, ld. Senior counsel that each an d every foreign exchange transaction
is reported b y the concerned reporting entit y and the Petitioner is merely
providing a facilitator platform and charging a nominal fee f or each of the
transact ions. No foreign exchange is actually collected or pai d by t he
Petitioner platform. He categorically submits and assures the Court that in
the transactions facilitated by the Petitioner, no actual money is received or
disbursed by the Petitioner – except for the payment of the nominal facilitator
fee. He therefore submits, that the Petitioner cannot be deemed to be a
“reporting entity ” under the P ML Act. Reliance is placed by the ld. se nior
counsel, upon the RBI ’s affidavit filed in another writ petition , where the
RBI took a stand that the Petitioner is not operatin g or participating in a
payment system , and the Payment and Settlement Systems Act, 2007
(hereinafter , ‘PSS Act’) does not apply to the Petitioner.
5. On the strength of these subm issions, it is urged by the ld. Senior
Counsels that the impugne d order , holding that the Petitioner would be
liable to be a reporting entity under the PML Act, is not tenable.
6. Mr. Chetan Sharma, ld. ASG appear ing along with Mr. Amit
Mahajan, ld. Standing Counsel , has taken a preliminary ob jection that the
Petition er ought to avail of the alternative remed y ava ilable under Section 26
of the PML Act, which provides for an appellate remedy before the
Appellate Tribunal. It is further submitted by Mr. Sharma, ld. ASG , that a
reading of the definition s of “payment s ystem”, “paym ent system operator ”
and “reporting entity ” under section s 2(1)(rb), 2(1)(rc) and 2(1)(wa) of the
PML Act, clearly shows that the Petitioner s form a par t of the said
definition s provided. Ld. ASG, in addition submits that this Court would not
have jurisdiction t o entertain this petition on the basis of the judgment
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passe d by the ld. Division Bench of this High Court dated 5th December,
2018, in W.P.( C) 12494/2018 titled, Aasma Mohammed Faroo q and Anr.v
Union of India .
7. Heard ld. co unsels for t he parties and perused the impugned order
and the stand of the RBI in the affidavit relied upon by the Petitioners. The
case of the Petit ioner is that it merely facilit ates transactions and does not
actua lly enter into any transactions with either of the parties conducti ng the
same. On a query from the Court , Mr. Rohtagi , ld. Senior C ounsel states
that the Petitioner is not a payment wal let.
8. A perusal of the RBI’s affidavit shows that the stand of the RBI is
that the Petitioner would not be attracted by the Payments and Settle ments
Scheme , under the PSS Act. The relevant portion of the RBI’s affidavit is
set out below:
“6-7. With regard to the Paras No. 6 & 7, it is
submitted that RBI’s ‘Ombudsman Sch eme for Digital
Transac tions, 2019’ is applicable t o system
partici pants as defined under the scheme. According to
this scheme, system participant means any person
other than a bank participating in a payment system as
defined under Section 2 of the Paymen t and Settlement
System s Act, 2007 excluding a ‘Sys tem Provider’.
Further, according to this scheme, ‘System Provider’
means and includes a person who operates an
authorized payment system as defined under Section 2
of the Payment and Settl ement Systems A ct, 2007. It is
furthe r submitted that currently P aypal Payments
Private Ltd. is not operating or participating in, a
payment system and hence this scheme is not
applicable to it. ”

9. This court is of the opinion that t he question as to whether a busines s
like the Petitioner’s , which is of recent origin in India . ought to fall
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within the ambit of a `payment system ’ and whether the Petitioner would be
a `payment system op erator’ and a `reporting entity ’, requires consideration.
A substantial legal issue has arisen in this petitio n, and the questio n of
jurisdiction has also been raised . Accordingly, issue notice to the
Respondents. Notice is accepted by Mr. A mit Mahajan , ld. Standing
Counsel .
10. As per ld. counsels , there is no other payment gateway entity which
has been brought under the PM L Act. Under the facts and circumstan ces of
the presen t case, it is deemed appropriate to implead R eserve Bank of India
as Respondent No.2. Ordered accordingly. Let the amended memo of
parties be filed within one week.
11. The stand of the RBI in the affidavi t referred above appears to be in
contrast with the view taken in the impugned order . 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, Min istry of Finance, is
directed to constitute a Com mittee with a nominee of the RBI and the
Ministry of Finance , to clarify their position as to whether compa nies l ike
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 operator s” and hence “reporti ng entities ” under the PML Act. Let
the Committee meet within ten days and the conclusion of the Committee be
filed, by way of an affid avit, within two weeks there after.
12. In the meantime, the following directions are issued:

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i. The Petitioner shall, henceforth, maintain records of all
transactions under S ectio n 12(1)( a) of the PML Act, in electronic
form on a secur e server , located in Indi a, for the same to be retrieved ,
if requir ed, subject to further orders in this writ petition .
ii. The Petitioner shall furnish a bank guarantee , to the satisfaction
of the Registrar Gener al of this Court , for a sum of Rs.96 lakhs. The
said bank guaran tee shall be dep osited within two weeks.
iii. The Managing Director of the Petitioner Compan y shall furnish
an undertaking to the Court to the effect that i t would abide by any
orders that ma y be passed in this petition, including furnish ing of data
(irrespect ive of where the server s are located) , as may be required by
a repo rting ent ity under Section 12 of the PML Act, if the Petitioner is
unsuccessful in this petitio n. The said affidavit of undertaking be filed
within two weeks by the Petiti oner.
13. Subject to the Petitioner ’s compliance of the abo vementioned
directions , the impugned order shall remain stayed.
14. List before the Registrar General for acceptance of the Bank
Guarantee on 16th February, 2021. List thi s matter for fur ther hearing on 26th
February, 2021.

PRATHI BA M. SINGH
JUDGE
JANUARY 1 2, 2021 /dj/Ak
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