Daijiworld Media Network - New Delhi
New Delhi, Sep 27: The Supreme Court will on Monday, September 28, hear a plea challenging the Centre's decision to impose a Merchant Discount Rate (MDR) on specified UPI person-to-merchant transactions above Rs 2,000, in a move that could test the legal basis of the new payment charge framework.
The apex court's cause list for September 28 shows that the petition will come up before a bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana.
The government has ended nearly six years of fully free UPI payments by introducing a 0.4% MDR on specified person-to-merchant transactions above Rs 2,000 from October 15, while keeping everyday person-to-person transactions and smaller payments free of charges.
The MDR will be capped at Rs 300 for payments of Rs 75,000 and above.
Essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will pay a flat MDR of Rs 5 per transaction for payments above Rs 2,000.
Transactions involving mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02% per cent, also capped at Rs 300.
Person-to-person (P2P) transfers, which account for 37% of UPI's transaction volume and 70% of its transaction value, will continue to remain free irrespective of the transaction amount.
The public interest litigation (PIL) filed by advocate Anjan Datta challenges the Centre's September 14 notification and the MDR framework announced on September 15, which is scheduled to come into effect on October 15.
The petition alleges that the levy was introduced without adequate statutory safeguards, transparency or public consultation.
It also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007, arguing that the provision gives the executive unguided powers to determine which electronic payment modes would receive protection from charges.
The petitioner has sought a declaration that an MDR or similar compulsory charge cannot be imposed merely on the basis of a press release or FAQs without a duly authorised, authenticated and published statutory instrument.
The plea states: "Declare that no MDR or analogous compulsory charge may be imposed or recovered merely on the strength of a press release or FAQs absent a duly authorised, authenticated and published statutory instrument."
The petitioner has also questioned the distinction between UPI transactions and RuPay debit card payments, pointing out that the notification continues to provide no-charge protection for RuPay debit cards without a monetary ceiling.
The plea alleges that the framework is arbitrary and discriminatory and could adversely affect merchants, particularly those operating on low margins. It also raises concerns about a possible indirect burden on consumers and the risk of digital exclusion.
The petitioner has sought the quashing or suspension of the framework insofar as it imposes MDR on UPI transactions above Rs 2,000.
Alternatively, the plea seeks reconsideration of the framework after transparent consultation, publication of empirical data and an impact assessment, along with safeguards for micro and small enterprises.
It further seeks a direction that any future MDR classification be based on factors including merchant turnover, statutory MSME status, actual margins, geography and ability to bear the cost, while avoiding what the petitioner describes as "cliff-edge treatment unsupported by evidence".
The Centre, Reserve Bank of India and other authorities have been made respondents in the matter.
The Supreme Court's hearing on Monday comes ahead of the proposed October 15 implementation of the new MDR framework for specified UPI merchant transactions.