The Andhra Pradesh High Court ruled on June 22 that merchants’ bank accounts cannot be frozen solely because they received Unified Payments Interface (UPI) payments from individuals accused of fraud. Justice Ravi Cheemalapati emphasized that vendors cannot be expected to verify the credentials of every UPI payer before accepting payments, protecting legitimate businesses from undue hardship, according to medianama.com.
The court order highlighted the challenges faced by cybercrime investigators in tackling fraud involving mule accounts, which layer stolen money through multiple accounts rapidly. While the Reserve Bank of India has deployed AI tools like MuleHunter.AI to detect such fraud, the court noted that indiscriminate freezing of merchant accounts risks crippling legitimate commerce without effectively dismantling organized fraud networks. This follows similar rulings in Kerala and Rajasthan.
The ruling comes amid concerns over the low recovery rate of cyber fraud losses in India. A 2024 Parliamentary Standing Committee report found that Rs 2,294.79 crore was lost to cyber fraud in 2022, but only Rs 0.57 crore was recovered, a rate of roughly 0.02%. The court stressed the need to balance enforcement with due process, noting that merchants cannot reasonably verify every UPI customer before accepting payments.
The Andhra Pradesh High Court’s decision sets a precedent that authorities must avoid freezing merchant accounts without clear evidence of wrongdoing by the merchants themselves. The order was delivered on June 22 by Justice Ravi Cheemalapati and is expected to influence how digital payment fraud cases are handled across India.