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PayU Payments Gets From in IRF Dispute
Interim Shield for PayU: Court Stops IRF Deductions
The on granted to by ordering on deductions from its in a dispute over 's claims. Justice Subramonium Prasad also referred the matter to the ) for mediation, aiming to resolve the underlying issue of incorrect within 30 days.
Called to Mediate Merchant Code Tangle
PayU, an -authorised , facilitates online payments for merchants. When a customer pays via card, the transaction is routed through PayU to (like , and ) via the network. The deduct an interchange fee and remit the net amount to PayU's escrow account. The dispute arose when , an (identified as ), raised IRF claims before , alleging that merchants onboarded by PayU were assigned incorrect MCCs, resulting in a shortfall in interchange fees. processed these claims under its , and deducted Rs 6.88 crore from PayU's settlements.
The Core Dispute: Who Assigns Merchant Category Codes?
PayU contended it had no role in assigning MCCs—that responsibility lies with —and challenged the legality of 's process, arguing it bypassed the under (). PayU argued that its only role is to forward merchant information to , which independently assign MCCs. It claimed 's private IRF process lacks statutory backing and cannot justify deductions from its regulated . PayU also apprehended further deductions from other totalling over Rs 41 crore.
countered that its IRF process is based on its own rules and that it does not deal with PayU directly; any recovery by banks is a matter of . The maintained that deductions were based on 's determinations.
's Private Process Under Scrutiny
The court noted that both PayU and operate under authorisations granted under the . Instead of compelling under , the court found it more appropriate to involve the as a mediator, given its supervisory role over the entire payment system. The court referenced the 's decision in , which emphasized the mandatory nature of but also allowed courts to refer parties to mediation even after , as in
Court's Reasoning: Leveraging 's Supervisory Role
The court observed:
"In the opinion of this Court, since the entire regime is being operated under the certificates granted by the
and under the supervision of the
, instead of sending the parties for
process, it would be more appropriate to request the
to act as a mediator."
The court also clarified that the would only act as a facilitator, not a dispute resolution body under Section 24, ensuring the plaintiff's remain intact.
"Though, learned Senior Counsel appearing for the Plaintiff has argued that referring the matter to
would deny an appeal to the Plaintiff, this Court makes it clear that the matter is being referred to
only as an effort to find out a solution,"
Justice Prasad noted.
What the Order Means for the Parties
The court ordered the to depute a senior officer to attempt a resolution within 30 days. Meanwhile, it directed on past IRF claims: shall not issue final IRF determinations, shall not make deductions from PayU, and the shall not raise further claims for MCC misclassification prior to the suit. The order applies only to transactions where incorrect MCCs are alleged and does not affect .
The matter is listed for , with all rights and contentions of the parties expressly reserved.
