ABSTRACT
“Unified Payments Interface (UPI) has transformed the way people in India perform digital transactions. It has made doing those transactions every day extremely easy and convenient for people. However, just as this convenience allows people to conduct these types of transactions quickly and easily, the risk of making a mistake, such as transferring money to the wrong recipient because of a mistaken entry of an incorrect telephone number or UPI ID, has increased. This article examines the available legal and procedural options for users who have inadvertently transferred funds to an incorrect recipient. Among other things, the article provides an overview of the guidelines established by the National Payments Corporation of India (NPCI), what options are available to users under the Ombudsman scheme established by the Reserve Bank of India (RBI) and the legal basis for recovering funds (unjust enrichment) pursuant to the Indian Contract Act, 1872, providing a complete resource for navigating this new age digital payment challenge.”
KEYWORDS: Unified Payments Interface (UPI), Accidental Transfer, NPCI, Reserve Bank of India (RBI), Unjust Enrichment, Digital Payments, Grievance Redressal.
INTRODUCTION
The Unified Payments Interface (UPI), introduced in India as an alternative payment method for those wishing to move into a cashless lifestyle, is becoming increasingly popular amongst users. Through its ability to transfer funds instantly, regardless of the time of day or day of the week, and provide banks with the means to transfer funds between banks smoothly, UPI has played a significant role in converting many of the country’s users into consumers of a cashless economy. An important aspect of this innovation is that UPI allows for instantaneous transfer of funds without needing to have the sender’s and receiver’s bank account numbers, IFSC codes or other identifying information, but rather relies only on the telephone number and Virtual Payments Address (VPA) for both parties. As a result, if a sender inputs the wrong number into UPI (what is referred to as “one digit error”), he or she may inadvertently transfer money to a third party’s account. Most users who discover they have made a one-digit error react with panic. However, in Indian law and through banking protocols, there are procedures to follow if this occurs to enable recovery of the funds. Therefore, to ensure that you do not lose money as a result of a one-digit error in UPI transactions, it is necessary to understand these processes.
THE LEGAL FOUNDATION: UNJUST ENRICHMENT
Understanding the substantive law that protects the remitter is essential before exploring the technical process of reversing a transaction. The foundation of your potential legal remedy can be found in the Indian Contract Act of 1872.
Section 72 of the Indian Contract Act,18721 explicitly sets out the rule of unjust enrichment: “A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it,” The principle of unjust enrichment arises in the case of UPI payments made by mistake and when a person who receives money from an unintended UPI transfer has no legal basis to keep that money. By keeping that money, the unintended recipient is unjustly enriched because he or she has received an economic benefit at the expense of the sender with no underlying legal basis or contract. This legislative enactment creates a legal obligation for the unintended beneficiary to return the amount. Thus, it forms the legal basis for all future recovery actions.
NPCI GUIDELINES AND IMMEDIATE PROCEDURAL STEPS
As the organisation responsible for the UPI infrastructure, the NPCI has defined specific procedures to handle complaints related to such situations, and the timing of the resolution is critical.
- Raising an in-app complaint: The user must first initiate a complaint via their Payment Service Provider (PSP) application (like Google Pay, PhonePe or Paytm). Users can do this by accessing their transaction history, selecting the relevant transfer transaction, and raising a complaint under the category “Transferred incorrectly to another account”.
- Contact between the PSP and Bank: In mean time, the sender of the UPI payment should also contact the customer care (CC) of the UPI application (Paytm, Google Pay, etc) as well as their bank (SBI, HDFC, etc) to inform them about the incorrect payment. They must file an official complaint to the Customer Care, and are required to give their basic identity, including transaction details like the UPI transaction reference number (UTR).
- NPCI website: Thirdly, if there is still no resolution through the PSP application, the user may go directly to the NPCI’s dispute resolution portal (Online Portal) and fill out a complaint form detailing how the payment was made incorrectly.
THE ROLE OF BANKS AND THE RBI OMBUDSMAN
In facilitating the payment system technology, the National Payments Corporation of India (NPCI) is not the custodian of funds. However, the commercial banks serve this function by maintaining all funds. The remitter’s bank serves as an intermediary between these two banks.
If a customer files a dispute, the remitter’s bank will contact the beneficiary bank to address any issues that may arise with regard to a mistaken transfer. The beneficiary’s bank will then attempt to contact the unintended recipient of the funds to address the issue. It should be noted that, according to the standard banking practice, the beneficiary bank may not reverse the transaction on its own without the agreement of the recipient of the funds. If the unintended recipient acknowledges the error and consents to the reversal of the funds, the beneficiary’s bank will reverse the transaction.
If the issue can’t be resolved within 30 days of the complaint being made by the remitter to their bank, or if the beneficiary bank does not respond, the remitter has the right to escalate the matter to the Reserve Bank of India (RBI). Under the RBI Integrated Ombudsman Scheme, 2021, a customer can lodge an electronic or digital complaint against any regulated entity (i.e. commercial banks and payment service providers) for inadequate service associated with the resolution of errors relating to the error in transfer of funds.
CRIMINAL LIABILITY AND CIVIL LITIGATION
In If the recipient has intended to harm you by refusing to return your money or by ignoring your efforts to communicate with the bank, or if the recipient acts to withdraw and spend the amount credited to their account immediately after the credit occurs, this situation may escalate from a civil dispute to potentially being a criminal offence or act.
If the recipient remains in possession of the funds, through not returning them or not acting on your attempts to recover the same, it is possible that charges can arise against the recipient under Section 403 of IPC / Section 314 of BNS for dishonest misappropriation of property. You may file a police complaint against a recipient within your local jurisdiction by going to a cybercrime unit or lodging an FIR.
If a remitter can no longer recover the amount by consensual means, then section 72 of the Contract Act allows for the remitter to file a civil suit for the recovery of money per the provisions of the Code of Civil Procedure. Even though civil suits can take time to resolve, the threat of legal action, including police involvement, will typically compel the recipient to authorise the reversal of the funds.
CONCLUSION
UPI’s convenience has greatly changed how we use money today, but to benefit from this change, it’s important to be cautious when using UPI! If you make one simple error when entering information, your experience could quickly turn into a stressful ordeal. Fortunately, you can still recover funds after accidentally transferring money. In fact, the law protects people who accidentally send money due to the concept of “unjust enrichment.” Therefore, if you need help recovering your funds, you should immediately contact the NPCI’s grievance redressal features and use all available resources within your bank’s network or through the Reserve Bank Ombudsman and any other formal avenues. The best way to defend yourself is to carefully verify that the recipient has provided you with correct information before pressing the “pay” button.
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WRITTEN BY: VINEET SEERVI
