Delhi HC's Trail on Google Pay's functional legitimacy

Delhi HC’s trial on Google Pay’s functional legitimacy

This article is about the recent ruling in the case of Google Pay taken up by the Delhi High Court. Before we get into the details of the case, let us first look at the background on some of the parties and also explain the terms commonly used.

Background on Google Pay:

Google pay was launched as Android Pay by Google at Google Innovation in Open Annual Developer Conference, 2015. But in India, Google Pay, earlier known as Tez, was launched on September 18, 2017. Later renamed as Google Pay on August 28, 2018.

It is operated by Unified Payment Interface (UPI), developed by National Payment Corporation of India (NPCI), an Reserve Bank of India (RBI) regulated entity.

Unified Payment Interface (UPI):

Unified Payments Interface is an instant real-time payment system developed by NPCI facilitating inter-bank transactions. It is regulated by the RBI and works by instantly transferring funds between two bank accounts on a mobile platform.

NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from August 25, 2016 onwards.

Any UPI Client Third Party App Provider (TPAP) may be used and multiple bank accounts may be linked to single app.

Third Party App Provider (TPAP):

A ‘Third Party App Provider’ is an authorised online service provider that has been introduced as part of Open Banking. They exist outside of our relationship with our bank, and involved in the online transactions carry out.

Some of the most popular NPCI approved TPAP providers include Amazon Pay, Google Pay, MobiKwik​, Phonepe and so on.

Writ against Google Pay:

Case 1:
Facts of the Case:

A writ petition had been filed against Google in the Delhi High Court on May 5, 2020 by Shubham Kapaley as Delhi based User Interface designer for machines and software as Google Pay did not allow him donate to the Prime Minister’s coronavirus relief fund through a different UPI app. Kapaley reportedly said that when he tried to pay using the app, Google tried to register him on the app first, which he said was a violation of NPCI guidelines.

The petitioner reportedly referred to Circular dated January 18, 2017 issued by NPCI which says that UPI apps cannot force users to create a Virtual Payment Address to use the app.

The petition also stated that the petitioner tried to make multiple payments through the Google Pay application, none of which allowed him to add his existing UPI ID.

The petitioner had also sought a thorough third-party and independent investigation to ensure that Google Pay was in compliance with all other directives and guidelines issued by NPCI and RBI. Besides this, they also wanted “proper punitive action” and imposition of a “hefty penalty” of at least 10 times the revenue of Google Pay, which may be contributed towards the Covid-19 Relief Fund in India.

In the Trial

The first hearing in the case held on May 14, 2020 by Justice Asha Menon.

The notice was issued to the Government of India, Reserve Bank of India (RBI), Google India Digital Service and other respondents by Justice Asha Menon. The high court had granted three weeks’ time to Google Pay and other respondents to file their response and it would list the matter for hearing once the pleading is complete.

Case 2:
Facts of the case:

A public interest litigation filed by financial economist Abhijit Mishra who has alleged that Google’s mobile payment app, Google Pay or GPay in short, was facilitating financial transactions without the requisite authorisation from RBI.

Mishra has claimed that GPay was acting as a payments system provider in violation of the Payments and Settlements Act as it has no valid authorisation from the central bank of the country to carry out such functions.

He has also contended that GPay does not figure in NPCI’s list of authorised ‘payment systems operators’ released on March 20, 2019

In the trial:

The hearing in the case was held on June 19, 2020 by Chief Justice D.N. Patel and Prateek Jalan.

RBI told the Delhi High Court that Google Pay is a third party app provider (TPAP) and therefore they are not system providers nor do they operate any payment system and hence Payment and Settlement System Act, 2007, is not violated in any manner in the present case.

RBI had also told the court that since Google Pay does not operate any payment system, it does not find a place in the list of authorised payment system operators published by the NPCI.

The bench said the matter requires detailed hearing as it affects other third-party apps and listed it on July 22, 2020.

Googles’ first line of defence:

The RBI statement has led to some confusion, so much so that some are believing that Google Pay is not legal in India or that doing transactions through it is risky. This is not accurate and now Google India has issued a long statement to clear the confusion. The company says:

Google Pay operates completely within the law. Google Pay works as a technology service provider to partner banks, to allow payments via UPI. UPI apps in the country are categorized as ‘third party apps’, and are not required to be ‘payment systems operators’.

All transactions made via Google Pay are fully protected by redressal processes laid out by applicable guidelines of the RBI/NPCI, and users can reach out for any help 24/7, through Google Pay customer care.

Some quotes on social media, wrongly attributed to the RBI, claim that issues arising while transferring money through Google Pay are not protected by the law, since the app is unauthorised. This is incorrect and can be verified on NPCI’s website. RBI has stated no such thing either in the court hearing or in their written response to the HC.

The Perspective on case:

Google Pay provides UPI based payment service under the approval of NPCI. Since NPCI is an RBI controlled entity and RBI empowered NPCI to implement and control the UPI based payment service in India, RBI has no role to approve Google Pay.

Besides Google is not a wallet like Paytm or any other app and it is also not a bank where anyone can open an account.

However, this public interest litigation may push RBI to bring some common regulations for payment wallets and UPI based payment services.

 

CA.DHEENADAYALAN R

AOM- Finance | Taxation

Aparajitha Corporate Services Pvt. Ltd.

 

Disclaimer: “The article represents the opinions of the author and the author is solely responsible for the facts, cases and legal or otherwise reproduced in the article”

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