In the third in sequence yet the fiercest attempt of downing the Reserve Bank of India’s circular blocking off banking services to cryptocurrency exchanges, four more Indian cryptocurrency exchanges have jointly filed a Writ Petition (Civil) no. 373 of 2018 under Article 32 of the Constitution challenging the constitutional validity of the Central Bank’s Circular.
The cryptocurrency exchanges who have moved to the Supreme Court, along with their Shareholders, against the RBI are (1) Coindelta Exchange run by Bitfair Technologies Pvt. Ltd., Gurgaon; (2) Koinex Exchange run by Discidium Internet Labs Pvt. Ltd., Mumbai; (3) Throughbit Exchange run by Throughbit technologies Pvt. Ltd., Bangalore and; (4) CoinDCX run by Neblio Technologies Pvt. Ltd., Mumbai.
Only a month has passed since the Reserve Bank of India, vide Circular issued on 6th April 2018, directed the regulated banks and payment platforms to immediately suspend their services for cryptocurrencies, in the following words:
“… it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.”
As per the current status of the Crypto litigation in the Supreme Court, prior to the latest joint Writ Petition by four exchanges, two Writ Petitions in public interest are pending for deciding the legality/illegality of cryptocurrencies.
The first Writ Petition no. 1071/2017 was filed in Public interest under Article 32 of the Constitution by Mr.Vijay Pal Dalmiya Advocate before the Supreme Court of India in which he sought a ban on the sale and purchase of cryptocurrencies on the ground that it is used in anti-national, illegal and nefarious activities such as terrorism funding, illegal trade of arms and drugs, bribery, money laundering, tax evasion, payment of ransom etc. He also argues that the sale and purchase of cryptocurrency including Bitcoin violate or have a bearing on various existing laws of India including Reserve Bank of India Act, 1934; the Foreign Exchange Management Act, 1999; the Coinage Act, 1906; the Securities Contracts (Regulation) Act, 1956; the Sales of Goods Act, 1930; the Payment and Settlement Systems Act, 2007 and Indian Contract Act, 1872.
The second Writ Petition no. 1076/2017 under Order 38 of Supreme Court Rules 2013 read with Article 142, was filed in public interest by Mr. Dwaipayan Bhowmick Advocate in which he sought a direction to regulate the flow of cryptocurrency and to ensure that the cryptocurrency be made accountable to the Exchequer.
The RBI dictum was followed by a public outcry on this unexpected step which adversely affected the interest of large number of cryptocurrency ventures and start-ups. In the first attempt to assail the Circular of RBI, Kali Digital Eco-systems Pvt. Ltd. which runs the exchange “CoinRecoil”, approached the High Court of Delhi by way of a Writ Petition no. 3677/2018 crying infringement of its Right to equality (Article 14) and Right to carry on trade [Article 19 (1) (g)] guaranteed under Part III of the Constitution of India. Just after this, another exchange namely moneytradecoin.com approached the High Court of Delhi challenging the RBI Circular. Considering the similarity of issue in both the Writ Petitions the Court has tagged the matters and the same are likely to be heard on 24th May, 2018.
The joint Writ Petition filed by the four exchanges came to be heard before the Court of Justice Adarsh Goel and Justice Indu Malhotra on 1st May, 2018, who after examining the issue involved, issued a notice to the Reserve Bank of India and tagged the matter with the other two pending Writ Petitions. All the Writ Petitions are likely to be listed for hearing before the Court on 11th May 2018.
It is notable that all the stakeholders of the crypto community have approached the Court for protection of their right, whereas the Crypto holder/investor still remains unvoiced. It will be interesting to expect a move from the investors also for having their stance heard as one of the interested and the most affected party!
About the author: Mohammed Danish is a lawyer practicing at the High Court of Delhi in India. You can follow the author on twitter @cryptokanoon, and direct your queries at firstname.lastname@example.org
Last modified: May 20, 2020 8:49 PM UTC