Delhi High Court Issues Notice on PIL for Stronger Framework to Curb Rising UPI Frauds

The Delhi High Court has issued notice on a public interest litigation seeking the formulation of comprehensive guidelines to deal with the rising incidence of frauds linked to the Unified Payments Interface (UPI), as concerns mount over the security architecture of India’s rapidly expanding digital payments ecosystem.

The petition calls for a robust regulatory, enforcement and recovery framework, contending that the existing redressal mechanisms are fragmented, non-transparent and lack time-bound processes for restitution to victims.

A Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia sought responses from the Union of India through the Ministry of Finance, the Reserve Bank of India and the National Payments Corporation of India.

The Court was hearing a plea filed under Article 226 by Pankaj Nigam, which seeks structural directions to address what is described as a sharp surge in UPI-related financial frauds and to streamline investigative and remedial processes across agencies.

The petition places reliance on recent official data presented before Parliament to submit that digital payment frauds have increased significantly in tandem with the exponential growth in UPI usage.

It states that in the financial year 2023-24 alone, more than 13 lakh UPI-linked fraud incidents were reported, involving amounts exceeding Rs. 1,000 crore, and asserts that the trend has continued into the current financial year.

The plea contends that the scale of transactions and the speed at which funds are transferred through layered accounts have exposed systemic vulnerabilities that are being exploited by organised fraud networks.

Nigam has also narrated his personal experience of allegedly being defrauded of Rs. 1.24 lakh in February, 2024 while searching for rental accommodation online.

According to the petition, despite lodging complaints through the available cybercrime reporting channels, no recovery has been effected and no substantive information regarding the alleged perpetrators has been provided, highlighting what is termed as the absence of a transparent and accountable grievance redressal mechanism.

Among the principal directions sought is a requirement that only fully Know Your Customer-compliant bank accounts be permitted to participate in UPI transactions. The plea submits that stricter enforcement of KYC norms would curb the use of mule accounts and prevent fraudsters from rapidly opening and operating multiple accounts to siphon off funds.

It further seeks the creation of a dedicated integrated reporting platform linking the National Cyber Crime Helpline portal with UPI applications, banks, payment service providers and telecom service providers so that complaints can be lodged seamlessly and immediate alerts can be generated for freezing suspicious accounts before the defrauded amount is dissipated.

The petition also urges that UPI fraud cases involving amounts below Rs. 10 lakh be brought within the scope of the e-Zero FIR initiative to enable automatic registration of First Information Reports in serious online financial fraud cases.

It states that victims currently face jurisdictional ambiguities and procedural delays, particularly where transactions span multiple states and involve different investigating agencies. In addition, the plea calls for the formulation of a comprehensive standard operating procedure, beyond the existing framework under the Information Technology Act, to ensure coordinated investigation in cases involving multiple victims and inter-state transactions.

Reference has also been made to a recent LocalCircles survey to indicate the extent of underreporting, with the petition stating that one in five Indian families with UPI users had experienced fraud and that more than half of the victims did not report the incidents to authorities.

This, it is contended, reflects a deficit of user trust in the present enforcement and recovery framework.

The matter will be taken up after the Centre, the Reserve Bank of India and the National Payments Corporation of India file their responses.

The petition submits that the issues raised have significant implications for the safety and credibility of the digital payments ecosystem and require the evolution of uniform safeguards, clear accountability standards and efficient restitution mechanisms for victims of online financial fraud.

Case Title: Pankaj Nigam v. Union of India & Ors.

Bench: Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia