The Delhi High Court has sent the PayU dispute over merchant-category codes and interchange claims to a Reserve Bank of India-facilitated mediation, while temporarily freezing action on disputed past claims. The 14 September order gives an RBI-appointed senior officer 30 days to try to find a solution and lists the case again on 27 October 2026.
Key takeaways
- The court asked RBI to facilitate talks because PayU, Visa and the relevant banks operate inside an RBI-supervised payment-system regime.
- The standstill applies to disputed past transactions involving alleged merchant-category-code errors, not ordinary future payment activity.
- PayU says it does not assign merchant category codes; the order does not decide who was responsible or whether the claims are valid.
- The practical issue is whether payment-system disputes can be resolved before interchange claims flow through bank settlements and payment-aggregator escrow accounts.
The PayU dispute is not a final ruling that PayU, Visa or any bank acted unlawfully. Justice Subramonium Prasad expressly left the parties’ rights and arguments open. The court instead created a temporary operating arrangement: keep normal transactions moving, stop further action on the identified historical claims, and put the system’s regulator in the room.
Everyone else is reporting that RBI will mediate; we are explaining how merchant codes can turn a card-network fee disagreement into a settlement risk for a payment aggregator.
What the PayU dispute order actually does
In PayU Payments Private Limited v. Yes Bank Limited & Others, CS(COMM) 974/2026, the court requested RBI to nominate a senior officer familiar with the payments industry. That officer is to facilitate an attempted solution within 30 days, according to the digitally signed Delhi High Court order reproduced by Indian Kanoon.
The order distinguishes facilitation from statutory adjudication. RBI is being asked to act as a mediator, not to deliver a final binding decision under Section 24 of the Payment and Settlement Systems Act, 2007. That distinction preserves the parties’ ability to pursue their legal positions if the talks fail.
During the process, Visa is not to issue a final Interchange Reimbursement Fee, or IRF, determination on the disputed past transactions. The acquiring banks are not to make related deductions or netting from PayU, while the issuing bank is not to raise further claims tied to alleged merchant-code misclassification for transactions before the suit.
Why merchant category codes matter
A merchant category code, or MCC, is a four-digit label describing a merchant’s main business. Card networks and banks use MCCs for routing, controls and pricing, including the interchange fee that an acquiring bank pays an issuing bank on a card transaction.
The order records ICICI Bank’s allegation that some merchants processed through acquiring banks had incorrect MCCs, causing an interchange shortfall. PayU disputes responsibility. Its case is that it collects and checks merchant information, but the acquiring bank independently assigns the MCC.
This is the mechanism that makes the PayU dispute important beyond one company. A classification decision made during merchant onboarding can later become a network claim. If an acquiring bank passes that claim through by deducting money from a payment aggregator’s settlement flow, the disagreement can reach an escrow account before liability has been finally resolved.
| Participant | Role described in the order | Why the dispute reaches it |
|---|---|---|
| PayU | RBI-authorised payment aggregator | Routes merchant payments and settles onward from regulated escrow arrangements |
| Acquiring banks | Process and settle merchant card payments | Assign merchant codes, according to PayU’s pleaded case, and receive network claims |
| Issuing bank | Issues cards used by customers | May claim interchange shortfall from alleged misclassification |
| Visa | Card-network and system provider | Runs the IRF compliance process challenged by PayU |
| RBI | Payments regulator and authorising authority | Asked to facilitate a 30-day settlement effort |
The money figures are claims, not findings
The court order records PayU’s claim that Yes Bank reversed more than ₹5.95 crore but continued to retain ₹6,88,18,850. It also records PayU’s stated apprehension about claims of approximately ₹5.26 crore, ₹27.30 crore and ₹8.82 crore involving other acquiring banks.
Those numbers describe the plaintiff’s case. The court did not validate the alleged MCC errors, determine which participant assigned a wrong code, or award recovery. A separate same-day report by Supreme Today independently confirms the 30-day RBI process, the temporary standstill and the ₹6.88 crore amount recorded as retained.
What RBI mediation can—and cannot—settle
RBI’s advantage is institutional context. It authorises payment aggregators and card networks under the PSS Act and can understand how onboarding, MCC allocation, interchange adjustments and escrow settlements interact. That makes it better placed than a general mediator to identify an operational solution that does not interrupt payments.
But the mediation request is not a declaration that RBI will adjudicate the PayU dispute. The court said RBI would facilitate only, leaving the maintainability of the suit, the validity of Visa’s IRF process, contractual rights and ultimate liability unresolved.
The broader consequence is a control question for India’s payment companies: merchant classification must be traceable across the aggregator, acquiring bank and network. When responsibility is fragmented, a code error can produce a fee claim without a single participant accepting ownership of the classification decision.
For context, Lapaas Voice has previously explained how payment aggregators fit into India’s payment economics, and how UPI MDR policy separates consumer charges from merchant-side costs. The present case concerns card-network interchange claims, not a new UPI fee.
What happens next
RBI is expected to depute a senior officer and attempt a solution by mid-October. The court will take up the matter again on 27 October. Until then, the order seeks to prevent the old claims from escalating while keeping routine processing intact.
The Delhi High Court’s PayU dispute order is best understood as an operational pause, not a verdict: RBI gets 30 days to mediate, historical claim enforcement is held in place, normal payment activity continues, and every substantive legal question remains open.
FAQs
Did the Delhi High Court rule that PayU was not responsible?
No. The court recorded PayU’s arguments but did not decide who assigned any incorrect merchant codes or who bears liability for the interchange claims.
What is an MCC in card payments?
A merchant category code is a four-digit classification of a merchant’s principal business. It can affect controls and the interchange pricing applied to card transactions.
What did the court ask RBI to do?
The court asked RBI to nominate a senior payments officer to facilitate a solution within 30 days. RBI is acting as a mediator, not issuing a binding Section 24 adjudication.
Will the PayU dispute interrupt customer payments?
The order says it should not obstruct ordinary transactions. Its temporary restrictions are limited to identified claims arising from disputed past transactions.
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