PIL in Supreme Court challenges charges on UPI transactions over Rs 2000

A PIL in the Supreme Court challenges the Finance Ministry's framework for charging MDR on UPI transactions over Rs 2,000. The plea argues it is unconstitutional, discriminatory, and lacks legislative authority and transparency.

A public interest litigation (PIL) has been filed in the Supreme Court challenging the Union Finance Ministry’s September 14 Gazette notification and the September 15 Merchant Discount Rate (MDR) framework that permits charges on Person-to-Merchant (P2M) UPI transactions above Rs 2,000.

Filed by advocate Anjan Datta, the plea also challenges the constitutional validity of the amended Section 10A of the Payment and Settlement Systems Act, 2007. The Union government, Reserve Bank of India, National Payments Corporation of India (NPCI) and the UPI and Services Steering Committee have been made respondents in his plea.

Challenge to Amended Law

The petitioner has argued that the amended provision gives the executive unguided discretion to decide which electronic payment modes would remain protected from charges and up to what transaction value. He has alleged that Parliament has not laid down any policy, formula, ceiling or safeguards to guide the exercise of this power.

The plea contends that the amended Section 10A amounts to excessive delegation of essential legislative functions. It argues that the provision does not prescribe any criteria for selection or exclusion of payment modes, transaction-value differentiation, merchant classification or withdrawal of the protection. “The power thereby conferred is entirely unguided and unstructured,” the plea states.

Procedural Lapses in Announcing Rates

The petitioner has also challenged the manner in which the MDR rates were announced. According to the plea, the September 14 notification itself did not prescribe any MDR rate, while the detailed rates, caps and sectoral classifications were subsequently announced through a Finance Ministry press release following deliberations of the UPI Steering Committee. The plea states that a levy of general application affecting a large number of merchants cannot be brought into being merely by a press release. It alleges that no corresponding notification, rule or order prescribing the rates was published in the Official Gazette.

Allegations of Discrimination and Arbitrary Thresholds

The petitioner has further alleged that the framework violates Article 14 by creating differential treatment between UPI and RuPay debit cards. While UPI transactions are protected from charges only up to Rs 2,000, the plea says RuPay debit-card payments continue to enjoy no-charge protection without a monetary ceiling. It argues that both are electronic payment modes used by overlapping classes of consumers and merchants.

The plea also questions the Rs 2,000 transaction threshold and the Rs 1 lakh monthly receipt threshold for small merchants, calling them “cliff-edge” classifications unsupported by disclosed empirical data. It argues that a transaction of Rs 2,001 would attract a charge while a Rs 2,000 transaction would not, and that a merchant could lose protection after crossing the monthly threshold irrespective of margins or ability to bear the cost.

Impact on Merchants and Consumers

The petitioner has also raised a challenge under Article 19(1)(g), arguing that the MDR directly affects merchants’ receipts and their ability to carry on trade and business. The plea says there is no disclosed impact assessment or justification showing that the rates chosen are the least restrictive means of funding cybersecurity and digital-payment infrastructure.

Another ground concerns the alleged indirect burden on consumers. The plea argues that merely directing merchants not to pass on MDR to customers does not eliminate the economic consequences, as merchants could revise prices, withdraw discounts, refuse UPI payments, impose minimum ticket sizes or seek split payments.

Lack of Transparency and Consultation

The petitioner has also alleged a lack of transparency and consultation, saying that no public consultation paper, draft rates, merchant impact study or responses were disclosed before the framework was announced. It has sought disclosure of the committee’s minutes, cost study, impact assessment, stakeholder inputs, rate methodology and distribution formula.

Challenge to 'Money Bill' Classification

The plea further challenges the manner in which the amendment to Section 10A was enacted. It argues that the provision was part of the Taxation and Other Laws (Amendment) Act, 2026, which was passed as a Money Bill, despite the amendment dealing with regulation of charges between banks, payment-system providers and merchants. The petitioner contends that this subject does not fall within the matters specified under Article 110 of the Constitution.

Reliefs Sought in the Petition

The petitioner has sought a declaration that the amended Section 10A is unconstitutional and void and, consequently, that the September 14 Gazette notification and September 15 MDR framework be quashed. Alternatively, the plea seeks that the provision be read down so that it does not permit selective withdrawal of no-charge protection based on transaction value or merchant class, or allow prescription and distribution of MDR without express legislative criteria and authority.

It has also sought directions requiring the respondents to place on record the complete authenticated notification, statutory source, committee constitution, agenda and minutes, cost study, impact assessment, stakeholder inputs, rate methodology, distribution formula, RBI approval and enforcement safeguards.

The petitioner has further sought a declaration that no MDR or similar compulsory charge can be imposed merely on the basis of a press release or FAQs without a duly authorised and published statutory instrument. In the alternative, he has sought reconsideration of the framework through a transparent process involving public consultation, merchant and consumer representation, empirical data, protection for micro and small enterprises, independent audit and periodic review. The plea also seeks an enforceable anti-pass-through mechanism, including disclosure of charges, complaint and audit mechanisms, penalties for hidden fees and restitution for unlawful collections. (ANI)

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