The Kerala High Court recently flagged certain security concerns associated with India’s Unified Payment Interface (UPI) system. In a judgment passed on October 19, 2023, Justice Devan Ramachandran acknowledged the positive impact that UPI has had on money transactions, but also noted that there are security issues with the system that need to be addressed.
The Court’s observations came while considering a batch of petitions moved by persons whose bank accounts were frozen by investigating and police authorities after a cyber criminal allegedly transferred money to their accounts through UPI. The petitioners argued that they were facing incalculable loss to their businesses since their bank accounts were now inoperable, and that the trust of the business community in the UPI system had been severely shaken.
The Court questioned why the entire bank account needs to be frozen, especially when the requisitions in these cases mention the exact amount suspected to have been credited to the accounts. It observed that “unless the investigation eventually reveals that they were complicit in the Cyber Crime, or had received the same being aware of it, they could never be construed to be accused.”
Therefore, the Court ordered the respective banks of the petitioners to freeze the accounts only to the extent of the amounts mentioned in the orders issued by the police. It also directed the police to inform the banks as to whether the accounts of the petitioners need to remain frozen, and if so, for how long. If the same is not done, the petitioners are free to approach the Court again.
The Court’s judgment is a timely reminder of the need to strengthen the security of the UPI system, which is now the most popular mode of payment in India. It is also a welcome move that the Court has recognized the plight of innocent people whose bank accounts are frozen due to no fault of their own.
