Court Emphasizes Compliance with Pre-Litigation Mediation Under Commercial Courts Act, 2015 and Orders Status Quo on IRF Deductions Pending RBI-Facilitated Mediation
In a significant judgment dated September 14, 2026, the Delhi High Court, presided over by Justice Subramonium Prasad, addressed a complex dispute involving Payu Payments Private Limited and Yes Bank Limited along with other defendants, including Visa as the card network provider. The case centers on deductions made from Payu's escrow accounts related to Interchange Reimbursement Fee (IRF) claims stemming from alleged wrong assignments of Merchant Category Codes (MCCs) to merchants whose transactions were processed through Payu's platform.
Payu Payments, an RBI-authorized non-bank payment aggregator, challenged deductions made by acquiring banks (Defendants No. 1, 3, 4, and 5) on the basis of IRF claims raised by an issuing bank (Defendant No. 2, Yes Bank) under Visa's private IRF Compliance Process. The Plaintiff contended that it was not responsible for assigning MCCs - a code crucial for determining applicable interchange fees between issuing and acquiring banks - and that the private dispute resolution process adopted by Visa did not comply with the statutory framework mandated under Section 24 of the Payment and Settlement Systems Act, 2007 (PSS Act).
The Court examined the maintainability of the suit, emphasizing the mandatory requirement of pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015. Citing the Supreme Court's ruling in Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd., (2022) 10 SCC 1, the Court reiterated that exemption from pre-litigation mediation is to be granted only in exceptional cases where urgent interim relief is necessary. Since Payu did not demonstrate the need for urgent interim relief, the Court underscored the importance of complying with this procedural mandate.
Instead of dismissing the suit outright for failure to comply, the Court took a pragmatic approach by referring the matter to the Reserve Bank of India (RBI) to act as a mediator. The RBI, the regulatory authority overseeing the payment ecosystem and the issuer of authorizations to both Payu and Visa under the PSS Act, was directed to facilitate mediation and propose a resolution concerning the disputed MCC assignments and related IRF claims within 30 days.
The Court clarified that the RBI's role as mediator is distinct from adjudication under Section 24 of the PSS Act and is not bound by the interim orders passed by the Court. Parties were granted liberty to seek modifications of the Court's interim directions based on developments during the mediation process.
Meanwhile, the Court directed all parties to maintain status quo regarding the deductions from Payu's escrow accounts arising from the disputed IRF claims. The acquiring banks were restrained from making further deductions, and Visa was restrained from issuing any final IRF determination pending the mediation. The order preserves the normal course of transactions unrelated to the MCC disputes and leaves open all legal and contractual questions between the parties.
The Court's intervention aims to ensure smooth functioning of the payment ecosystem, protect the interests of all stakeholders, and address systemic issues arising from MCC misclassification, which has wider implications for payment aggregators, banks, and merchants.
The matter is listed for further hearing on October 27, 2026.
Bottom Line:
Payment and Settlement Systems Act, 2007 - Dispute regarding deductions from Escrow Account based on Interchange Reimbursement Fee (IRF) claims - Court directs Reserve Bank of India (RBI) to act as mediator to address concerns regarding wrong Merchant Category Codes (MCCs) and related disputes.
Statutory provision(s):
Commercial Courts Act, 2015 Section 12A, Payment and Settlement Systems Act, 2007 Section 24
Payu Payments Private Limited v. Yes Bank Limited, (Delhi) : Law Finder Doc Id # 2979294
