Karnataka HC dismisses PhonePe's petition against police notice in betting case

Bengaluru: The Karnataka High Court has dismissed a petition filed by digital payments platform PhonePe, which had challenged a police notice seeking user information in connection with an alleged online sports betting case.

The court held that the company could not use user privacy as a shield against lawful criminal investigations.

Justice M Nagaprasanna, who delivered the verdict recently, observed that in the digital age, the nature of crime has evolved and that cyber offences demand a prompt and targeted investigative approach.

He stressed that while consumer privacy is important, it cannot override the necessity of lawful inquiries.

"Today, conventional crimes have receded, and new-age crimes have emerged in large numbers. These new-age crimes are cyber crimes – the clandestine modern offences. Such offences demand a swift, targeted, and effective response," the judge noted.

"While privacy, as contended by the petitioner, should be maintained, it cannot be wielded as a shield against lawful investigation," he added.

The court also underlined the importance of balancing confidentiality with accountability.

"The protection of consumer privacy cannot eclipse the lawful imperative of investigating officers to secure evidence and take the investigation to its logical conclusion. Confidentiality must coexist with accountability," Justice Nagaprasanna said.

The case stemmed from a 2022 complaint by a man who claimed to have deposited around Rs 6,000 via PhonePe into a sports betting website during India vs South Africa cricket matches.

He alleged that he was later unable to withdraw his funds and that the website became inaccessible.

Accusing the platform of "cheating", he lodged a complaint.

Following the complaint, police issued a notice to PhonePe in December 2022 under Section 91 of the then-prevailing Code of Criminal Procedure (CrPC).

The notice sought user details linked to the betting transactions, asked whether the company had conducted any due diligence while onboarding users, and whether it had noticed any suspicious or gambling-related activity on its platform.

PhonePe was also asked to provide a list of users possibly involved in online gambling.

The company challenged the notice, arguing that it had a legal obligation under the Payment and Settlement Systems Act, 2007, and the Bankers’ Books Evidence Act, 1891, to maintain user confidentiality.

It claimed that disclosure of user data was only permissible through a court order.

However, the court found that these laws do allow the sharing of information with statutory bodies, including investigating agencies.

It also cited the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2011, which mandate intermediaries to provide user data to investigating officers within 72 hours of a legitimate request.

"The duty to protect data must yield where public interest and criminal investigation intersect," the court ruled, emphasising that such requests must be specific and not overly broad or speculative. In this instance, it found the notice was targeted and lawful, aimed at tracing a possible network of illegal financial transactions.

Accordingly, the court dismissed PhonePe’s petition.

Advocate Nitin Ramesh appeared for PhonePe, while Additional Government Advocate Mohammed Jaffar Shah represented the state.