Grounds Continued - Draft of the (PIL) Writ Petition against Virtual Currencies - Crypto currencies like Bitcoins etc. - Filed in Supreme Court of India

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Draft of Writ Petition (PIL) No. 1071/2017

 

GROUNDS

A.      Because sale or purchase or dealing in any other manner with the illegal Virtual Currencies like Bitcoins,which are being traded openly and extensively within the knowledge and domain of the Respondents for a host of anti-national, illegal and nefarious activities, such as funding of terrorism and insurgency, illicit trade of arms and drugs, recruitment of terrorists, bribery, corruption, money laundering, tax evasion, generation of black money, payment of ransom, human trafficking, hawala trade, illicit investments, online gambling, inflation, loss of control of Government on financial discipline and illegal diversion of money, and all this happening without any border restrictions or geographical constraints by avoiding and violating laws, resulting in danger to the integrity and sovereignty of India causing harm and danger to the peace and tranquility of the society, the security of the state and the residents of India, friendly relations with Foreign States, public order and morality.

 

B.      Because Virtual Currencies like Bitcoins are per-se illegal even under the present laws, rules and regulations in India.

 

C.      Because production, introduction and circulation of Virtual Currencies like Bitcoins into the system are being carried by the private parties.

 

D.      Because Virtual Currencies like Bitcoins are being generated through the processof mining by third party without any intervention or regulation of the Indian Government which is against the basic legal framework and Constitution of India.

 

E.      Because use of illegal Virtual Currencies like Bitcoins are in contravention of the provisions of FEMA, as such Virtual Currencies are being used and exchanged between the people of different countries without complying with any exchange control laws.

 

F.      Because India does not have any specific law, rules or regulations in India dealing with or applicable to Virtual Currencies likeBitcoins.

 

G.     Because the Respondents, despite being aware of the issues raised in this petition, have miserably failed to understand the gravity of the impact of Virtual Currencies like Bitcoins, on India and are still in a thinking mode, without taking any action on the ground zero, despite all the powers which they have under various laws of India, thereby also failing to protect the rights of people in India under Article 21 of the Constitution of India.

 

H.      Because banningof trading of Virtual Currencies like Bitcoins,  would protect the interest of India as well as its people, who are becoming victim of inaction and indecision on the part of the Respondents. Though there are laws, as mentioned hereinabove, the Respondents are not taking any action to prevent the dangers of Virtual Currencies like Bitcoins.

 

I.        Because the people in India are, knowingly or unknowingly, falling prey to the lure of illegal Virtual Currencies like Bitcoins, as such currencies have converted internet into a hub of anti-national, illegal and nefarious activities, having all the potential to damage the fabric of the nation, i.e., India.

 

J.       Because the sovereignty and security of the Nation has been put at stake as no legal or decisive administrative action has been taken by the Respondents, despite all the powers in their hands, therebyexposing public at large who, may be knowingly or unknowingly or inadvertently, committing various offenses under Indian laws.

 

K.      Becausetheillegal Virtual Currencies likeBitcoins, provide an outlet for ill-gained personal wealth that is beyond law, regulations, restriction and confiscation.

L.      Because illegalVirtual Currencies likeBitcoins are instrumental in defeating the provisions of Prevention of Money Laundering Act, 2002and The Benami Transactions (Prohibition) Amendment Act, 2016.

 

M.     Because Entry 36 and 46 of List I of the Seventh Schedule of the Constitution states that only the Central Government shall have the power to legislate in respect of currency, coinage, legal tender, foreign exchange and bills of exchange, cheques, promissory notes and other like instruments.However, the Respondents have shut its eyes on illegal Virtual Currencies likeBitcoins.

 

N.      Becauseillegal Virtual Currencies likeBitcoins, encourage and assist in stashing black money.

O.     Because illegal VirtualCurrencies likeBitcoins are giving rise to illegal activities which are being executed through electronic medium and helping the perpetrators to keep their identity hidden, by-passing KYC norms.

P.      Because illegalVirtual Currencies likeBitcoins are being used by the criminals to hide their proceeds of crime and integrate the said proceeds of crime into the financial system.

Q.     Because illegal Virtual Currencies likeBitcoins are encouraging benami transactions in India and would make it difficult for the government authorities to identify such benami transactions and benami properties.

R.      Becauseillegal Virtual Currencies likeBitcoins act as a mechanism to avoid various tax and financial laws.

S.      Because use of illegal Virtual Currencies likeBitcoins in a developing nation like India, where majority of Indian wealth is being held by the 1% of the Indian population which primarily comprises of big businessmen, politicians, etc., would assist them in stashing their black money and avoiding the rigour of laws, as well as would have further devastating effect on the growth of the Indian economy.

 

T.      Because these illegal Virtual Currencies likeBitcoins are damaging the Rule of Law in the country, which is the basic foundation of the Democracy and the Constitution of India, and the sovereignty and security of the Nation has been put on stake, thereby exposing public at large who, knowingly or unknowingly or inadvertently, may be committing various offences under Indian laws.

U.      Because illegal Virtual Currencies likeBitcoins do not fall under the definitionof ‘Currency’ or “Currency notes” as defined in Section 2(h) and 2(i) of the Foreign Exchange Management Act, 1999;

 

V.      Because under Section 22 of the Reserve Bank of India Act, 1934only RBI has the sole, right to issue bank notes in India.

 

W.    Because illegal Virtual Currencies likeBitcoinsare not legal tender in India, and are not a currency as per Indian laws.

 

X.      Because RBI has failed to act and exercise its powers under Section 18 of the Payment and Settlement Systems Act, 2007, which empower it to regulate the payment systems or operation of any of the payment systems, or in public interest.

 

Y.      Because the Reserve Bank of India regulates the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage, and if its autonomy is damaged by unauthorized monetary transactions by illegal Virtual Currencies due to failure or inaction of the Respondents, an anarchy will be created resulting in destruction of the structure of India.

 

 

 

Z.      Because illegalVirtual Currency likeBitcoins donot fall under the definition of “securities” under Section 2(h) of the Securities Contracts (Regulation) Act, 1956.

 

 

 

AA.Because under section 23 of the Indian Contract Act, 1872, the consideration or object of an agreement is considered to be lawful, unless, it is forbidden by law, or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy; hence trading of or payments in illegal Virtual Currencies likeBitcoins, are violative of this section.

 

 

BB.Because in the entire trade of illegal Virtual Currency likeBitcoins, (“Know Your Customer”) KYC Norms are also not being followed with impunity under the nose of the Respondents and its functionaries.

 

 

CC.Because obligationsof Banking Companies, Financial Institutions andIntermediaries under Section 12 of the Prevention of Money Laundering Act, 2002 (PMLA) for reporting the transactions listed therein are also being violatedbecause of the inaction of the Respondents.

 

DD.Because section3 of The Foreign Exchange Management Act, 1999, is being also violatedbecause of the trade being done in illegal Virtual Currencies likeBitcoins.

 

EE.  BecauseVirtualCurrencieslikeBitcoins, have all the tenets of promoting cyber as well as actual terrorism, cheating and extortions.

 

 

FF.  Because theRespondents have failed in discharging their constitutional duties.

2.     That the Petitioners has not filed any other Petition before any High Court or this Hon’ble Court seeking the same or similar relief.

 

PRAYER:

 

It is therefore respectfully prayed that this Hon’ble Court may be pleased to:

a)             Issue a Writ of Mandamus or any other appropriate Writ, order or direction under Article 32 of the Constitution of India, directing the Respondents to declare as illegal and ban all illegal virtual Currencies,cryptocurrencies orDecentralised Digital such as, Bitcoins, litecoins, bbqcoins, dogecoins etc.,and investigate, fix accountability and responsibility for the sale and purchase of Virtual Currencies like BitCoins till date, and prosecute the offenders.

b)             Issue a Writ of Mandamus or any other appropriate Writ, order or direction under Article 32 of the Constitution of India, directing the Respondents to declare illegal and ban all website, web links and mobile applications, which are being used to buy, sell or deal in any manner whatsoever, illegal Virtual Currencies like Bitcoins;

 

c)              Issue a Writ of Mandamus or any other appropriate Writ, order or direction under Article 32 of the Constitution of India, directing the Respondents to give advertisements and wide publicity through all media, informing and educating public in India about the illegalities involved with the sale, purchase and dealing of illegal Virtual Currencies like Bitcoins;

 

d)             Pass such other appropriate writ, order(s) or directions as this Hon’ble Court may deem fit and proper.

 

AND FOR THIS ACT OF KINDNESS THE PETITIONERS SHALL EVER PRAY.

 

 

DRAWN &FILED BY:

 

 

PETITIONERS -IN- PERSON NO. 1 AND 2

                                        1. SIDDHARTH DALMIA

                                        FLAT NO. 2101, OLYMPIA TOWER-II,

                                        ELDECO UTOPIA, SECTOR-93A,

                                        NOIDA, U.P.-201304

                                        MOBILE NO.+91 9971799250

                                        LANDLINE NO.+91120 4150022

                                        EMAIL: dalmiasiddharth1994@gmail.com         

 

                                     2. VIJAY PAL DALMIA

                                        FLAT NO. 2101, OLYMPIA TOWER II,

                                        ELDECO UTOPIA, SECTOR-93A,

                                        NOIDA, U.P.-201304

                                        MOBILE NO.+91 9810081079

                                        LANDLINE NO.+91120 4150022

                                        EMAIL: VPDALMIA@GMAIL.COM

DRAWN ON:-

FILED ON:-

NEW DELHI

 

      IN THE SUPREME COURT OF INDIA

[CIVIL ORIGINAL JURISDICTION]

WRIT PETITION (C) No.                  / 2017

(UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA)

PUBLIC INTEREST LITIGATION:

IN THE MATTER OF

SIDDHARTH DALMIA & ANR                               .....PETITIONERS

Versus

UNION OF INDIA & OTHERS                              ....RESPONDENTS

AFFIDAVIT

I, Siddharth Dalmia, son of Shri Vijay Pal Dalmia, aged about                        23 years approx., resident of Flat No. 2101, Olympia Tower – II, Eldeco Utopia, Sector 93A, NOIDA, U.P. - 201304, presently at New Delhi, do hereby solemnly affirm and state as under:

 

1.              That I am the Petitioner No. 1 in the above-mentioned matter and am well conversant with the facts and circumstances of the case, and I along with the Petitioner No. 2 have drafted this petition, hence I am competent to swear this affidavit. 

 

2.              I say that I have drafted the accompanying writ petition (pages 1 to 44) (para 1 to 5 ) along with the Petitioner no. 2,  and say that the facts stated in the Synopsis and List of Dates (B-I), Annexures [Page 49 to 192] and application to seek permission (pages 193-199) are true and correct to the best of my knowledge and belief.

 

3.              That I have no personal gain, private motive or oblique reason in filing the present petition. I have no personal interest in the litigation and am not guided by self-gain or for gain of any person/institution/body and there is no motive other than public interest.

 

4.              That the annexures annexed to the accompanying Writ Petition are true copies of their respective originals.

 

5.              That the petitioner has not filed any other petition in this Hon’ble Court.

 

DEPONENT

VERIFICATION

I, Siddharth Dalmia, the deponent abovenamed do hereby solemnly affirm and verify that what is stated in the foregoing affidavit is true and correct to my knowledge and belief, no part of it is false and nothing material has been concealed therefrom.

Verified at New Delhi on __ __day of _________, 2017.

                    DEPONENT

 

IN THE SUPREME COURT OF INDIA

[CIVIL ORIGINAL JURISDICTION]

WRIT PETITION (C) No.                  / 2017

(UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA)

PUBLIC INTEREST LITIGATION:

IN THE MATTER OF

SIDDHARTH DALMIA& ANR                                .....PETITIONERS

Versus

UNION OF INDIA & OTHERS                              ....RESPONDENTS

AFFIDAVIT

I, Vijay Pal Dalmia, son of Late Banwari Lal Dalmia, aged about                        55 years approx., resident of Flat No. 2101, Olympia Tower – II, Eldeco Utopia, Sector 93A, NOIDA, U.P. - 201304, presently at New Delhi, do hereby solemnly affirm and state as under:

 

1.              That I am the Petitioner No. 2 in the above mentioned matter and am well conversant with the facts and circumstances of the case, and I along with the Petitioner No. 1 have drafted this petition, hence I am competent to swear this affidavit. 

 

2.              I say that I have drafted the accompanying writ petition (pages 1 to 44) (para 1 to 5 ) along with the Petitioner no. 1,  and say that the facts stated in the Synopsis and List of Dates (B-I), Annexures [Page 49 to 192] and application to seek permission (pages 193-199) are true and correct to the best of my knowledge and belief.

 

3.              That I have no personal gain, private motive or oblique reason in filing the present petition. I have no personal interest in the litigation and am not guided by self-gain or for gain of any person/institution/body and there is no motive other than public interest.

4.              That the annexures annexed to the accompanying Writ Petition are true copies of their respective originals.

4.       That the petitioner has not filed any other petition in this Hon’ble Court.

 

DEPONENT

VERIFICATION

 

I, Vijay Pal Dalmia, the deponent abovenamed do hereby solemnly affirm and verify that what is stated in the foregoing affidavit is true and correct to my knowledge and belief, no part of it is false and nothing material has been concealed therefrom.

Verified at New Delhi on __ __day of _________, 2017.

 

                    DEPONENT

ANNEXURE P- 1

PRESS RELEASE

DEPARTMENT OF COMMUNICATION, Central Office, S.B.S.Marg, Mumbai-400001

Phone: 91 22 2266 0502 Fax: 91 22 22660358

RESERVE BANK OF INDIA

Website :www.rbi.org.in

email: helpdoc@rbi.org.in

December 24, 2013

RBI cautions users of Virtual Currencies against Risks

 

The Reserve Bank of India has today cautioned the users, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.

 

The Reserve Bank has mentioned that it has been looking at the developments relating to certain electronic records claimed to be “Decentralised Digital Currency” or “Virtual Currency” (VCs), such as, Bitcoins, litecoins, bbqcoins, dogecoins etc., their usage or trading in the country and the various media reports in this regard.

 

The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users, including the following:

·       VCs being in digital form are stored in digital/electronic media that are called electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc. Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in the permanent loss of the VCs held in them.

 

·       Payments by VCs, such as Bitcoins, take place on a peer-to-peer basis without an authorised central agency which regulates such payments. As such, there is no established framework for recourse to customer problems / disputes / charge backs etc.

 

·       There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value.

 

·       It is reported that VCs, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of VCs on such platforms are exposed to legal as well as financial risks.

 

·       There have been several media reports of the usage of VCs, including Bitcoins, for illicit and illegal activities in several jurisdictions. The absence of information of counterparties in such peer-to-peer anonymous/ pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.

 

The Reserve Bank has also stated that it is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.

 

Ajit Prasad

Press Release: 2013-2014/1261    Assistant General Manager

 

 

//TRUE COPY//

 

ANNEXURE P - 2

EBA OPINION ON ‘VIRTUAL CURRENCIES’

EBA/Op/2014/08

4 July 2014 EBA Opinion on ‘virtual currencies’.

 

........................................

 

24 The concept of governance authority is derived from the European Central Bank, Harmonised oversight approach and oversight standards for payment instruments, February 2009. There, the governance authority is described as being accountable for the overall functioning of the scheme that promotes the (initiation of the) payment instrument in question and for ensuring that all the actors involved comply with the scheme’s rules. Moreover, it is responsible for ensuring the scheme’s compliance with oversight standards.

25 http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32010R1093&from=EN

//TRUE COPY//

 

ANNEXURE P - 3

 

FREQUENTLY ASKED QUESTIONS

Know Your Customer Guidelines

(Updated up to September 02, 2016)

(This is a summarised and simplified version of the Reserve Bank of India’s Know Your Customer guidelines.)

 

Q1. What is KYC? Why is it required?

Response: KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts. Banks are also required to periodically update their customers’ KYC details.

 

Q2. What are the KYC requirements for opening a bank account?

Response: To open a bank account, one needs to submit a ‘proof of identity and proof of address’ together with a recent photograph.

 

Q3. What are the documents to be given as ‘proof of identity’ and ‘proof of address’?

Response: The Government of India has notified six documents as ‘Officially Valid Documents’ (OVDs) for the purpose of producing proof of identity. These six documents are Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhaar Card issued by UIDAI and NREGA Job Card. You need to submit any one of these documents as proof of identity. If these documents also contain your address details, then it would also be accepted as ‘proof of address’. If the document submitted by you for proof of identity does not contain address details, then you will have to submit another officially valid document which contains address details.

 

Q4. If I do not have any of the documents listed above to show my ‘proof of identity’, can I still open a bank account?

Response: Yes. You can still open a bank account known as ‘Small Account’ by submitting your recent photograph and putting your signature or thumb impression in the presence of the bank official.

 

Q5. Is there any difference between such ‘small accounts’ and other accounts

Response: Yes. The ‘Small Accounts’ have certain limitations such as:

·       balance in such accounts at any point of time should not exceed Rs.50,000

·       total credits in one year should not exceed Rs.1,00,000

·       total withdrawal and transfers in a month should not exceed Rs.10,000

·       Foreign remittances cannot be credited to such accounts.

Such accounts remain operational initially for a period of twelve months and thereafter, for a further period of twelve months if the holder of such an account provides evidence to the bank of having applied for any of the officially valid documents within twelve months of the opening of such account.

 

Q6. Would it be possible, if I do not have any of the officially valid documents, to have a bank account, which is not subjected to any limitations as in the case of ‘small accounts’?

Response: A normal account can be opened by submitting a copy of any one of the following documents as Proof of Identity (PoI):

(i) Identity card with person’s photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;

or

(ii) letter issued by a gazetted officer, with a duly attested photograph of the person.

 

For Proof of Address (PoA), you may submit the following documents:

       i.          Utility bill, which is not more than two months old, of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill);

     ii.          Property or Municipal Tax receipt;

   iii.          Bank account or Post Office savings bank account statement;

   iv.          Pension or family Pension Payment Orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address;

    v.          Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation; and

   vi.          Documents issued by Government departments of foreign jurisdictions or letter issued by Foreign Embassy or Mission in India.

This, however, is not a general rule and it is left to the judgement of the banks to decide whether this simplified procedure can be adopted in respect of any customer.

 

Q7. If my name has been changed and I do not have any OVD in the new name, how can I open an account?

Response: A copy of the marriage certificate issued by the State Government or Gazette notification indicating change in name together with a certified copy of the ‘Officially Valid Documents’ in the prior name of the person is to be furnished for opening of account in cases of persons who change their names on account of marriage or otherwise.

 

Q8. Are banks required to categorise their customers based on risk assessment?

Response: Yes, banks are required to classify their customers into ‘low’, ‘medium’ and ‘high’ risk categories depending on their AML risk assessment.

 

Q9. Do banks inform customers about this risk categorisation?

Response: No

 

Q10. If I refuse to provide requested documents for KYC to my bank for opening an account, what may be the result?

Response: If you do not provide the required documents for KYC, the bank will not be able to open your account.

 

Q11. Can I open a bank account with only an Aadhaar card?

Response: Yes, Aadhaar card is accepted as a proof of both identity and address.

 

Q12. Is it compulsory to furnish Aadhaar Card for opening an account?

Response: No. you may furnish Aadhaar card or any of the other five OVDs for opening an account.

 

Q13. What is e-KYC? How does e-KYC work?

Response: e-KYC refers to electronic KYC.

e-KYC is possible only for those who have Aadhaar numbers. While using e-KYC service, you have to authorise the Unique Identification Authority of India (UIDAI), by explicit consent, to release your identity/address through biometric authentication to the bank branches/business correspondent (BC). The UIDAI then transfers your data comprising your name, age, gender, and photograph electronically to the bank. Information thus provided through e-KYC process is permitted to be treated as an ‘Officially Valid Document’ under PML Rules and is a valid process for KYC verification.

 

Q14. Is introduction necessary while opening a bank account?

Response: No, introduction is not required.

 

Q15. If I am staying in Chennai but if my proof of address shows my address of New Delhi, can I still open an account in Chennai?

Response: Yes. You can open a bank account in Chennai even if the address in the “Officially Valid Document” is that of New Delhi and you do not have a proof of address for your Chennai address. In such case, you can submit the officially valid document having your New Delhi address, together with a declaration about your Chennai address for communication purposes.

 

Q16. Can I transfer my existing bank account from one place to another? Do I need to undergo full KYC again?

Response: It is possible to transfer an account from one branch to another branch of the same bank. There is no need to undergo KYC exercise again for such transfer. However, if there is a change of address, then you will have to submit a declaration about the current address. If the address appearing in the ‘Officially Valid Documents’ (OVDs) submitted for proof of address is no longer your valid address (i.e. neither your permanent address nor your current address), you need to get an Officially Valid Document for Proof of Address containing the current or the permanent address and furnish the same within six months. In case of opening an account in another bank, however, you will have to undergo KYC exercise afresh.

 

Q17. Do I have to furnish KYC documents for each account I open in a bank even though I have furnished the documents of proof of identity and address?

Response: No, if you have opened a KYC compliant account with a bank, other than a ‘small account’, then for opening another account with the same bank, furnishing of documents is not necessary.

 

Q18. For which banking transactions do I need to quote my PAN number?

Response: PAN number needs to be quoted for transactions such as account opening, transactions above Rs.50,000 (whether in cash or non-cash), etc. A full list of transactions where PAN number needs to be quoted can be accessed from website of Income Tax Department at the following URL:

http://www.incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=rule&cname=CMSID&cval=103120000000007541&searchFilter=&k=114b&IsDlg=0

 

Q19. Whether KYC is applicable for Credit/Debit cards?

Response: Yes. KYC exercise is necessary for Credit/ Smart Cards and also in respect of add-on/ supplementary cards. Since debit cards are issued only to account holders and accounts are opened only after the KYC procedure is completed, there is no need for separate KYC for issuing debit card.

 

Q20. I do not have a bank account. But I need to make a remittance. Is KYC applicable to me?

Response: Yes. KYC exercise needs to be done for all those who want to make domestic remittances of Rs. 50,000 and above and all foreign remittances.

 

Q21. Can I purchase a Demand Draft/Payment Order/Travellers Cheque against cash?

Response: Yes, Demand Draft/Payment Order/Travellers Cheques for below Rs.50,000/- can be purchased against cash and such instruments for Rs. 50000/- and above can be issued only by way of debiting the customer's account or against cheques.

 

Q22. Do I need to submit KYC documents to the bank while purchasing third party products (like insurance or mutual fund products) from banks?

Response: Yes, all customers who do not have accounts with the bank (known as walk-in customers) have to produce proof of identity and address while purchasing third party products from banks if the transaction is for Rs.50,000 and above. KYC exercise will not be necessary for bank’s own customers for purchasing third party products. However, instructions to make payment by debit to customers’ accounts or against cheques for remittance of funds/issue of travellers’ cheques, sale of gold/silver/platinum and the requirement of quoting PAN number for transactions of Rs.50,000 and above will be applicable to purchase of third party products from bank by its customers as also to walk-in customers.

 

Q23. My KYC was completed when I opened the account. Why does my bank insist on doing KYC again?

Response: Banks are required to periodically update KYC records. This is a part of their ongoing due diligence on bank accounts. The periodicity of such updation varies from account to account depending on its risk categorisation by the bank. Periodic updation of records also helps prevent frauds in customer accounts.

 

Q24. What are the rules regarding periodic updation of KYC?

Response: Different periodicities have been prescribed for updation of KYC records depending on the risk perception of the bank. KYC is required to be done at least once in two years for high risk customers, once in eight years for medium risk customers and once in ten years for low risk customers. This exercise would involve all formalities for KYC normally taken at the time of opening the account.

While periodic updation of KYC has to be carried out in respect of customer categorised as ‘low risk’ also, if there is no change in status with respect to the identity (change in name, etc.) and/or address of such customers the banks may ask such customers to submit only a self-certification about ‘no-change in status’ at the time of periodic updation.Banks may not ask such customers to submit copies of ‘Officially Valid Documents’ for periodic updation.

In case of change of address of such ‘low risk’ customers, they could merely forward a certified copy of the document (proof of address) by mail/post, etc. Physical presence of such low risk customer is not required at the time of periodic updation.

Customers who are minors have to submit fresh photograph on becoming major.

 

Q25. What if I do not provide the KYC documents at the time of periodic updation?

Response: If you do not provide your KYC documents at the time of periodic updation, bank has the option to close your account. Before closing the account, the bank may, however, impose ‘partial freezing’ (i.e. initially allowing all credits and disallowing all debits while giving an option to you to close the account and take your money back). Later, even credits also would not be allowed. The ‘partial freezing’ however, would be exercised by the bank after giving you due notice.

Q26. How is partial freezing imposed?

Response: Partial freezing is imposed in the following ways:

·       Banks have to give due notice of three months initially to the customers before exercising the option of ‘partial freezing’.

·       After that a reminder for further period of three months will be issued.

·       Thereafter, banks shall impose ‘partial freezing’ by allowing all credits and disallowing all debits with the freedom to close the accounts.

·       If the accounts are still KYC non-compliant after six months of imposing initial ‘partial freezing’ banks shall disallow all debits and credits from/to the accounts, classifying them inoperative.

Meanwhile, the account holders can revive accounts by submitting the KYC documents.

 

//TRUE COPY//

 

 

ANNEXURE P- 4

PRESS RELEASE

DEPARTMENT OF COMMUNICATION, Central Office, S.B.S.Marg, Mumbai-400001

Phone: 91 22 2266 0502 Fax: 91 22 22660358

RESERVE BANK OF INDIA

Website :www.rbi.org.in

email: helpdoc@rbi.org.in

February 01, 2017

RBI cautions users of Virtual Currencies

The Reserve Bank of India had cautioned the users, holders and traders of Virtual Currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to, vide its press release dated December 24, 2013.

The Reserve Bank of India advises that it has not given any licence / authorisation to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.

Jose J. Kattoor

Press Release: 2016-17/2054         Chief General Manager

 

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ANNEXURE P - 5

 

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF ECONOMIC AFFAIRS

RAJYA SABHA

UNSTARRED QUESTION NO. 2960

TO BE ANSWERED ON 28th MARCH, 2017/ CHAITRA 7, 1939 (SAKA)

FINANCIAL RISK DUE TO VIRTUAL CURRENCIES

QUESTION

2960: DR. K.V.P. RAMACHANDRA RAO:

Will the Minister of FINANCE be pleased to state:

(a) whether Government shares the reported comment of RBI that virtual currencies pose a financial risk; and

(b) if so, how will it address the problem while pushing for a cashless economy?

ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE

(SHRI ARJUN RAM MEGHWAL)

(a) & (b): Reserve Bank of India, vide, its Press Release dated February 01, 2017 has advised that it has not given any license / authorization to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.

 

Reserve Bank of India had issued cautionary advice to the users, holders and traders of Virtual Currencies (VCs) including Bitcoins about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to , vide, its press release dated December 24,2013.

 

The creation, trading or usage of VCs including Bitcoins, as a medium of payment is not authorized by any central bank or monetary authority. No regulatory approval, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities.

 

The absence of counter parties in usage of VCs including Bitcoins, for illicit and illegal activities in anonymous/ pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.

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ANNEXURE P- 6

 

By Speed Post POD & Email

 

Date: 19th July, 2017

 

To,

 

The Reserve Bank of India

Through Its CGM And Secretary
Secretary's Department
Reserve Bank of India
16th Floor, Central Office Building
Shahid Bhagat Singh Marg
Mumbai - 400 001

 

And by email id at

 

dicgc@bom.5.vsnl.net.in

rdmumbai@rbi.org.in

cepcmumbai@rbi.org.in

cepcnewdelhi@rbi.org.in

 

MOST URGENT: FOR COMPLIANCE OF THE ORDERS OF THE HON’BLE SUPREME COURT

Subject:  In the matter of (Public Interest Litigation) Writ Petition (C) No. 000406 of 2017

BEFORE SUPREME COURT OF INDIA
HON'BLE THE CHIEF JUSTICE MR. J.S. KEHAR
HON'BLE DR. JUSTICE D.Y. CHANDRACHUD

 

Last date of Hearing: 14th July, 2017

Item No. 11

Vijay Pal Dalmia & Anr.

Versus:

Union of India Through Cabinet Secretary,

Ministry of Home Affairs Through its Secretary

Ministry of Finance Through its Secretary

Reserve Bank of India

 

Dear Sir/Madam,

 

With reference tothe above mentioned subject, you are requested to note that the undersigned filed a captioned Public Interest Litigation, before the Hon’ble Supreme Court of India, the particulars of which have been described in the subject of this letter.

 

In the above Writ Petition(s) (Civil) No(s).000406/2017, theHon’ble Court was pleased to pass the following order:

 

1.              The application for permission to appear and argue in person is allowed.

 

2.              Petitioner No.1, who has appeared in person, has invited our attention to two communications, issued by the Reserve Bank of India, dated 24.12.2013 and 01.02.2017 (Annexures P-1 and P-5 respectivelyof the writ petition). He has also invited the attention of this Court to the question posed in the Rajya Sabha, which came to be answered on the issue in hand, on 28.03.2017.  We are prima facie satisfied, that the Reserve Bank of India is conscious of the  issue  raised  and  pointed  out  by  the petitioner-in-person.  Be that as it may, we grant liberty to the petitioner-in-person to communicate the instant writ petition along  withitsannexures to the Reserve Bank of India, within two weeks from today. The Reserve Bank of India shall examine the issue posed by the petitioner-in-person, and take a conscious decision on the same, one way or the other. The decision taken by the Reserve Bank of India, shall be communicated to the petitioner-in-person, within four weeks from the date of receipt of a copy of the writ petition.

3.              The writ petition is disposed of, in the above terms.

 

The above order can also be accessed from the website of the Hon’ble Supreme Court of India. A copy of the Order, as downloaded and printed from the website of the Hon’ble court is attached herewith this letter.

 

As per the orders of the Hon’ble Court, I am enclosing herewith this letter, the complete paper book of the Writ Petition along with all annexures, as filed in the court.

 

This Writ Petition was filed  in Public Interest under Article 32 of the Constitution of India for issuance of Writ of Mandamus or any other appropriate Writ, order or direction directing the Respondents to take emergency and urgent  steps for restraining the sale and purchase of illegal cryptocurrencies or Decentralised Digital Currency or “Virtual Currency” (VCs), such as, Bitcoins, litecoins, bbqcoins, dogecoins etc., which are being traded and invested-in openly and extensively within the knowledge and domain of the Respondents anonymously over internet and otherwise for a host of anti-national, illegal and nefarious activities, such as funding of terrorism and insurgency, illicit trade of arms and drugs, recruitment of terrorists, bribery, corruption, money laundering, tax evasion, generation of black money, payment of ransom, human trafficking, transfer of money through hawala, hawala trade, illicit investments, avoidance of banking channels and surveillance of funds, online gambling resulting in negative impact on Indian currency, inflation, loss of control of Government on financial discipline and illegal diversion of money, and all this happening without any border restrictions or geographical constraints by avoiding and violating laws, resulting in danger to the integrity and sovereignty of India causing harm and danger to the peace and tranquility of the society,  the security of the state and the residents of India.

 

As per the directions of the Hon’ble Court, you are called upon to examine the issue posed by the undersigned as petitioner-in-person, and take a conscious decision on the same, one way or the other.  The decision taken by you, as per the directions of the Hon’ble Court, shall be communicated to the undersigned, within four weeks from the date of receipt of a copy of the writ petition.

 

A copy of this letter along with the copy of the above mentioned Writ Petition is also being sent to the other respondents, i.e. Union of India through its Cabinet Secretary, Ministry of Home Affairs through its Secretary and Ministry of Finance through its Secretary, for updating them about the Public Interest Litigation, filed by the undersigned, with a request to take an appropriate action and decisive stand on the aspects involved in the Writ Petition and as per prayers made therein.In order of ease, I am also sending the scanned copy of the Writ Petition to all concerned, by email also.

 

In view ofthe above, youare hereby called upon to comply with the orders of the Hon’ble Court.

 

In case you need any other information or assistance, kindly contact.

 

Thanking You.

 

Yours faithfully

 

 

Vijay Pal Dalmia

Encl. As mentioned above

 

CC to:

 

1.              Union of India

Through Cabinet Secretary,

Cabinet Secretariat, Rashtrapati Bhawan

New Delhi-110004

Also by email at cabinet@nic.in

 

2.              Ministryof Home Affairs,

Through its Secretary

North Block

Central Secretariat

New Delhi – 110001

Also by email at jscpg-mha@nic.in

 

 

3.              Ministry of Finance
         Through its Secretary, North Block,

New Delhi - 110001 (India)
 

Also by email at

mosfinance@nic.in

smn.dash@nic.in

rsecy@nic.in

jsabc-dea@nic.in

         

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ANNEXURE P- 7

 

RESERVE BANK OF INDIA

www.rbi.org.in

August 8, 2017

DPSS. CO. EPPD.No. 634/ 04.11.02 I 2017-18

 

By Speed Post/ E-mail

 

Shri Vijay Pal Dalmia

Shri Siddharth Dalmia

Flat No. 2101, Olympia Tower II,

Eldeco Utopia, Sector 93 A,

Noida

UP 201304

Ph.: 9810081079

 

Dear Sir,

 

Before the Supreme Court of India – Writ Petition (Civil) No. 000406 of 2017

 

Please refer to your e-mail dated July 19, 2017 forwarding a copy of your Writ Petition No.  000406 of 2017 together with its annexures and the Orders of the Hon'ble Supreme Court of India thereon dated July 14,  2017. We have examined the issues raised in the Writ Petition and would like to respond as under -

 

As mentioned in the Writ Petition, Reserve Bank of India (RBI), has  issued  a cautionary advice to users,  holders and traders of Virtual  Currencies  (VCs), vide, Press Release dated December 24, 2013. The Advisory has –

 

cautioned users, holders and traders of VCs about the  potential  financial, operational, legal, customer protection and security related  risks that they are exposing themselves to.

 

highlightedthat there is no underlying or backing of any asset for VCs; as such, their value seems to be a matter of speculation.  Huge volatility in the value of VCs  has  been noticed  in  the  recent  past.  Thus, the users are exposed to potential losses on account of such volatility in value.

 

alertedof the several media reports of the usage of VCs,  including  Bitcoins, for illicit and illegal activities in several jurisdictions. The absence of information of counterparties in such peer-to-peer anonymous I pseudonymous systems could subject  the  users  to  unintentional  breaches  of Anti-Money  Laundering  and Combating the Financing of Terrorism (AML I CFT) laws.

 

2. Further, as also elaborated in the Writ Petition, RBI, vide,  Press Release dated February 01, 2017,  has advised that it has not given any license I authorization to any entity  I company to operate such schemes or deal with  Bitcoin or any VC. As such, any user, holder,  investor,  trader,  etc.,  dealing with  VCs will  be doing so at their own risk.

 

4.    In this regard, we would like to inform you that the Government of India, Ministry of Finance has constituted an Inter-Disciplinary Committee under the Chairmanship of Special Secretary (Economic  Affairs)  to  examine  the  regulatory framework  with regard to Virtual  Currencies.  Thus, the issues raised in the captioned Writ  Petition are already under examination  by the said Committee. The Committee, inter-alia, comprises of representatives from different Government  Departments,  SEBI, SBI, including RBI. As part of its deliberations, the Committee has  had  interactions with major stakeholders,  including  calling for  comments  from  members  of the  public through  the MyGov website.  The Committee is in the process of finalizing its  report and making its recommendations.  Since, RBI has  communicated its views to the Committee on the issues  involved,  further  course  of action  of RBI is  dependent on the extent to and manner in which the recommendations are accepted by the Government and the roles and responsibilities of various regulatory and enforcement agencies are delineated.”

 

Yours Faithfully

 

(P Vasudevan)

Chief General Manager

 

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