In a judgment of Supreme Court of India, given on 4rth march, 2020 in the case of Internet and Mobile Association of India v. Reserve Bank of India, the court bashed down the circular issued by Reserve Bank of India. The circular issued, tends to put a ban on the trading of virtual currencies also known as crypto currencies. The court as of the view that the restrictions imposed by the Reserve Bank of India on banks and other entities in regard to the trading of virtual currency is unfair and therefore declared the restrictions to be un-viable.

Introduction
Supreme Court declared the circular issued by Reserve Bank of India (RBI) as illegal that is declared the guidelines of the circular to unenforceable. The circular directs the bank to not to deal with the transactions involving the trade of virtual currencies. The hon'ble court declared the instructions by RBI to be inappropriate and hence declared it to be un-enforceable. Justice Rohinton Nriman, Anirudhha Bose and V. Ramasubramanion were the judges of Supreme court of India, under whom the judgement to the petition filled by Internet and Mobile Assiociation of India (IMAI) was pronounced.

Background of the case:
Reserve Bank of India (RBI) issued a circular dated 6th april,2018. The circular do prohibits the bank and other entities too from trading in virtual currencies. Moreover the circular do barred the banks to provide any kind of services to any individual or entity dealing or setting virtual currencies. The prohibition issued by the Reserve Bank of India had a negative effect on the Indian economy as because the mediums (the bank accounts), through which virtual currencies were traded could no longer be maintained or operated therefore an end to the business through virtual currencies do prevailed.

In reference of the same, at the time of issuance of the circular by Reserve Bank of India there was no legislation passed imposing a ban on the trade of virtual currencies. In other words the virtual currency was separated from the assets of the economy. The reason why Reserve Bank of India issued the circular was there concern which was related to the hacking of the virtual currencies.

Which could lead to numerous problem in the economy such as:

• loss to the economy
• money laundering
• can promote terrorist activities too.

In reference to the above concern of RBI, a press release was done by RBI before issuing the circular, asking the banks and the entities to beware from the trade of virtual currencies, moreover non of the new risk was highlighted by the bank(RBI) at the time of issuance of the circular.

Facts
On 5th April, 2018 Reserve Bank of India issued a press release raising the concern about the consumer protection from trade of virtual currency. They were of the view that trading in virtual currency also referred as crypto currencies are prone to hacking and therefore would lead to money laundering, terrorist activities, etc. In this view RBI asked the banks to not to deal with the transactions related to the trading of virtual currency.

The services which RBI directed the bank not to deal with were- maintaining the accounts, registering, trading, settling, clearing, giving loans against virtual currencies, accepting virtual currency as collateral, opening accounts of exchanges dealing with them and transfer or sale/purchase of virtual currencies.

The matter was challenged by Internet and Mobile Association of India. The Supreme court of India allowed the petition on the ground of proportionality. Earlier in 2013 the Reserve Bank of India do issued a public caution to the traders and holders of virtual currency in context with the legal and security related risks associated with it.

Issues:

• Petitioner's contentions
  
  1. The petitioner contended that Reserve Bank of India do lacks the jurisdictions to disallow the trade of virtual currency (crypto currency) moreover the ban imposed by RBI is based on the mis-understanding of RBI.
      
  2. The Petitioner also contended that the Virtual currency or the crypto currencies are not a kind of currency note or coin but a medium of exchange or a store of value.
      
• Respondent's contentions
  
  1. Replying to the 1st contention of petitioner (as mentioned above), the respondent dis-agreed with the fact that it do not have jurisdictions, moreover said that crypto currency is a mode of digital payment which RBI do holds the power to have a control.
      
  2. Replying to the 2nd contention of petitioner, the respondent said that crypto currency is a stainless digital currency which is used for trading. They (RBI) further contended that since crypto currency do operate independently they are immune to government's interference.
      
• Related Cases
  
  1. Here in the present case of Internet and Mobile association of India v. Reserve Bank of India, the court cited the case of State of Maharastra v. Indian Hotel and Restaurant association[1]. In this case the court was of the view that atleast some degree of damage suffered by the petitioner in order to pronounce the judgment in their favour.
      
• Judgment
  The court was of the view that although Reserve Bank of India has wide powers and do plays an important role in the upliftment of Indian economy, but here they are unable so show any sought of damage suffered by it's regulated entities. Therefore the guidelines issued by the Reserve Bank of India, directing the banks to stop dealing or providing services to the entities trading in virtual currencies are illegal hence unenforceable.
   
• Concepts Highlighted
  
  1. The Circular dated 06/04/2018, issued by RBI deals entirely with virtual currencies and the prohibition on dealing with the same. This Circular is statutory in character, issued in exercise of the powers granted under:
     
     1. Reserve bank of India act, 1934
     2. Banking Regulation act, 1949 and
     3. Payment settlement system act, 2007.
         
  2. On 27-12-2013, newspapers reported the first ever raid in India by the Enforcement Directorate, of 2 Bitcoin trading firms in Ahmedabad, by name, rBitco.in and buysellbitco.in. This was stated to be India's first raid on a Bitcoin trading firm and the second globally, after Federal Bureau of Investigation of the United States of America conducted a raid in October of the same year.
      
  3. Siddharth Dalmia and Vijay Pal Dalmia came up with a writ petition in WP (C) No.1071 of 2017 under Article 32 of the Constitution of India seeking the issue of a writ of mandamus directing the respondents to declare as illegal and ban all virtual currencies as well as ban all websites and mobile applications which facilitate the dealing in virtual currencies.
      
  4. The Financial act Task Force (FATF) has also observed that crypto assets are being used for money laundering and terrorist financing. A globally coordinated approach is necessary to prevent abuses and to strictly limit interconnections with regulated financial institutions.
      
  5. The impugned decision is within the range of wide powers conferred upon RBI under the Banking Regulation Act, 1949, The Reserve Bank of India act, 1934 and the Payment and Settlement System act 2007.

Conclusion
As per the above mentioned points and the judgement it is clear that that petitioner succeed and the circular issued by Reserve Bank of India is declared to be un-enforceable. Due to the judgement, the businesses can rejoin the industry and hence can trade in Virtual currencies (crypto currency). However it is important to know that the Supreme Court in it's judgement have only stuck down the circular issued by the RBI but have not declared the virtual currencies as legal or illegal, moreover since their is no legislation regarding the same therefore virtual currencies remain unregulated in India.

Recently a bill has being drafted namely Banning of Crypto currency and regulation of official Digital currency bill, 2019. The bill has being drafted in regard of the legal status of virtual currency in India, however it has not been presented in front of the parliament or have not being discussed by the members of parliament. As stated above too, the bill raises certain issues like holding, selling, disposing off or any kind of trade through crypto currencies in India is to be considered legal or not.

End-Notes:

• Citation: MANU/SC/0264/2020 - Year of the case 2018
• Appellant
  Internet and Mobile Association of India
  
  Respondent
  Reserve bank of India
• Bench/judges
  
  1. Rohinton Fali Nariman,
  2. Aniruddha Bose
  3. V. Ramasubramanian
• Acts Involved
  
  1. Banking Regulation act, 1949
  2. The Payment and Settlement Systems act, 2007
  3. Article 19(1)(g) of Constitution of India,1949
  4. The Payment and Wages act, 1936
  5. The General Clauses act, 1897
• Important Sections
  
  1. Article 19(1)(g) of the Constitution of India
  2. Section 2 of the Banking and Regulation act, 1949
  3. Section 18 of the Banking and Regulation act, 1949
  4. Section 45(l) of the Banking and Regulation act, 1949
  5. Section 22(1) of the Banking and Regulation act, 1949
  6. Section 36(1)(a) of the Banking and Regulation act, 1949
  7. Section 18 of Payment of wages act,1936

Reference:

1. https://indiankanoon.org/doc/38033723/ , Citation-MANU/SC/0045/2019