III.Currency
The RBI Act does not specifically define currency, but it does define foreign currency to have the same meaning as in Foreign Exchange Regulation Act, 1973, which has since been replaced by FEMA. ‘Currency’ has been defined under FEMA to include, ‘all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank’.102 FEMA defines ‘foreign currency’ as any currency other than Indian currency.103 Definition of ‘Indian Currency’ under FEMA states that Indian currency is the currency which is expressed or drawn in Indian Rupees. The definition excludes special bank notes and special one rupee issued under section 28A of the RBI Act.104
IV.Legal Tender
Although there is no definition for legal tender under Indian law, the power to issue bank notes vests exclusively with the Reserve Bank of India (“RBI”). The bank note issued by RBI is considered legal tender (S. 26 of RBI Act). For any instrument to qualify as a legal tender it must fulfill the test prescribed in Section 13 of the Coinage Act which states that coins issued under the authority of Section 6 of the Coinage Act, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed. Over a period of time various instruments have been defined to mean legal tender, such as One Rupee issued under Currency Ordinance, 1940 as well as bank notes issued by RBI under the RBI Act. From the above, it could be argued that so far as Bitcoin are not specifically designated by the government to be legal tender, they should not fall within this category.
V. Currency Notes
The term currency notes are specifically defined in Section 2(i) of FEMA to mean and include cash in the form of coins and bank notes. This definition therefore does not cover Bitcoin which are not issued either under the Coinage Act or RBI Act. S. 22 of the RBI Act provides that RBI has the sole right to issue bank notes and S. 26 provides that bank notes shall be legal tender in India. From the above it appears that while Bitcoin have several features of a currency or legal tender it is not bank notes and is consequently not legal tender in India. Accordingly, it is left to be examined if it falls within the purview of securities, derivatives, or commodities.
VI.Virtual Currency
The question at hand is whether a ‘virtual currency’ such as Bitcoin can be said to come under the purview of the definition of currency above. The answer to this question can be found in the maxim ‘express um facit cessare tacitum’. The maxim represents the principle ‘when there is express mention of certain things, then anything not mentioned is excluded’. The maxim has been recognized by Indian courts and was also relied upon by the Supreme Court in Shankara Rao Badam & Ors. v. State of Mysore & Anr. 105 and Union of India & Anr. v. Tulsiram Patel.106 In light of the provisions of the law, it can be reasonably concluded that ‘virtual currency’ should be considered excluded from the definition of currency. While it may be argued that it may fall under ‘such other similar instruments’ under Section 2(h), but such ‘other instruments’ need to be specifically notified by the RBI which is not the case. There is no such declaration in respect of cryptocurrencies in general or Bitcoin in particular. RBI has merely advised the public to be cautious regarding the trading of virtual currencies.107 Therefore, under the provisions of existing law, Bitcoin are not currency.108
102 Section 2(m) of The Foreign Exchange Management Act, 1999
103. Section 2(q) of The Foreign Exchange Management Act, 1999
104. [1969] 3 S.C.R. 1
105. 1985 AIR SC 1416 104. RBI Cautions Users of Virtual Currencies Against Risks, Press Release : 2013-2014/1261 dated December 24, 2013 available at: http://rbi.org.in/scripts/ BS_PressReleaseDisplay.aspx?prid=30247
105. According to Section 26 of the RBI Act, 1934 bank notes can be considered as “Legal Tender”. Further, according to Section 24 of the same only RBI has a power to issue it and no one else. See also Are Bitcoin currency or asset?, note 48 above.
106. 2002 178 ELT 22 S.C
107. Hon’ble Mr. Justice S.B. Sinha’s view in Tata Consultancy Services v. State of Andhra Pradesh, 271 ITR 401 (2004).
108. Section 2 of The Sale of Goods Act, 1930
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