In a hearing held on August 28 that lasted well over two hours, a division bench of the Central Information Commission (CIC) consisting of Information Commissioners Neeraj Kumar Gupta and Suresh Chandra heard arguments on whether the NPCI is a public authority and if it should fall under the RTI Act. But after the hearing, the bench has not arrived at any decision yet. It’s unclear if there will be an order on the case. Information Commissioner Suresh Chandra said there may be another hearing before a final judgment is passed.

At the latest hearing held at the CIC in New Delhi, NPCI was represented by lawyer Sudip Mullick. The body’s chief finance and legal officer Sanjay Saxena was present. The complainant Neeraj Sharma also attended the hearing, and he was represented by lawyer Nikhil Borwankar.

Borwankar argued that the NPCI operates several services such as Aadhaar Enabled Payments Service (AePS), Bharat Bill Pay, RuPay, UPI, IMPS, BHIM, BHIM Aadhaar, which are all public functions. He also argued, among other things, that a majority of the NPCI’s shares are held by public sector banks.

In December 2016, Neeraj Sharma had filed an RTI with the NPCI asking for details of its PIO (Public Information Officer) and Appellate Authority under the RTI Act. After Sharma did not receive any reply, he filed a complaint with the CIC in April 2017. After multiple hearings, the CIC constituted a division bench in July 2019 to decide the case. It said that whether the NPCI is a public authority, and whether the information sought by Sharma should be disclosed, “involves a substantial question of law”.

The case is now listed for the final hearing on October 9, since the CIC felt both parties could not conclude their respective submissions due to paucity of time (see order below). The order was released almost 3 weeks after the hearing took place.

Case so far: Sharma says NPCI is a public authority

Sharma’s complaint argues that although the NPCI was not formed under the Constitution, by the Parliament, or by a central/state government, it is “owned, controlled and substantially financed directly or indirectly by funds provided by the Central government”. He also said that:

  • public sector banks hold about 67.82% of the NPCI’s shares,
  • members of its board of directors are nominated by the public sector banks,
  • it’s MD is appointed by the RBI, and
  • it’s regulated by the RBI under the Payments & Settlements Act, 2007.

It’s also considered a government company under Section 2(45) of the Companies Act, 2013, which is why it’s audited by the CAG (Comptroller & Auditor General of India), he said. This is why, he concluded, the NPCI is a public authority and falls under the RTI Act.

These are the main arguments made about the case at the August 28 hearing:

1. RBI control over the NPCI

RBI has control over management of the body: The NPCI was incorporated as a non-profit organisation under Section 25 of the Companies Act, 2013, but it is controlled by the RBI, argues Sharma’s petition. During its initial years, it was managed by officials deputed from the RBI and some of the promoter banks.

  • AP Hota was deputed from the RBI as MD of NPCI from 2008-2010, and was appointed CEO and MD in FY 2010-11.
  • The RBI also has a nominee director on the board of the NPCI.

These show that the RBI, and by extension the government, have control and say over the management of the NPCI.

RBI director appointed in regulatory capacity, says NPCI: NPCI has 20 directors and one RBI nominee director, said Mullick. NPCI’s Articles of Association (AoA) allow the RBI to place a nominee director on its board, he said. However, he explained that the RBI has placed the nominee director not under the NPCI’s AoA, but in a regulatory capacity under the Banking Regulation Act.

2. NPCI’s relation with the government; CAG as auditor

CAG audits govt undertakings under Companies Act: Borwankar said it’s important to examine the government’s relationship with the NPCI.

  • The accounts of the NPCI are audited by the CAG.
  • Section 139(5) and 139(7) of the Companies Act state that bodies owned or controlled by the state or central government will be audited by the CAG.

Mullick argued that the CAG is allowed to audit the accounts of private companies as well, and simply conducting an audit “doesn’t show that they’re exercising control”. The “CAG’s mandate does not extend to audit of public sector banks, who are my promoters, and not the companies CAG has the authrotiy to audit the even private companies, and we are a Secion 25 company,” he said. Because the CAG has appointed an auditor to supervise the audit of NPCI, it doesn’t mean that there is government control over the NPCI.

Borwankar also said that when the Payments & Settlements Bill was being discussed in Parliament in 2007, then cabinet minister P. Chidambaram had explicitly stated that the NPCI will be a public sector organisation, and public sector banks will own it. Nobody would be allowed to own more than 10% of the NPCI, he had said, according to Borwankar.

3. NPCI performs public functions, on the RBI’s behalf, argues Sharma

Borwankar argued that the NPCI operates the National Financial Switch, IMPS, RuPay, UPI, National Electronic Toll Collection, among others – services which are carried out on behalf of the RBI. In addition to this, RBI has also authorised the body to operate Aadhaar Enabled Payments System (AePS) and Aadhaar Payment Bridge System (APBS), he said.

He argued that the NPCI has monopoly over retail payments, given that the RBI has authorised only the NPCI to own and operate UPI, and also the BHIM UPI app which is promoted by the government for digital transactions. Sharma had also filed another RTI with the RBI asking for the tasks it had given to the NPCI. The RBI replied that it had delegated the National Financial Switch which it operated prior to NPCI’s incorporation to the NPCI.

“NPCI has a de-facto monopoly over payments systems in India and is not a normal Section 25 company,”
Nikhil Borwankar

Mullick argued that a body can be a public authority falling under the RTI Act, if government control over it is “substantial” and not merely supervisory or regulatory.

Sharma has argued that NPCI has a monopoly, Mullick said. But according to him, it was set up to encourage more participation and “to minimize the risk of concentration in retail payment systems”. The RBI’s policy paper stated that banks will also be permitted to offer payment services like the ones NPCI now offers based on their own capabilities and risks. Hence, the RBI was not trying to create a monopoly via the NPCI, he said.

The CIC’s order, dated September 16: