On 15 October 2026 the Delhi High Court entertained a public‑interest litigation challenging the Union of India’s notification of a 0.4 % merchant discount rate on UPI transactions above INR 2,000. The suit contests the amendment to Section 10A of the Payment and Settlement Systems Act, 2007, which eliminated the previous blanket no‑charge rule. Merchants handling larger UPI payments now incur a statutory fee; banks and payment‑app providers receive the distributed revenue. The petition questions the fee’s constitutionality and the adequacy of the consultation process.

Full News Breakdown

The dispute followed the government’s notification of a differentiated fee structure on UPI person‑to‑merchant payments. The petition alleges that the fee breaches equality and procedural fairness. The petitioner seeks a declaration of unconstitutionality; the Union argues that fiscal policy decisions fall within legislative discretion. The court has agreed to hear the matter, leaving the fee’s enforceability pending.

• Case Name: Anjan Datta v. Union of India

• Court: Delhi High Court

• Date: 15 October 2026

• Statutes Cited: Payment and Settlement Systems Act, 2007

• Key Provisions: Section 10A (amendment removing blanket no‑charge protection for UPI merchant transactions)

• Primary Legal Issue: Constitutionality of the merchant discount rate and the adequacy of public consultation before its imposition

• Petitioner Arguments: The fee infringes equality and due‑process rights; the government failed to conduct a time‑bound public consultation

• Respondent Arguments: Economic and fiscal policy decisions merit legislative discretion and deference by the courts

How Does This Affect You?

Previously the legal landscape was ambiguous about whether a statutory fee could be levied on UPI merchant transactions without violating constitutional safeguards. The court’s decision to entertain the petition confirms that the amendment to Section 10A is the operative provision, though its validity remains subject to judicial review. Practitioners therefore treat the 0.4 % charge as a binding statutory requirement for qualifying transactions, while monitoring for an interim stay or eventual invalidation. The following sections outline implications for lawyers, students, and businesses.

For Lawyers & Advocates

• Merchant agreements now incorporate a clause referencing the amendment to Section 10A, specifying the 0.4 % rate for transactions above INR 2,000 and the flat INR 5 charge for thin‑margin sectors, which enhances contractual enforceability.

• Banking and fintech clients are revising internal revenue‑sharing schedules and disclosing the fee’s impact in quarterly financial statements, aligning with RBI reporting norms and the statutory distribution framework.

• Affidavits and written submissions challenging the notification foreground the lack of a time‑bound public‑consultation process as a breach of procedural fairness under Article 14.

• Compliance checklists for merchants in sectors such as fuel, telecom, and agriculture now incorporate the flat‑fee structure, and pricing teams model the cost impact to avoid margin erosion.

• The court’s docket is being monitored for interim orders. If a stay is granted, clients may suspend MDR collection immediately and communicate the temporary relief to affected merchants.

For Law Students

This case illustrates the judiciary’s calibrated approach to reviewing legislative economic measures, balancing deference with constitutional safeguards. The core doctrinal focus is the tension between legislative discretion in fiscal policy and the procedural fairness requirement under Article 14.

The decision is particularly relevant for the study of:

• Constitutional law – procedural due‑process in economic legislation

• Banking and financial regulation – statutory amendment of payment system provisions

• Administrative law – standards for public consultation in policy‑making

• Competition law – impact of fee structures on market dynamics

• Tax law – distinction between fees and taxes in regulatory contexts

Comparable cases include State of West Bengal v. Union of India (2010, Supreme Court), which affirmed legislative leeway in fiscal matters, and M. C. Mehta v. Union of India (2006, Supreme Court), which emphasized the need for public consultation in environmental regulations. Comparing them highlights how courts differentiate between substantive economic policy and procedural legitimacy.

For Businesses

• Retail merchants processing UPI payments above INR 2,000 revise pricing policies to embed the 0.4 % fee, mitigating profit compression and non‑compliance penalties.

• Companies operating in thin‑margin sectors such as fuel stations, telecom retailers, and agricultural input dealers adjust standard operating procedures to apply a flat INR 5 charge per transaction and reflect this in cost‑of‑goods‑sold calculations.

• CFOs convene board meetings to approve the incorporation of the new fee structure into financial forecasts and disclose the impact in upcoming quarterly reports, ensuring alignment with statutory requirements.

• Payment‑service providers update internal revenue‑sharing agreements, amend system configuration to automatically calculate the differentiated fee, and file revised statements with the regulator to demonstrate compliance.

Key Takeaways

• The amendment to Section 10A now expressly authorises a differentiated merchant discount rate on UPI transactions, ending the previous blanket exemption.

• Practitioners embed MDR calculations into merchant contracts and pricing models for transactions exceeding INR 2,000.

• Regulators can now enforce fee collection and revenue distribution without classifying the charge as a tax, provided the statutory framework is followed.

• The Delhi High Court’s final judgment on the PIL, expected within six months, will determine the constitutional validity of the fee and the required consultation process.

• In‑house counsel audit all UPI‑related fee clauses and obtain board approval before the court’s