The Delhi High Court has fixed May 24 as the next date of hearing for a petition filed by Flinstone Technologies Pvt. Ltd. with regard to staying Reserve Bank of India (RBI) strictures related to conducting business with individual and business entities dealing in virtual currencies.
A single judge bench of the high court was hearing a petition filed by Amit Lakhanpal, Director, Flinstone Technologies.
In his petition, Lakhanpal claimed that a circular issued by the RBI last month has made trading in virtual currencies impossible and is spreading panic among investors.
Lakhanpal informed the high court that Flinstone Technologies Pvt. Ltd. was conducting its business under the trade name of Money Trade Coin (MTC), which was experiencing a bull run in the first few months after its launch, but adverse actions by certain financial institutions on January 24, 2018, followed by the RBI's April 6 circular had affected commercial operations of all virtual currency companies in India.
"When we started our business, we wrote to all relevant ministries and officials to ensure that our business model was in line with all statutory guidelines. But these arbitrary decisions by regulators and certain financial institutions have jeopardized our business interests. Today, we have been made to look guilty in front of our investors for no fault of ours," Lakhanpal said in his petition to the high court.
In its April 6 notification, the RBI said, "Reserve Bank has repeatedly through its public notices on December 24, 2013, February 01, 2017 and December 05, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.
In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.
Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.
Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.
These instructions are issued in exercise of powers conferred by section 35A read with section 36(1)(a) of Banking Regulation Act, 1949, section 35A read with section 36(1)(a) and section 56 of the Banking Regulation Act, 1949, section 45JA and 45L of the Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007."
Flinstone Technologies Pvt. Ltd. has demanded quashing of this RBI circular, terming it as "arbitrary, unfair and unconstitutional."
It has also urged the high court to issue notices to the finance ministry and the Goods and Services Tax (GST) Council.
Flintstone Technologies has pleaded that in the interest of investors the RBI should mandate KYC (Know Your Customer) norms and anti-money laundering guidelines instead of imposing complete prohibition on access to banking.
Senior advocate and former union minister Salman Khurshid is representing Lakhanpal and Flinstone Technologies Pvt. Ltd. in this case.
The Delhi High Court said Friday it will hear Lakhanpal's petition along with a petition filed by the Ahmedabad-based Kali Digital on May 24.
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