What is wrong when I see this code on the display of the inside unit and the outside unit seems to be frozen 

This code is not an error code but the code that indicates that the system is DeFrosting the outside unit.

This usually happens when the airconditioner is heating a room. When warming up a room, the outside unit starts to cool off and when the outside temperature is already rather cold, the outside unit can freeze.

Whenever this happens the system automatically stops heating the room and deflects the warm air to the outside unit in order to defrost that unit. This process might take up 10 to 15 minutes. After that the airconditioner starts heating the room again.

It is important not to start pushing buttons but wait untill the defrosting is finished. Again, the airconditioner will start heating again automatically. If you do have pushed all kinds of buttons, take the power plug from the mains and put it back again after appr. 15 minutes. In this way the airconditioner resets itself.

This solution is valid for among others AC-5421