Kerala High Court restricts banks from freezing entire bank accounts in cyber-crime cases

Kerala High Court restricts banks from freezing entire bank accounts in cyber-crime cases

The petitioners had complained of facing huge losses to their businesses after their accounts were suspended

The Kerala High Court has directed banks to limit the freezing orders issued in cases of cyber fraud to the amount involved in the crime and not to the entire bank account.

A single-judge bench of Justice Devan Ramachandran was hearing a batch of petitions moved by people whose bank accounts were frozen by authorities after finding out that a cyber-criminal had allegedly transferred money to their accounts through UPI (Unified Payments Interface).

While acknowledging the positive impact that UPI has on money transactions, the court also expressed security concerns about the system.

The petitioners had stated facing huge losses to their businesses after their bank accounts were frozen. They sought intervention from the court as the trust of the business community in the UPI system was being affected.

On the other hand, the Government of India argued there was an instant response system when such complaints were raised. It stated that the concerned state police promptly examined such accounts.

However, the court questioned why the entire bank accounts should be frozen. It held, "One fails to fathom why their bank accounts, in full, should remain frozen. This is more so because, even when the sums in question may have found credit in the accounts of the petitioners, unless the investigation eventually reveals that they were complicit in the cybercrime, or had received the same being aware of it, they could never be construed to be accused."

The bench 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 of whether the accounts needed to remain frozen, and if so, for how long. If the same was not done, the petitioners could again approach the court.

The judge stated, "The UPI has transformed the financial spectrum in India; and in particular, the manner in which people transact money. It is an easy-to-use interface and the ingrained security features, have made UPI the preferred mode of payment for millions of Indians, making it the fastest-growing payment system in the world. Like in many good initiatives, there are chinks in the armor – in a manner of speaking; charlatans commit cybercrimes and create a byzantine maze of accounts, through which ill-gotten wealth is moved and parked.”

He added, “For this, certain specific safeguards will have to be now infused into the process, lest the people lose their faith in the UPI system, especially when it is spearheaded and recognized internationally as a vanguard initiative of India.”