Vendors Can't Verify Every UPI Customer's Credentials; Their Bank Account Can't Be Frozen Over Buyer's Involvement In Cybercrime: AP High Court

The Andhra Pradesh High Court has held that vendors accepting payments through UPI apps such as PhonePe and Google Pay cannot be expected to verify the credentials or criminal antecedents of every customer before completing a transaction, and their bank accounts cannot be frozen merely because a payer is subsequently found to be involved in a cybercrime. [2026 LiveLaw (AP) 113]

Directing the State Bank of India to defreeze a wine trader's bank account, the Court observed that UPI-based payments have become a routine mode of payment in petty businesses and that freezing a merchant's account without any material showing its involvement in the alleged offence is contrary to law.

Justice Ravi Cheemalapati passed the order in a writ petition filed by a licensed wine trader, whose bank account was frozen at the instance of the Cyber Cell, Patna, after it received a Rs. 1,000 UPI payment from a customer who was later accused in a cheating case.

The Court observed:

"No doubt, with regard to transactions in petty businesses, amounts are being transferred between vendors and vendees through PhonePe, and Google Pay, etc., by using UPI (Unified Payments Interface). As rightly contended by the learned counsel for the petitioner, if any individual purchases goods and pays through UPI using the above said applications, the vendor cannot verify the credentials of such individual. 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."

The petitioner submitted that his current account containing over Rs. 8.26 lakh was frozen without notice after a customer purchased liquor worth Rs. 1,000 through UPI. He later learnt that the customer had allegedly been implicated in a cheating case in Bihar, following which the Cyber Cell directed the bank to freeze the Petitioner's account.

Before the High Court, the petitioner argued that almost all petty businesses now accept payments through UPI applications such as PhonePe and Google Pay, making it impossible for vendors to verify the credentials of every buyer. He further submitted that the continued freezing of his account was causing irreparable loss and hardship to him.

Accepting the contention, the High Court held that there was no material linking the petitioner to the alleged offence and declared the freezing of his bank account illegal. It accordingly directed the State Bank of India to defreeze the account.

Case Title: Sri Sai Wines v. Union of India & Ors.

Case No.: Writ Petition No. 969 of 2026

Counsel for the Petitioner: Chetan Ponnuru

Counsel for the Respondents: J.U.M.V. Prasad (Central Government Counsel)

Click Here To Read/Download Order

Citation: 2026 LiveLaw (AP) 113