On Tuesday, the Delhi High Court stayed a FIC order via which the Agency put a penalty of ₹96 lakhs on the American Online Payment Company, PayPal.
The fine was imposed on regard to its non-registeration as “reporting entity” under the Prevention of Money Laundering Act (PMLA), 2002.
PayPal agrued in the plea that the Financial Intelligence Unit wrongly interpreted PMLA provisions against all settled principles of statutory interpretation. It further described that the Company functions as a payment intermediary and Online Payment Gateway Service Provider to its customers, and doesn't provide clearing, payment, money transfer or settlement services.
Thus, it contended that it's not a 'Financial Institution' as described under Section 2(1)(l) of the PMLA, and therefore, doesn't require to register as a 'reporting entity' under Section 2(1) (wa) of the Act.
The plea in this regard, read:
"..the Respondent passed the Impugned Order, in complete derogation of the settled principles of law and statutory interpretation.The Impugned Order incorrectly holds that, by virtue of the activities being carried on by the Petitioner as a payment intermediary, the Petitioner is covered under the definition of “reporting entity” as under Section 2(l)(wa) of the PMLA..."
Contending that the FIC's order is in voilation of principles of 'Natural Justice' as the Company was never provided with an opportunity to rebute the certain findings made against it, submitted that the order runs contrary to the regulatory understanding of PayPal's business by the RBI which has laid down the operational framework for the regulation and supervision of payment systems in India.
A single-Judge Bench of Justice Prathiba M Singh while ruling in PayPal's favour and staying the penalty imposed made it subject to PayPal depositing a bank guarantee of the penalty amount with the High Court and maintaining records of all its transactions.
While issuing Notice in the matter, the Delhi High Court has previously sought Financial Intelligence Unit's response also.
Senior Advocate Mukul Rohatgi and Sajan Poovayya with SAM Partner Anuj Berry appeared for PayPal. The Court has adjourned the matter for next hearing on 26th February, 2021.
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