Internet And Mobile Association of India v. Reserve Bank of India

By – Rashi Bisht

NAME OF THE CASE  Internet And Mobile Association of India v. Reserve Bank of India
CITATION  (2020 SCC online SC 275)
DATE OF THE CASE  March 4, 2020

APPELLANT  Internet and Mobile Association of India
RESPONDENT  Reserve bank of India
BENCH/ JUDGERohinton Fali Nariman, Aniruddha Bose, V. Ramasubramanian
STATUTES/ CONSTITUENTS INVOLVEDBanking Regulation Act, 1949. The Payment and Settlement Systems Act,2007. Article 19(1)(g) of the Constitution of India,1949. The Payment and Wages Act, 1936. The General Clauses Act, 1897.
IMPORTANT SECTION/ ARTICLESArticle 19(1)(g) of the Constitution of India. Section 2 of the Banking and  Regulation Act, 1949. Section 18 of the Banking and Regulation Act, 1949. Section 45(l) of the Banking and Regulation Act, 1949. Section 22(1) of the Banking and Regulation Act, 1949. Section 36(1)(a) of the Banking and Regulation Act,1949. Section 18 of the Payment of Wages Act,1936.


In the decision of the Supreme Court of India in the case of the Reserve Bank of India vs. the Reserve Bank of India on March 4, 2020, the court withdrew the circulation issued by the Reserve Bank of India. Issued circulations tend to prohibit trading in cryptocurrencies (also known as cryptocurrencies). The court ruled that the restrictions imposed by the Reserve Bank of India on banks and other businesses in connection with cryptocurrency transactions were unfair and therefore declared the restrictions unenforceable.

Introduction and background of the case

  • The Supreme Court deemed the Reserve Bank of India’s (RBI) circular to be unlawful, rendering the circular’s directives unenforceable. The circular instructs the bank not to handle transactions involving the exchange of virtual currency. The Hon’ble Court ruled that the RBI’s directives were incorrect and so unenforceable.
  • The Supreme Court of India’s justices who ruled on the petition submitted by the Internet and Mobile Association of India (IMAI) were Justice Rohinton Nriman, Anirudhha Bose, and V. Ramasubramanion. The Reserve Bank of India (RBI) published a circular on April 6, 2018. The circular forbids the bank, as well as other businesses, from trading in virtual currency.
  • Similarly, at the time of the Reserve Bank of India’s circular, no legislation prohibiting the trading of virtual currencies had been enacted. The Reserve Bank of India published the circular in response to their worry about the hacking of virtual currencies.
  1. The economic damage.
  2. Laundering of funds.
  3. May can encourage terrorist activity.
  • Regarding the above RBI concerns, prior to the issuance of the circulation, RBI issued a press release urging banks and companies to pay attention to cryptocurrency transactions, and no new ones were issued by Bank (RBI). The risk was emphasized. At the time of issuance of the circular.

Facts of the case

  • For RBI-regulated entities, (i) not to serve individuals or companies that trade or settle virtual currencies, and (ii) if they already own, trade, or settle virtual currencies (VC). Instructed not to terminate these personal / corporate relationships.
  • Following the above statement, RBI will exercise its delegated authority to provide services regulated by RBI (i) to trade or promote in cryptocurrencies[1]. We have also issued a notice instructing us not to do so[2]. Transactions involving crypto assets involved in granting access to banking services to remove the restrictions on individuals or groups trading or trading in cryptocurrencies, and (ii) banks and financial institutions regulated by the RBI. The person involved and the complainant have come to the petition for writing.
  • The petitioners of the second letter included some companies engaged in the online exchange of crypto assets. The RBI Statement [3] and thus Circulation is a highlight of cryptocurrencies and is a report on market risk by the Bank for International Settlements (BIS) International Settlements Bank (CPMI)[4]. For digital currencies, Financial Stability Reports 2015 and 2016 of 06.
  • RBI has issued a press release warning cryptocurrency users, holders and traders [5]. In April 2017, Press Release, Government of India, Ministry of Finance released public on cryptocurrency risks and government steps and trading of such currencies. RBI has issued another press release [6].
  • The Government of India and the Ministry of Finance have also adopted cryptocurrencies as fiat currencies or coins, and the FSB’s initial assessment shows the use of these currencies in financing. As announced in 204 2018, there is no risk to crypto assets that portray global financial stability. RBI sent an email to the government with a note on crypto asset regulation.
  • As a result, the disputed Circular was issued by RBI, and several applications were approved accordingly, and Circular was overturned for proportional reasons[7]. The April 5, 2018, statement was challenged in a written petition, but instead of statutory instructions, RBI was instructed to close the petitioner’s account in petition. 373.

Issues Raised Before the Court

1. Did RBI’s authority include VC regulations as this currency was nothing more than a tradable commodity and fiat currency?

2. Even if VCs were within the RBI’s regulatory jurisdiction, did the Circular unduly infringe on the petitioner’s rights?

Argument from the Appellant Side –

  • The petitioner went on to say that because virtual money does not form part of the country’s credit system, the RBI lacks the jurisdiction to regulate it to its advantage. The circular, according to the counsel, had no legal foundation because it imposed a complete prohibition on virtual money, which would violate article 19(G)(1) of the Indian constitution, which controls commerce and industry with reasonable restrictions[10].
  • In his second writ, the petitioner said that without effective legislation, such laws had a negative impact on the economy, potentially leading to a black market.
  • It also asserted that the RBI has failed to recognize various types of virtual currency schemes, and that because virtual currency lacks a medium of exchange, a store of value, a unit of account, and constitutes a final discharge of debt, it cannot be recognized as money, and thus the RBI has no power to regulate it.

Argument from the Respondent Side –

  • RBI In response to the petitioner’s concerns, the bank stated that it has the authority to control virtual money under the Reserve Bank of India Act of 1934, the Banking Regulation Act of 1949, and the Payment and Settlement Act of 2007[11].
  • It does not infringe on any of the essential rights provided by articles 14, 19, and 21 of the Indian constitution. The companies controlled by the RBI have no absolute rights, and virtual currency is not completely prohibited.
  • According to the respondent, the circular is not excessive because the RBI granted their firms three months to end their links with virtual currency. Furthermore, for the past five years, the bank has issued warnings to stakeholders about the challenges and risks associated with virtual currency.
  • Furthermore, the RBI ruled that, while virtual money cannot be recognized as a currency and does not fall under the purview of the payment system, it has the potential to become a parallel payment system, which provides the RBI the ability to regulate virtual currency in the public interest.


  • Banking Regulation Act, 1949: The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India. Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966.
  • The Payment and Settlement Systems Act,2007: THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007 [20th December 2007] An Act to provide for the regulation and supervision of payment systems in India and to designate the Reserve Bank of India as the authority for that purpose and for matters connected therewith or incidental thereto.
  • Article 19(1)(g) of the Constitution of India,1949:  To practice any profession, or to carry on any occupation, trade, or business.
  • The Payment and Wages Act, 1936: WHEREAS it is expedient to regulate the payment of wages to certain classes of [employed persons].
  • The General Clauses Act, 1897: WHEREAS it is expedient to consolidate and extend the General Clauses Acts, 1868 and 1887.
  • Section 35A of the Banking Regulation Act, 1949 vests power in the RBI to give directions to banks and can act, “to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or a manner prejudicial to the interests of the banking company”


The court referenced the case of “State of Maharashtra v. Indian Hotel and Restaurant Association”[12] in the current case of “Internet and Mobile Association of India v. Reserve Bank of India.” In this case, the court determined that the petitioner had incurred at least some degree of harm in order to rule in their favor.

Reasoning and Judgement

  • After hearing from all parties, the court agreed to examine the RBI’s function and power, as well as identify the virtual currency. After reviewing the history of the RBI’s function and considering the Reserve Bank of India Act 1934, Banking Regulation Act 1949, and Payment and Settlement Act, the court concluded that the RBI had the authority to control the country’s monetary framework. According to the court, the RBI gets its authority from the RBI Act of 1934 and its sources from the Banking Regulation Act of 1949.
  • The court conducted an in-depth examination of the petitioner’s concerns.

I. The petitioner’s first point was that virtual money was not legal cash but rather a commodity over which the RBI has no regulatory power. Using definitions provided by numerous authorities, governments, and courts, the court concluded that, while virtual currency does not attain the status of legal cash, it can nevertheless be used as real money.

II. The court ruled that the RBI can use its authority regardless of whether anything is legal tender or possesses the four criteria of a real currency. The virtual currency has been classified in various countries as property, funds, commodities, and money.

III. The court further noted that the contested circular did not outright ban the usage or exchange of virtual money. The circular solely applied to RBI-regulated organizations and instructed them not to interact with or offer services to individuals or entities dealing with virtual currency.

IV. There was no malice in the deed because the RBI raised the problem throughout a five-year period, making stakeholders aware of the VC threat. The court further stated that because the RBI is a legislative body rather than a statutory entity, it has the authority to dictate and do certain things without the involvement of the national government.

V. Concerning the topic of multiple forms of VC and whether to prohibit solely anonymous virtual currency, the court argued that it is up to the expert to determine.

  • After conducting an in-depth examination of all the arguments presented, the Supreme Court ruled that the RBI circular is unenforceable and illegal due to a lack of proportionality. The court further directed the RBI to instruct the central bank of India not to freeze the accounts and to refund the reward to the petitioner with interest.


The court overturned the circulation issued by RBI, but said that virtual bill, called the ban on cryptocurrencies and the regulation of official digital currencies issued by RBI, was declared illegal and therefore unenforceable. Did not declare. The court overturned the circulation issued by RBI but did not declare that cryptocurrencies were legal or illegal. Cryptocurrencies are not regulated in India because there is no law on this issue and was drafted in connection with the legal status of Indian cryptocurrencies, but the same.

[1] Section 35A read with Section 36(1)(a) and Section 56 of the Banking Regulation Act, 1949 and Section 45JA and 45L of the Reserve Bank of India Act, 1934 (hereinafter, “RBI Act, 1934”) and Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007

[2] Dated April 6, 2018

[3] Dated 05-04-2018

[4] Dated 06-04-2018

[5] Dated On 01-02-2017

[6] Dated 05- 12-2017

[7] Dated 06- 04-2018

[8] Reserve Bank of India Act, 1934

[9] Banking Regulation Act, 1949

[10] Article 19(1)(g), the Constitution of India.

[11] The Payment and Settlement Systems Act,2007

[12] (2019) 3 SCC 429.

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