The Delhi High Court has called upon the Reserve Bank of India (RBI) to mediate a contentious issue involving PayU Payments, Yes Bank, ICICI Bank, and Visa concerning the classification of merchants. In an order dated September 14, Justice Subramonium Prasad instructed the RBI to appoint a senior officer versed in the payments sector to mediate the dispute within 30 days.
The court further mandated that all parties maintain the status quo regarding past disputed transactions during the mediation period. Justice Prasad remarked that this approach would prevent disruptions to future transactions while mediation is underway. He emphasized that the RBI, under whose certificates and supervision the payment systems operate, is best positioned to mediate the dispute rather than resorting to pre-litigation mediation.
The central issue in this case revolves around Merchant Category Codes (MCCs), which are four-digit identifiers used to determine a merchant’s primary business and the associated interchange fees. ICICI Bank, a Visa card issuer, alleged that some merchants using PayU were incorrectly assigned MCCs, resulting in reduced interchange fees. Consequently, ICICI Bank levied claims against acquiring banks through Visa’s Interchange Reimbursement Fee (IRF) process.
PayU contested these claims, clarifying that it does not assign MCCs; rather, it collects and verifies merchants’ business details, which are then independently coded by the acquiring bank. PayU’s legal action followed Yes Bank’s deduction of amounts from its settlements due to alleged IRF liabilities, even though Yes Bank later refunded over ₹5.95 crore, with ₹6.88 crore still withheld. PayU feared further deductions from other banks over pending IRF claims.
Additionally, PayU challenged Visa’s IRF process, advocating that such disputes fall under the purview of the Payment and Settlement Systems Act, 2007. However, the High Court deferred judgment on these issues, encouraging the parties to pursue mediation facilitated by the RBI first.
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Justice Prasad stipulated that during mediation, Visa should refrain from issuing final IRF determinations on the disputed transactions, and acquiring banks should not make additional deductions from PayU concerning these claims. The court clarified that its order should not alter or impede routine transactions between the parties.
PayU Payments was represented by Senior Advocates Rajiv Nayar, Sandeep Sethi, and Rajeeve Mehra, alongside a team of advocates including Anush Raajan and Ayush Singh Dhami. Yes Bank’s legal representation included Senior Advocate Rajshekhar Rao and a team of advocates such as Karthik Somasundaram, while ICICI Bank was represented by Senior Advocate Ashwini Mata and others. Visa’s representation featured Senior Advocate Akhil Sibal and a team of advocates. Advocates Sidhant Kumar from Unum Law represented Airtel Payments Bank, while Neelam Rathore and Ashish Mahajan appeared for IndusInd Bank.
