Cannot Stop Government From Bringing Law on Cryptocurrencies: Supreme Court

The bench said it was a constitutional issue and the Reserve Bank of India circular only advises.

Supreme Court of India.

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The Supreme Court said on Friday it cannot stop the government from bringing a legislation in Parliament on crypto currencies and dismissed a plea challenging constitution of an inter-ministerial committee to make recommendations to the Centre on virtual currencies.

Crypto currencies are digital or virtual currencies in which encryption techniques are used to regulate generation of their units and verify the transfer of funds while operating independently of a central bank.

A bench of Justices DY Chandrachud and Hima Kohli termed the PIL filed by a private firm "misconceived" and dismissed it.

"There is no actionable cause for a petition under Article 32 of the Constitution. The Court cannot interdict the Government from bringing a legislative proposal before Parliament," the bench said.

At the outset, the court said, "What kind of plea is this? Government has made an inter-ministerial committee (IMC), so you filed a petition under Article 32 of the Constitution? You want to challenge the proposed law. You're going by RTI response."

Advocate Prabhat Kumar, appearing for the firm, said the finance minister had announced in the budget speech that crypto currencies are not legal tender nor are they safe and now the government is saying they will make a law.

The bench noted it was a constitutional issue and the Reserve Bank of India (RBI) circular only advises and is not binding on the government.

It noted in the order that invoking the jurisdiction of the Supreme Court under Article 32 of the Constitution, the petitioner seeks to challenge a communication dated September 2, 2021 of the Government of India in the Ministry of Finance, Department of Economic Affairs.

The communication is in response to a query under the Right to Information Act of 2005, submitted by an advocate in Hyderabad. The letter refers to a statement in the Budget Speech of 2018-19 and to the constitution of a high level inter-Ministerial Committee.

"The letter finally states that the Government would take a decision on the recommendation of the IMC and a legislative proposal, if any, would be introduced in parliament following the process," the bench said.

It said, besides being a response to a query under the 2005 RTI Act, the letter merely indicates what has happened in the past and adverts to the fact that the government may introduce a legislative proposal.

The bench noted that counsel for the petitioner also relied on a communication dated May 31, 2021 of the Reserve Bank of India which, in fact, informs all entities, including commercial and cooperative banks, to whom it is addressed, that the earlier circular of the RBI dated April 6, 2018 was set aside in the judgment of this court dated March 4, 2020 and it is no longer valid.

Banks have, however, been requested to continue carrying out due diligence procedures, the court said, while referring to the RBI's latest circular on the issue.

It noted that besides seeking to challenge the letter dated September 2, 2021, which was in response to an RTI query, the petitioner has sought direction to implement the judgment of this court dated March 4, 2020 and for the issuance of a fresh circular in accordance with that judgment.

"No such relief is required to be granted. Hence, the petition is misconceived and is accordingly dismissed," the bench said.

On March 4, 2020 the top court had allowed banks and financial institutions to provide services related to crypto currencies by setting aside the RBI circular of 2018, which had prohibited them.

It had said the Reserve Bank of India (RBI) circular is liable to be set aside on the ground of "proportionality".

The court's verdict had come on a plea of 'Internet and Mobile Association of India (IMAI)' which had argued that the RBI had banned crypto currencies on "moral grounds" as no prior studies were conducted to analyse their effect on the economy.

It had contended that the RBI barred all the entities regulated by it from providing services to any individual or business dealing in virtual currencies.