Namaste Tribe! The Crypto vs. RBI hearing resumed today. Kudos to Coin Crunch for posting live updates from the Supreme Court in the morning, and then Crypto Kanoon jumping back in action. 💪

We’ve consolidated today’s hearing updates in this post for you.

Today at 10:58 AM

👉 The court is in session. IAMAI counsel Ashim Sood is reading out the FATF guidelines in court as per our sources present.

👉 Sood is now reading out judgments from other countries. He states that Cryptocurrency is not recognized as Legal tender.

👉 Mr. Sood is now explaining what is a virtual currency exchange and how it operates. He’s reading from the written submissions done to court earlier!

👉 Sood adds that a Banking channel is required to run an exchange.

👉 Honorable judge has asked How bitcoins are minted. Ashim Sood now explaining Bitcoin mining.

👉 The court had yesterday asked for a full argument from the beginning. So all counsels will run through the same submissions made in last August, and then new submissions!

👉 Ashim Sood is now reading the latest RBI response to the IAMAI representation. The same was submitted by RBI in September 2019. RBI has responded to each and every point made by IAMAI, as ordered by the court. This will take some time to be fully read.

Today at 2:17 PM

👉 Mr. Sood is reading out a report stating drawbacks of the draft bill recommended by the Committee to Indian Govt.

👉 It is the report by SEBI. Mr. Sood gives a remark that the entire focus seems to be on a consumer interest while relying on a third party analysis.

👉 Mr. Sood says that RBI in its circulars mentioned about certain risks including volatility, however the the same is involved in stock trading also and effectively lies under the domain of SEBI and not RBI.

👉 Now CBDT’s version is being read out to the court regarding the issues pertaining to taxes.

👉 Every regulator is looking at Crypto from their own regulatory perspective like SEBI is concerned about securities and volatility, CBDT is concerned about tax evasion but RBI cries consumer interest going totally outside their domain as a regulator. This is arbitrary.

👉 RBI circular is bad in law on three diff. aspects:
1. Malice in law. RBI doesn’t have the power to ban but acted to ban Crypto on effect.
2. Colourable exercise
3. Ultra Vires — without authority.

👉 Now Mr. Sood is reading out a judgement (2010 (9) SCC) supporting the first aspect of his arguments i.e. Malice in law.

👉 Another judgement having citation 1985 (3) SCC 1

👉 When a power is conferred to achieve a certain purpose, power cannot be exercised otherwise than to achieve that purpose.

👉 When RBI says that it has no power over the commodity, how can then RBI exercise power to stop commodity from being traded.

👉 1974 (2) SCC 687 — Judgement is being read.

👉 If it is established that there is no material on record for forming of opinion by a regulator, the court may infer that authority has not applied its mind.

👉 2008(4) SCC 144 — Another Judgement on opinion forming without application of mind.

👉 Opinion cannot be formed on imaginary grounds. There must be active application of mind.

👉 Necessity of a ground is of crucial importance behind State’s action. Necessity is indispensable.

👉 Another judgement — 1969 (1) SCC 337

👉 The decision of the Govt. must be based on the facts gathered by the Govt. itself. And no fact gathered by the Govt. is on record.

👉 For the sake of arguments if it is assumed that there is sufficient material to support the state action but the fact of it being issued in consumer interest makes it bad in law.

👉 Mr. Sood is now reading out Banking Regulation Act. The use of ‘Public Interest’ provision can be done only in the context of the Act itself. You cannot go out in the world and find a problem to use this Act in the Public Interest.

👉 A judgement is being read in support of the Argument.- 2012 (16) SCC 61.

👉 On same point one more judgement — 2009(6) SCC 171.

👉 Judges are discussing among themselves.

👉 Arguments started with the reading of judgement.

👉 1987 (3) SCC 279 — One more judgement. Judgement throws light on the method of interpretation of Statute. No word of the statute can be understood in isolation.

👉 Concluding this argument with the remarks that Public interest has to be interpreted in the light of the purpose of Banking Regulation Act. It cant be used for public at large.

👉 45JA of RBI Act is being discussed.

👉 Now Mr. Sood came to Payment and Settlement Systems Act.

👉 This Act only seeks to regulators the payment systems created by this Act itself and not the Payment system as an economic activity.

👉 Definition of Payments System is being read. — Section 2(i) of PSS Act.

👉 Important: Judge asks whether your system is a payment system, Mr. sood says yes we could be my Lords but RBI itself says that we cant regulate you because you are not payment system.

👉 Section 18 of PSS Act.

👉 No finding to satisfy Section 18 that payment systems are affected by Crypto.

👉 Now Counter Affidavit of RBI is being read.

👉 Mr. Sood asks permission to read whole of RBI affidavit in order to show that RBI has no material and analysed nothing before taking action.

👉 Mr. Sood refers to the RBI version, in which it says that RBI has no power to regulate Cryptocurrencies, and says that since they cant regulate so they banned it. Those who have no power to regulate can they ban?

👉 Judge asks does shifting of people from conventional financial system to Crypto impact monetary system which RBI has to protect. Mr. Sood apprises Nov. 2017 circular of RBI saying it does not impact and would not impact till anytime soon.

👉 Mr. Sood reads out that RBI says in its report dated August 2018 that Crypto does not pose any threat to monetary system of the Country.

👉 Now Mr. Sood apprising the court that the authority who enjoys delegated power cannot prohibit the activity in total absence of any policy or statutory guidelines. An activity can only be prohibited by act of the Parliament.

👉 A judgement is being read on the topic of exercise of power without statutory authority.

👉 Judges started discussion among themselves.

👉 Mr. Sood comes back to the judgement as the judges discussion ends.

👉 RBI cannot devise a form of prohibition as there is no law to support it.

👉 The crux of the judgement is that when Legislature doesn’t find a reason to stop/prohibit any economic activity, then the authority doesn’t hav power to devise a new form to prohibit such economic activity. Such prohibition violates my right to freedom of trade.

👉 Another judgement being read — 2005 (12) SCC 77

👉 1962 Hamdard Dawakhana Judgement is being read.

👉 Discretion of administrative authority should not be so wide as it is difficult to discern its limits. There has to be a boundary for exercise of jurisdiction by an administrative authority.

👉 There has to be a principle laid down by an Act which defines the limits of subordinate legislation.

👉 Hearing ends here for the day. Court will reassemble tomorrow for further proceedings in the case.

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*Above content is migrated from medium to wazirx blog

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.