The Delhi High Court has asked the Reserve Bank of India (RBI) to mediate a dispute between PayU Payments, Yes Bank, ICICI Bank and Visa over the classification of merchants.
In an order passed on September 14, Justice Subramonium Prasad directed the RBI to depute a senior officer familiar with the payments sector to try to resolve the dispute within 30 days.
The Court also ordered the parties to maintain status quo on the disputed past transactions during the mediation.
“In the opinion of this Court, adopting this process will ensure that the future transactions by the parties in the scheduled course are not hampered pending mediation and in the opinion of this Court, the senior officer of the RBI would be the most competent person to assist the parties to come to a solution pending the mediation process,” the Court said.
The Bench reasoned that since the entire regime is being operated under the certificates granted by the RBI and under the supervision of the RBI, it would be more appropriate to request the RBI to act as a mediator instead of sending the parties to pre-litigation mediation.
The dispute relates to Merchant Category Codes (MCCs), four-digit codes identifying a merchant’s principal business and used to determine the applicable interchange fee.
ICICI Bank, which issues Visa cards, alleged that some merchants using PayU were assigned incorrect MCCs, resulting in lower interchange fees. It consequently raised claims against the acquiring banks through Visa’s Interchange Reimbursement Fee (IRF) process.
PayU, however, said it does not assign MCCs. It collects and verifies merchants’ business information and forwards it to the acquiring bank, which independently assigns the appropriate code. Therefore, it disputed liability for any alleged misclassification.
PayU approached the High Court after Yes Bank deducted amounts from its settlements towards the alleged IRF liability. Though Yes Bank later reversed more than ₹5.95 crore, ₹6.88 crore remained with the bank. PayU apprehended further deductions over pending IRF claims involving other acquiring banks.
It has also challenged Visa’s IRF process, arguing that such disputes should be dealt with under the Payment and Settlement Systems Act, 2007.
However, the High Court did not decide these issues at this stage. It said the parties should first attempt to resolve the problem through RBI-facilitated mediation.
Justice Prasad added that during the mediation, Visa cannot issue final IRF determinations concerning the disputed past transactions, while the acquiring banks cannot make further deductions from PayU in relation to those claims.
“It is made clear that this order shall not impact or obstruct or modify the transactions between the parties in the ordinary and usual course,” the Court added.
Senior Advocates Rajiv Nayar, Sandeep Sethi and Rajeeve Mehra along with advocates Anush Raajan, Ayush Singh Dhami, Meghna Tandon, Palak Bhargava, Pratham Vir Agarwal, Naman Maheshwari, Shreya Sethi, Abhishek Butoliya and Manas Tuli represented PayU Payments.
Yes Bank was represented by Senior Advocate Rajshekhar Rao as well as advocates Karthik Somasundaram, Sonam Gupta, Ankita Hariramani, Saumay Kapoor, Shiva Pande and Ritvika Poswal.
Senior Advocate Ashwini Mata with advocates Shankh Sengupta, Varuna Bhanrale, Vivek Krishnani and Tanya Hasija appeared for ICICI Bank.
Visa was represented by Senior Advocate Akhil Sibal along with advocates Binsy Susan, Akshay Sharma, Pavitra Singh, Palak Kaushal, Ayushi Jain and Krishnesh Bapat.
Advocate Sidhant Kumar from Unum Law represented Airtel Payments Bank.
Advocates Neelam Rathore and Ashish Mahajan appeared for IndusInd Bank.
[Read Order]