Online payment giant PayPal has lodged an appeal in the Delhi High Court against a recent ruling that categorized it as a "payment system operator" under the Prevention of Money Laundering Act (PMLA), thereby subjecting it to "reporting entity obligations" mandated by the law.
The appeal comes following a decision by a single judge of the high court, who pronounced that PayPal was obligated to adhere to the reporting obligations outlined in the PMLA. The order was subsequently challenged by PayPal, with their senior counsel presenting arguments before a bench headed by Chief Justice Satish Chandra Sharma.
PayPal's legal representative argued that the single judge's order was erroneous and untenable, particularly in light of a recent ruling by the Delhi High Court regarding Google Pay India Services Private Limited's case. Senior Advocate Mukul Rohatgi, representing PayPal, contended that the earlier order could not stand in the face of the more recent precedent, and he sought to draw a parallel between the two cases.
In a decision passed on July 24, the single judge had invalidated a penalty of Rs 96 lakh that had been imposed on PayPal by the Financial Intelligence Unit (FIU) India for purported non-compliance with reporting obligations mandated by the PMLA. The court had also upheld that PayPal was fittingly characterized as a "payment system operator" and was therefore subject to the associated obligations.
This ruling was delivered in response to a petition filed by PayPal challenging the penalty levied by the FIU. The company cited guidelines issued by the Reserve Bank of India (RBI) to assert that its role was that of an Online Payment Gateway Service Provider, falling outside the scope of a "payment system operator" or a "reporting entity" as defined by the PMLA.
Interestingly, the Delhi High Court had recently rejected Public Interest Litigations (PILs) seeking to halt the operations of Google Pay, establishing that it was not a "payment system provider." The court deemed Google Pay a "mere third-party app provider" and thus does not necessitate authorization from the RBI.
The division bench of Chief Justice Satish Chandra Sharma and Justice Sanjeev Narula listed the appeal filed by PayPal for further hearing in September, indicating that the court is prepared to thoroughly consider the arguments and ramifications of categorizing PayPal as a "payment system operator" under the PMLA.
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