INTERNET AND MOBILE ASSOCIATION

OF INDIA
Vs
RESERVE BANK OF INDIA
Name of the Case Internet and mobile association of India
vs Reserve bank of India
Citation (2020 SCC online SC 275 )
Date of the Case March 4,2020
Appellant Internet and mobile association of India
Respondent Reserve Bank of India
Bench / Judge Rohinton Fali Nariman, Aniruddha Bose,V.
Balasubramanian
Statutes / Constituents Involved Banking Regulation Act, 1949. The payment and
settlement system act 2007, Article 19(1)(g) of the
Constitution of India,1949, Payment of wages act,
1936, The general clauses act,1897

IMPORTANT SECTION/ ARTICLES Article 19(1)(g) of the Constitution of India. Section 2

of the Banking and Regulation Act, 1949. Section 18
of the Banking and Regulation Act, 1949. Section
45(l) of the Banking and Regulation Act, 1949.
Section 22(1) of the Banking and Regulation Act,
1949. Section 36(1)(a) of the Banking and Regulation
Act,1949. Section 18 of the Payment of Wages
Act,1936.
 FACTS OF THE CASE
• For RBI-regulated entities, (i) not to serve individuals or companies that trade or settle virtual currencies, and (ii) if they already
own, trade, or settle virtual currencies (VC). Instructed not to terminate these personal / corporate relationships.
• Following the above statement, RBI will exercise its delegated authority to provide services regulated by RBI (i) to trade or
promote in cryptocurrencies. We have also issued a notice instructing us not to do so. Transactions involving crypto assets
involved in granting access to banking services to remove the restrictions on individuals or groups trading or trading in
cryptocurrencies, and (ii) banks and financial institutions regulated by the RBI. The person involved and the complainant have
come to the petition for writing.
• The petitioners of the second letter included some companies engaged in the online exchange of crypto assets. The RBI
Statement and thus Circulation is a highlight of cryptocurrencies and is a report on market risk by the Bank for International
Settlements (BIS) International Settlements Bank (CPMI). For digital currencies, Financial Stability Reports 2015 and 2016 of
06.
• RBI has issued a press release warning cryptocurrency users, holders and traders . In April 2017, Press Release, Government of
India, Ministry of Finance released public on cryptocurrency risks and government steps and trading of such currencies. RBI has
issued another press release .
• The Government of India and the Ministry of Finance have also adopted cryptocurrencies as fiat currencies or coins, and the
FSB’s initial assessment shows the use of these currencies in financing. As announced in 204 2018, there is no risk to crypto
assets that portray global financial stability. RBI sent an email to the government with a note on crypto asset regulation.
• As a result, the disputed Circular was issued by RBI, and several applications were approved accordingly, and Circular was
overturned for proportional reasons.
 ISSUES RAISED BEFORE THE COURT

1. Did RBI’s authority include VC regulations as this currency was nothing more than a tradable

commodity and fiat currency?

2. Even if VCs were within the RBI’s regulatory jurisdiction, did the Circular

unduly infringe on the petitioner’s rights?

 ARGUMENTS FROM THE APPELLANT
• The petitioner stated that the RBI lacks the authority to prohibit the trade of virtual currency since virtual
currency is not a legal money but a commodity that is not covered by the Reserve Bank of India Act of
1934 or the Banking Regulation Act of 1949.
• The petitioner went on to say that because virtual money does not form part of the country’s credit system,
the RBI lacks the jurisdiction to regulate it to its advantage. The circular, according to the counsel, had no
legal foundation because it imposed a complete prohibition on virtual money, which would violate article
19(G)(1) of the Indian constitution, which controls commerce and industry with reasonable restrictions.
• In his second writ, the petitioner said that without effective legislation, such laws had a negative impact on
the economy, potentially leading to a black market.
• It also asserted that the RBI has failed to recognize various types of virtual currency schemes, and that
because virtual currency lacks a medium of exchange, a store of value, a unit of account, and constitutes a
final discharge of debt, it cannot be recognized as money, and thus the RBI has no power to regulate it.
 ARGUMENTS FROM THE RESPONDENT

• RBI In response to the petitioner’s concerns, the bank stated that it has the authority to control virtual money under the

Reserve Bank of India Act of 1934, the Banking Regulation Act of 1949, and the Payment and Settlement Act of 2007.

• It does not infringe on any of the essential rights provided by articles 14, 19, and 21 of the Indian constitution. The

companies controlled by the RBI have no absolute rights, and virtual currency is not completely prohibited.

• According to the respondent, the circular is not excessive because the RBI granted their firms three months to end their

links with virtual currency. Furthermore, for the past five years, the bank has issued warnings to stakeholders about the

challenges and risks associated with virtual currency.

• Furthermore, the RBI ruled that, while virtual money cannot be recognized as a currency and does not fall under the

purview of the payment system, it has the potential to become a parallel payment system, which provides the RBI the

ability to regulate virtual currency in the public interest.

 RELATED PROVISIONS AND CASE LAWS

• The court referenced the case of “State of Maharashtra v. Indian Hotel and Restaurant Association” in the current case

of “Internet and Mobile Association of India v. Reserve Bank of India.” In this case, the court determined that the petitioner

had incurred at least some degree of harm in order to rule in their favor.

• Banking Regulation Act,1949

• The Payment and Settlement System Act, 2007

• Article 19(1)(g) of the Constitution of India,1949

• Payment and Wages Act, 1936

• The General clauses Act, 1897

• Section 35A of the Banking Regulation Act,1949

 REASONING AND JUDGEMENT
• After hearing from all parties, the court agreed to examine the RBI’s function and power, as well as identify the virtual currency.
After reviewing the history of the RBI’s function and considering the Reserve Bank of India Act 1934, Banking Regulation Act
1949, and Payment and Settlement Act, the court concluded that the RBI had the authority to control the country’s monetary
framework. According to the court, the RBI gets its authority from the RBI Act of 1934 and its sources from the Banking
Regulation Act of 1949.

• The petitioner’s first point was that virtual money was not legal cash but rather a commodity over which the RBI has no
regulatory power. Using definitions provided by numerous authorities, governments, and courts, the court concluded that, while
virtual currency does not attain the status of legal cash, it can nevertheless be used as real money.

• The court further noted that the contested circular did not outright ban the usage or exchange of virtual money. The circular
solely applied to RBI-regulated organizations and instructed them not to interact with or offer services to individuals or entities
dealing with virtual currency.

• After conducting an in-depth examination of all the arguments presented, the Supreme Court ruled that the RBI circular is
unenforceable and illegal due to a lack of proportionality. The court further directed the RBI to instruct the central bank of India
not to freeze the accounts and to refund the reward to the petitioner with interest.
 CONCLUSION

• The court overturned the circulation issued by RBI, but said that virtual bill, called
the ban on cryptocurrencies and the regulation of official digital currencies issued
by RBI, was declared illegal and therefore unenforceable. Did not declare. The
court overturned the circulation issued by RBI but did not declare that
cryptocurrencies were legal or illegal. Cryptocurrencies are not regulated in India
because there is no law on this issue and was drafted in connection with the legal
status of Indian cryptocurrencies, but the same.