The Delhi High Court directed ICICI Bank to reverse an erroneous online transfer of ₹3,89,981 made by a petitioner-company to a wrong beneficiary with a similar name (M/s V.K. Traders instead of M/s V.K. Enterprises). The Court relied on a Recall-cum-Indemnity Bond provided by the originating bank and the respondent’s failure to substantiate its claim to the funds.
Court: High Court of Delhi
Bench: Justice Jasmeet Singh
Date of Decision: September 30, 2026
Subject Area: Banking Law | Erroneous Electronic Fund Transfer | Reverse Transaction | Equitable Relief
Key Legal Takeaways & High Court Findings
1. Role of the Recall-cum-Indemnity Bond
The Court emphasized that Indian Bank (the petitioner’s bank) issuing a Recall-cum-Indemnity Bond to ICICI Bank demonstrated the bona fide nature of the transaction error. The indemnity bond legally shielded ICICI Bank against potential liabilities or claims arising from reversing the transaction, proving crucial in establishing the genuineness of the claim.
2. Failure of Recipient to Substantiate Claim
When questioned by ICICI Bank, the unintended recipient (M/s V.K. Traders) initially claimed the funds were rightfully owed to them. However:
- The High Court noted that despite being granted an opportunity in July 2024 to submit documentary evidence (invoices/bills) proving a business transaction, M/s V.K. Traders failed to file any documents or appear in court for over two years.
- Consequently, the Court held that the recipient had no legal ground to retain the inadvertently transferred funds.
3. No Interest Awarded for Self-Created Errors
While ordering the full reversal of ₹3,89,981, Justice Jasmeet Singh denied the petitioner’s prayer for interest on the amount, observing that:
- The initial mistake was solely attributable to the petitioner’s negligence during online banking.
- No fault could be assigned to either Indian Bank or ICICI Bank for the delay, as they acted within procedural standards once notified.
Procedural Takeaways for Erroneous Online Transfers
- Immediate Notification: The remitter must immediately report the erroneous transfer to their bank.
- Inter-Bank Lien: The remitter’s bank contacts the recipient’s bank to place a lien on the transferred amount pending verification.
- Indemnity Bond: Originating banks issue a Recall-cum-Indemnity Bond to protect the destination bank from third-party liabilities during reversal.
- Judicial Intervention: If the unintended beneficiary refuses consent or fails to demonstrate entitlement, the High Court under Article 226 can issue directions for reversal based on equity and unjust enrichment principles.