Delhi HC issues notice to PayPal; may ask to stop operations in India

Delhi High Court has issued a notice to PayPal over a petition filed by Abhijit Mishra alleging that the global payments major has violated Section 4(1) of the Payment and Settlement Systems Act, 2007.

The petitioner also asked the court to stop the illegal and unauthorized operation of PayPal Payments in India immediately.

A Division Bench of Chief Justice DN Patel and Justice C Hari Shankar has issued the notice the Reserve Bank of India (RBI) and PayPal.

The payment and settlement system act 2007 states that no person other than the Reserve Bank, shall commence or operate a payment system except in accordance with an authorisation issued by the RBI.

The petitioner has also alleged that PayPal is not listed as an authorised operator as per the list of the 'Payment System Operators’ published by the RBI on May 27, 2019.

According to him, Paypal is violating Article 21 of the Constitution of India as it has unauthorized access to the personal information of the citizens such as Aadhaar and PAN, reports Bar & Bench.

He also alleged that Paypal is operating as a foreign exchange dealer and that is against Section 10 of the Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act and demanded to impose a penalty under the FEMA and Rules.

The petition further demands an investigation by the Enforcement Directorate to transfer allegedly illegal profits earned by PayPal to the Prime Minister's Relief Fund.

PayPal has not responded on the matter that is scheduled for the next hearing on September 18.

This is a serious allegation against a company that is already under RBI scanner to set up local data servers in compliance with data localisation norms.

Started its domestic operation in India in November 2017, PayPal facilitates cross-border payments for small merchants, entrepreneurs, and freelancers selling goods and services abroad.

Apart from payment business, PayPal is an active investor, runs an incubator program and has backed several startups such as Pine Labs, FtCash, Simility, and CodeMojo.