The Delhi High Court has asked the Reserve Bank of India (RBI) to mediate a dispute involving PayU Payments, Yes Bank, ICICI Bank and Visa over the classification of merchants and related interchange fee claims.
Justice Subramonium Prasad, in an order dated September 14, directed the RBI to nominate a senior officer with expertise in the payments sector to facilitate discussions between the parties and attempt to resolve the dispute within 30 days. The court also ordered the parties to maintain the status quo with respect to disputed past transactions during the mediation.
Visa cannot issue final Interchange Reimbursement Fee (IRF) determinations concerning those transactions, while acquiring banks have been directed not to make further deductions from PayU towards the disputed claims.
The court said involving the RBI was preferable to sending the parties to pre-litigation mediation, given its regulatory role over the payments ecosystem. The dispute centres on Merchant Category Codes (MCCs), four-digit codes used to identify a merchant’s principal business. These classifications are relevant for determining the interchange fee applicable to card transactions.
ICICI Bank, which issues Visa cards, alleged that certain merchants using PayU had been assigned incorrect MCCs, resulting in lower interchange fees. It subsequently raised claims against acquiring banks through Visa’s IRF mechanism. PayU disputed its liability, maintaining that it does not assign MCCs. According to the payments company, it collects and verifies information about merchants’ businesses and forwards the details to the acquiring bank, which independently determines the appropriate MCC.
The dispute led to Yes Bank deducting amounts from PayU’s settlements towards alleged IRF liabilities. While Yes Bank subsequently reversed deductions of more than Rs 5.95 crore, Rs 6.88 crore remained with the bank, according to PayU. PayU also apprehended further deductions relating to pending IRF claims involving other acquiring banks. The company has challenged Visa’s IRF process as well, arguing that disputes of this nature should be dealt with under the Payment and Settlement Systems Act, 2007. The High Court did not rule on these substantive issues at this stage.
Instead, it directed the parties to make an attempt at resolving the dispute through RBI-facilitated mediation. Justice Prasad said the payments framework in question operates under certificates granted by the RBI and under its supervision. In these circumstances, the court considered a senior RBI officer to be best placed to assist the parties in reaching a solution. The court clarified that the mediation arrangement would not affect transactions between the parties conducted in the ordinary course.
