Litigation News

Will not roll out payments service without complying with all the norms: WhatsApp tells Supreme Court

Shruti Mahajan

The Supreme Court today was assured by WhatsApp that it would not roll out its payment services without duly complying with all the regulations and norms in place in India.

WhatsApp made the statement during the hearing of a plea seeking a ban on its payment service, for not being in line with data localization norms.

The Bench of Chief Justice of India SA Bobde and Justices Indu Malhotra and Hrishikesh Roy took up the fresh petition via video conferencing today.

The Court took the assurance made by Counsel for WhatsApp, Senior Advocate Kapil Sibal, on record.

Mr. Kapil Sibal, learned Senior Counsel appearing for Respondent No.3 - WhatsApp Inc., makes a statement on behalf of his client that they will not go ahead with the payments’ scheme without complying with all the regulations in force.
Supreme Court recorded in its order

While a beta licence was granted to WhatsApp in 2018 for the purpose of launching its payment service, a dedicated and separate app has not yet been launched.

It is the petitioner's case that WhatsApp's existing model for its payments service, which is embedded within the messaging app itself, should be declared inconsistent with the Unified Payment Interface (UPI) Scheme, given that a "separate dedicated app" is not offered by the messaging service company.

The National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI) must ensure that WhatsApp's existing model is changed to be in line with the UPI payment scheme, the plea states. Thus, it was prayed that the messaging app's payment service operations be suspended till the change is made.

The petitioner has also urged the Court to direct the authorities responsible to not grant any relaxations to WhatsApp as regards data localization norms and the compliance of the same. The petitioner has also prayed for a direction to initiate punitive action against WhatsApp for its "blatant non compliance of Directives/Guidelines issued in regard to securing financial data of the Users".

The Court today asked the Central government, Facebook, and WhatsApp to file their replies within three weeks and has scheduled the next hearing thereafter. The Court also clarified that the government may process the applications filed by WhatsApp in accordance with the law and there is no stay on the same.

It is made clear that there will be no stay of the proceedings with respect to the application of respondent No.3 by the Government, which shall be processed in accordance with law.
Supreme Court said today

The petitioner has averred that the "serious, blatant, and wilful violation" by WhatsApp of the mandatory guidelines and regulatory norms of the UPI Scheme is a serious threat posed to the monetary policy of India. The same could also affect the safety and privacy of citizens of India, it is added.

The petitioner has also argued that despite WhatsApp's claims of having a secure and safe technological interface, the messaging app has been known to have lapses in relation to securing sensitive user data.

The company has consistently defaulted in complying with the norms pertaining to data localisation, which is a pre-requisite for payment services in India according to RBI's rules and guidelines, it is pointed out.

The petition is drawn by Advocates Yasir Rauf and Suneha Jain and filed by Advocate Gaurav Sharma.

WhatsApp was represented by Senior Counsel Kapil Sibal (briefed by Shardul Amarchand Mangaldas Partner Tejas Karia) and Facebook Inc. was represented by Senior Advocate Arvind Datar. The petitioner NGO, Good Governance Chambers, was represented by Senior Counsel Krishnan Venugopal.

In an earlier petition filed before the Supreme Court by think tank Centre for Accountability and systemic change (CASC), it was contended that WhatsApp is not fully in compliance with the norms prescribed in India for launching payment services.

The petitioner in that case had sought for directions to WhatsApp to ensure that norms related to appointment of a grievance officer and others are complied with before it is allowed to launch its payment service. WhatsApp, in that case also, had given the same assurance to the Supreme Court in May 2019.

CASC had claimed that while the RBI circular in relation to payment services mandates that a company must have its offices and payments in India, this rule appears to be violated by instant messaging service company.

The think tank subsequently filed an application claiming that WhatsApp, in its beta testing stage, was continuing testing its payment service on 1 million users in violation of data localization norms in India. An interim relief thus, was sought in the form of stopping the trials.

Read Order:

Good governance vs NPCI.pdf
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