- Download the court order regarding UPI payments from fraudsters here.
MediaNama’s Take: Cybercrime investigators face a genuine challenge. Mule accounts are the backbone of modern financial fraud, rapidly layering stolen money across multiple accounts before it disappears. The Reserve Bank of India’s deployment of AI tools such as MuleHunter.AI reflects both the scale of the threat and the need for faster detection.
However, effective enforcement cannot come at the cost of due process. Courts across Kerala, Rajasthan and now Andhra Pradesh have consistently recognised that merchants cannot reasonably verify every UPI customer before accepting payment. Treating every recipient of a tainted transaction as a suspect risks crippling legitimate businesses while doing little to dismantle organised fraud networks.
More importantly, there is little public evidence that indiscriminate freezes are delivering results. A Parliamentary Standing Committee report from 2024 noted that Rs 2,294.79 crore was lost to cyber fraud in 2022, but only Rs 0.57 crore was returned to victims, a recovery rate of roughly 0.02%.
What’s the news? The Andhra Pradesh High Court has held that authorities cannot freeze a merchant’s bank account merely because it received a UPI payment from a person accused of fraud, observing that “the vendor cannot verify the credentials of such individual” before accepting digital payments. In an order delivered on June 22, Justice Ravi Cheemalapati directed the State Bank of India (SBI), Mangalagiri Branch, to defreeze the bank account of Sri Sai Wines, a licensed liquor retailer in Guntur district, after it was frozen following instructions from the Cyber Cell, Patna District, and the Bariarpur Police Station, Munger, Bihar.
The retailer challenged the freeze after its current account, containing Rs 8.26 lakh, was blocked because a customer allegedly involved in a cheating case had paid Rs 1,000 via UPI for liquor. The Court held that the authorities had frozen the account without notice, without following due process and without establishing any involvement by the merchant in the alleged offence.
What the court said:
- Merchants cannot verify every UPI customer: The Court noted that “if any individual purchases goods and pays through UPI using the above said applications, the vendor cannot verify the credentials of such individual.”
- No evidence of the merchant’s involvement: Justice Cheemalapati observed that “without verifying the credentials of the petitioner and without noticing his involvement in any criminal case registered against the said individual, the authorities cannot freeze the petitioner’s account.”
- Freezing the account violated due process and was unlawful: The Court found that the account had been frozen “without notice and without following due process of law.” It further concluded that “the manner in which the petitioner’s account has been freezed is unsustainable and contrary to law”…
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