If you are stuck in such a situation, here is what to do.

Mr. Rohan Sharma, a resident of Shastri Nagar in Pune, finds himself in a perplexing situation with his bank, Apex Bank Ltd. A few weeks ago, he received a substantial sum via a UPI transfer for services he had rendered. The sender, Mr. Alok Verma, even provided a screenshot confirming the transaction was genuine and authorized. The amount was credited to Mr. Sharma’s account without any issues.

However, nearly a month later, Apex Bank placed a hold on the exact amount of the transfer. Upon inquiry, Mr. Sharma was informed that the sender’s bank had raised a dispute through the National Payments Corporation of India (NPCI), leading to the lien on his funds. To resolve the matter and release the hold, the bank presented Mr. Sharma with two options: either provide a consent letter from the sender, duly stamped by the sender’s bank, or submit a debit authority letter acknowledging that the funds were received erroneously, which is contrary to the facts.

The core of the problem lies in the fact that Mr. Sharma is no longer in contact with Mr. Verma and cannot procure the required consent letter. Despite providing Apex Bank with the screenshot and other communication records proving the legitimacy of the transaction, the bank remains adamant and refuses to lift the hold. Mr. Sharma is now in a bind, with his funds frozen despite having acted in good faith and possessing evidence of a valid transaction.

Advice in such cases

Navigating a situation where your bank freezes your funds can be distressing. The primary issue here is the bank’s action based on an NPCI dispute, which often happens automatically in cases of reported unauthorized or fraudulent transactions. However, the bank has a duty to its customer as well.

• Keep a detailed record of all communication with the bank. Prefer written communication like emails over phone calls to have a paper trail.
• Formally escalate the matter through the bank’s internal grievance redressal mechanism. Start with the Branch Manager, and if unresolved, move to the nodal officer and then the principal nodal officer.
• If the bank fails to provide a satisfactory resolution within 30 days, you can file a complaint with the Reserve Bank of India’s Banking Ombudsman.
• Send a formal legal notice to the bank through an advocate, detailing the entire issue, the evidence you possess, and the deficiency in their service, demanding the immediate release of your funds.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

Such disputes are primarily governed by banking regulations and contract law. However, if fraudulent intent is involved, provisions of the Bharatiya Nyaya Sanhita, 2023 (BNS) can be invoked.

• The Payment and Settlement Systems Act, 2007: This Act, along with regulations by the RBI and procedural rules by NPCI, governs UPI transactions and dispute resolutions. The bank’s action is likely a result of these procedural rules.
• Deficiency in Service under the Consumer Protection Act, 2019: If the bank acts arbitrarily and freezes your account without proper investigation or by ignoring the evidence you provide, it can be considered a ‘deficiency in service’. You can approach the Consumer Disputes Redressal Commission.
• Section 318 of the Bharatiya Nyaya Sanhita, 2023 (BNS): This section deals with cheating. If it is discovered that the sender maliciously filed a false complaint after making a legitimate payment, they could be prosecuted under this section.
• Section 314 of the Bharatiya Nyaya Sanhita, 2023 (BNS): This section pertains to criminal breach of trust. While less direct, arguments could be made if the bank is found to be wrongfully withholding funds entrusted to them.

If you are the complainant

If you are the person who sent the money and later filed a dispute (the sender in this story):

• Ensure your complaint is genuine, for instance, if the transaction was truly unauthorized or if you did not receive the goods/services for which payment was made.
• Provide your bank with all necessary evidence to support your claim. A false complaint can lead to legal consequences, including prosecution under Section 318 of the BNS.
• Follow up regularly with your bank on the status of your dispute resolution request filed through NPCI.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

If you are the person whose account has been frozen (the recipient like Mr. Sharma):

• Immediately gather all evidence proving the transaction’s legitimacy. This includes the UPI transaction ID, screenshots, any chat history, invoices, or agreements with the sender.
• Submit this evidence to your bank through a formal written complaint and demand the basis for the lien in writing.
• Do not sign any letter admitting the funds were received wrongly if they were not. This would be a false admission and would legally permit the bank to debit the amount.
• If the bank is unresponsive, proceed with a complaint to the Banking Ombudsman and issue a legal notice.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

Typically, the police are hesitant to intervene in such matters at the outset, viewing them as civil disputes between a customer and a bank, or a dispute between two transacting parties. They will likely advise you to approach the bank’s grievance cell or the Banking Ombudsman. However, if your complaint to the police clearly alleges a cognizable offence like cheating or fraud by the sender (e.g., they paid for goods, received them, and then falsely claimed the transaction was unauthorized), the police may register a First Information Report (FIR) under the relevant sections of the BNS. The investigation would then proceed under the framework of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

FAQs people normally have

Can a bank freeze my funds without informing me?

Yes, banks can place a temporary hold on funds without prior intimation if they receive a formal dispute or a directive from a law enforcement agency or regulatory body like NPCI, especially in cases flagged for potential fraud.

Is a screenshot of a successful transaction not enough proof?

While a screenshot is strong supporting evidence, it can be digitally manipulated. Therefore, banks often rely on the formal inter-bank communication channel managed by NPCI for dispute resolution and may require more concrete proof like a stamped letter from the sender’s bank.

What is the role of the Banking Ombudsman?

The Banking Ombudsman is an independent authority created by the RBI to resolve customer complaints against banks for deficiency in service. It is a free and efficient mechanism to seek redressal without going to court initially.

What evidence is required?

To effectively fight your case, you should gather the following:

• The UPI transaction ID and a screenshot of the successful transaction.
• Your bank account statement showing the credit of the funds.
• Any communication with the sender (chats, emails, invoices) that establishes the context and legitimacy of the payment.
• All written correspondence with your bank regarding the issue, including their replies.
• A copy of the complaint filed with the bank’s grievance cell and the Banking Ombudsman.

How long will the investigation take?

The timeline can vary significantly. An internal bank investigation or a complaint with the Banking Ombudsman may be resolved within 30 to 90 days. However, if the matter escalates to a consumer court or a civil/criminal court, it can take several months or even years to reach a final resolution. The complexity of the case and the evidence available play a crucial role in determining the duration.

Advocate Sudhir Rao, Supreme Court of India