Payment service will be launched only after complying with RBI norms: WhatsApp tells SC

Instant messaging app WhatsApp Friday told the Supreme Court that it is conducting a trial run of its payment service and will comply with RBI norms on data localisation before launching the full service.

The trial run is likely to be completed by July end this year, it said.

A bench of Justices R F Nariman and Vineet Saran was hearing a plea filed by an NGO, Centre for Accountability and Systemic Change (CASC), which has claimed that WhatsApp has not fully complied with RBI's circular which prescribed data localisation norms.

Senior advocates Kapil Sibal and Arvind Datar, appearing for the messenger app owned by US-based Facebook, told the bench that they are only having a trial run which is likely to be completed by July and it will not launch payments services without fully complying with RBI norms.

"We cannot launch the product without complying with the norms," Sibal said.

Advocate Virag Gupta, appearing for the NGO, said that WhatsApp was allowed to run the trial of its payments services with one million users. Relying on the Reserve Bank of India's circular of April 6, 2018, he said that trial data of users cannot be allowed to be kept outside India.

"This may be violative of permission granted by National Payment Corporations of India (NPCI) to Whatsapp," he said.

Sibal said there was no formal agreement between WhatsApp and NPCI till now. Solicitor General Tushar Mehta, appearing for the Centre, said that WhatsApp was not complying with data localisation norms which is evident from the affidavit filed by the RBI.

To this, the bench said that if norms laid down by RBI are not followed by Whatsapp, then it can be prosecuted.

"Don't worry our arms are long enough. They cannot escape the law," it said and added that the issue requires detailed hearing and listed the matter in July. On February 1, the apex court had sought response from RBI on the plea of NGO.

On January 14, the top court had allowed the NGO to implead RBI has party in the case. In its petition, the NGO has sought direction to restrain the instant messaging platform from proceeding with its payment service unless it fully complied with the provisions of the RBI.

The Centre and WhatsApp had earlier told the court that a grievance officer for India has been appointed by the instant messaging service company.

However, the NGO has claimed that grievance officer has been appointed in the United States of America, which is "preposterous and against the sovereignty of India".

In its plea, the NGO has referred to IT (Intermediary) Rules of 2011 and IT (reasonable security practices and procedures and sensitive personal data or information) Rules 2011 wherein provision is made for appointment of grievance officer. It has also said in its affidavit that it would be a paradox if data localisation norms are prescribed in India but companies are allowed to keep data officers in USA.

On August 27 last year, the apex court had agreed to examine the plea which alleged that WhatsApp does not comply with the Indian laws including the provision for appointing a grievance officer.

WhatsApp reportedly has over 200 million users in India and almost one million people are "testing" its payments service. India is one of the largest bases for the Facebook-owned company that has over 1.5 billion users globally.

In its plea, the CASC said that to open a bank account, a customer needs to comply with KYC norms laid down by the RBI and various other formalities.

"WhatsApp is a foreign company with no office or servers in India. To run Payments Service in India, WhatsApp is obligated to have its office and payments in India," it said.

"Moreover, it is also required to have a Grievance Officer for users in India. Yet, it is being allowed to continue with its payments and other services, without any check," the plea claimed.

The petition also alleged that the social media giant does not comply with tax and other laws of India, but its reach was such that it is used by everyone, be it a commoner or even the judges of the apex court.

It said every user has a number on WhatsApp but the messaging platform has no number through which its user can contact it for any grievance redressal.

Pointing to alleged cases of internet-based crimes, it has claimed that the growth of such incidents was directly proportional to the growth of the user base of messaging services like WhatsApp.