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Supreme Court gives RBI 6 weeks to confirm WhatsApp’s compliance with localisation rules

The Supreme Court has given the RBI six weeks to confirm WhatsApp’s compliance with data localisation of payments data as the company is planning to launch its UPI payment service in India this year, reports Reuters. The hearing was held on August 2 in response to a PIL (WP[C] 921/2018) filed by Centre for Accountability and Systemic Change (CASC). The company has 400 million users in India.

The SC has also asked the Union government to clarify its position on whether the company’s grievance officer should be based out of India. WhatsApp had been testing WhatsApp Payments in beta in India since January 2018. In August 2018, the Centre banned the beta testing of WhatsApp payment service and directed it to:

  • set up its office in India,
  • appoint a grievance officer in the country and
  • store user payments data locally only on Indian servers, per RBI localisation mandate

During the August 2 hearing, WhatsApp’s lawyer Kapil Sibal told the SC that the company has complied with payments data localisation directives and will soon submit its report to NPCI, ET reported. Additional Solicitor General of India Aman Lekhi, who represented the RBI, added that details of WhatsApp’s compliance will be submitted to the NPCI within 3-4 weeks. Following this, the central bank will file its report with the SC within 2 weeks. The case is tentatively listed for September 16; MediaNama is awaiting the court’s order on the matter.

CASC’s PIL demands that WhatsApp comply with Indian laws

WhatsApp’s payments service launch has been delayed by a year, due to the RBI’s data localisation rules, which mandate all payment companies to store data only on Indian servers. Last year, Delhi-based organisation CASC had petitioned (PIL attached below) the Supreme Court about WhatsApp’s failure to comply with Indian laws, including its failure to appoint a grievance officer.

Some of the other demands of the organisation made in the PIL were:

  • Cooperation with law enforcement: WhatsApp is not co-operating with Indian intelligence agencies in their probe into terrorist activities. At the same time, government service and law enforcement in India are using WhatsApp, but they do not have a person of contact at WhatsApp should they face any problems. “The biggest messaging platform has no WhatsApp number of its own, which in turn is dangerous for the Rule of Law in India,” says the petition.
  • Grievance redressal requirements: WhatsApp is not complying with the IT Act 2000, which mandates that all intermediaries appoint a grievance officer. The government allowing WhatsApp to do so is discriminatory as it puts restrictions on others but gives WhatsApp a “free hand”. Further, WhatsApp current grievance officer is based out of the US, making the position ineffective.
  • Taxes: WhatsApp does not pay any taxes in India, which violates the freedom to do business under Article 19.
  • RBI’s localisation mandate: “WhatsApp must be directed to store the data in Indian servers as mandated by Reserve Bank of India, and pay taxes on income caused due to its operations in India,” the petition states.
  • WhatsApp as an OTT service, and its regulation: WhatsApp being an OTT service which enables users to make calls, send messages and media, just like TSPs, does not follow any grievance redressal and data localisation norms that govern TSPs.
  • Violating poll conduct: Political parties use WhatsApp groups to message voters during the 48-hour silent period.

WhatsApp Payments: a timeline

After initially halting test for WhatsApp Payments, the company was able to resume the test in July 2019. Later that month, WhatsApp had said it’s reaching out to RBI to submit its audit report. A month earlier, Whatsapp had said that it had set up its data storage facilities in India and is planning to launch its UPI payments app in association with ICICI Bank.

  • In April 2019, WhatsApp had told the SC that it will rely on a third-party company to audit its payments system and ensure it’s compliance with the data localisation rules.
  • Following pressure from the Indian government, WhatsApp appointed US-based Komal Lahiri as the grievance officer for WhatsApp in India.
  • In August 2018, WhatsApp CEO Chris Daniels, held talks with Telangana IT minister K T Rama Rao (KTR) in order to set up its office in Hyderabad.

[embeddoc url=”https://www.medianama.com/wp-content/uploads/CASC-Petition.pdf” download=”all”]

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