INTERNET AND MOBILE ASSOCIATION OF INDIA versus RESERVE BANK OF INDIA

Citation: [2020] 2 S.C.R. 297 · Decided: 04-03-2020 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Appeal(s) allowed

Cited by 8 judgment(s) · cites 36 · see the full citation network in Lexace

Judgment (excerpt)

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INTERNET AND MOBILE ASSOCIATION OF INDIA
v.
RESERVE BANK OF INDIA
(Writ Petition (Civil) No. 528 of 2018)
MARCH 04, 2020
[R. F. NARIMAN, ANIRUDDHA BOSE AND
V. RAMASUBRAMANIAN, JJ.]
Reserve Bank of India Act, 1934 – ss.17, 20-22, 26, 38, 45JA,
45L, 45U, 45W, 45Z-45ZO – Reserve Bank of India (RBI) issued a
“Statement on Developmental and Regulatory Policies” dtd.
05.04.18 and circular dtd. 06.04.18 respectively, which directed
the entities it regulated (i) not to deal with or provide services to
any individual/business entities dealing with/settling virtual
currencies (VCs) and (ii) to exit the relationship, if they already
have one, with such individuals/business entities – Challenged by
petitioners (a specialized industry body representing interests of
online & digital services industry; companies running online crypto
assets exchange platforms; shareholders/founders thereof and
individual crypto assets traders) inter alia on the ground that RBI has
no power to prohibit the activity of trading in VCs through Virtual
Currency Exchanges (VCEs) since they are not legal tender but
tradable commodities/digital goods, not falling within the regulatory
framework of 1934 Act or 1949 Act and that VCs do not even fall
within the credit system of the country to enable RBI under the
Preamble to 1934 Act giving it a mandate to operate the currency &
credit system of the country to its advantage – Held: After 2016
Amendment Act, RBI is now vested with the obligation to operate
the monetary policy framework in India – 1934 Act, 1949 Act and
the 2007 Act cumulatively confer very wide powers upon RBI inter
alia to operate the currency and credit system of the country to its
advantage; regulate financial system of the country to its advantage;
to issue directions to a payment system or a system participant which
in RBI’s opinion is engaging in any act that is likely to result in
systemic risk being inadequately controlled or is likely to affect the
   [2020] 2 S.C.R. 297
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SUPREME COURT REPORTS
[2020] 2 S.C.R.
payment system, monetary policy or the credit policy of the country
and to issue directions to system providers or system participants or
any other person generally, to regulate the payment systems or in
the interest of management or operation of any of the payment
systems or in public interest – Depending on the text of the statute
involved in the case and the context, various courts in different
jurisdictions have identified virtual currencies to belong to different
categories ranging from property to commodity to non-traditional
currency to payment instrument to money to funds – Petitioners’
contention that VCs are just goods/commodities and can never be
regarded as real money and that they are carrying on an activity
over which RBI has no power statutorily, not accepted – Petitioners’
contention that the impugned decision is ultra vires is rejected –
Impugned Circular does not impose a prohibition on the use of/
trading in VCs, the prohibition is not per se against the trading in
VCs – It is against banking companies, with respect to a class of
transactions – Further, RBI cannot be held guilty of non-application
of mind when the sequence of events from June 2013 up to 02-04-
2018 show that RBI was brooding over the issue for almost five
years – Also, the contention that the impugned Circular is vitiated
by malice in law and is a colorable exercise of power cannot be
sustained – Impugned Circular cannot be assailed on the basis of
M. S. Gill test either – It is no doubt true that RBI has very wide
powers however, the availability of power is different from the
manner and extent to which it can be exercised – RBI has not so far
found, the activities of VCEs to have actually impacted adversely,
the way the entities regulated by RBI function – When the consistent
stand of RBI is that they have not banned VCs and when the
Government of India is unable to take a call despite several
committees coming up with several proposals including two draft
bills, both of which advocated exactly opposite positions, it is not
possible to hold that the impugned measure is proportionate –
Impugned Circular dtd. 06.04.18 is set aside on the ground of
proportionality – Statement dtd. 05.04.18, though challenged, is
not in the nature of a statutory direction and hence the question of
setting aside the same does not arise – Finance Act, 2016 – Banking
Regulation Act, 1949 – ss.5, 8, 21, 22, 27, 29A, 30(1B), 

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