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Issues:
Recovery of amount debited by the defendant without consent, Validity of reversing credit entry and debiting plaintiff, Application of section 72 of the Indian Contract Act, 1872, Bank's duty to inform account holder, Mistake of fact vs. mistake of law in payments, Legal consequences of circular issued by RBI, Bank's right to reverse credit entries without consent of account holder. Analysis: The plaintiff filed a suit for recovery of a debited amount, alleging that the defendant bank debited Rs. 10,543 from the plaintiff's account without consent. The lower court dismissed the suit, but the appellate court reversed the decision, leading to this second appeal. The main issue was whether the reversal of the credit entry and debiting of Rs. 10,176.50 by the defendant bank was valid and if the plaintiff was entitled to claim the amount (Para. 1-2). The defendant bank reversed the credit entry citing an RBI circular prohibiting interest payment on savings accounts of trading or business concerns. The plaintiff, a proprietary concern, had received interest periodically until the reversal. The plaintiff argued that the bank's unilateral action without informing them of the mistake did not bind them, and section 72 of the Indian Contract Act was not applicable (Para. 4). The court highlighted the duty of the bank to inform the account holder of the true state of accounts and not make mistakes of fact. It differentiated between mistakes of fact and mistakes of law, emphasizing that recovery cannot be based on a mistake of law. The court referred to various legal precedents to support its reasoning (Para. 6-10). The judgment discussed the legal consequences of the circular issued by the RBI under the Banking Regulation Act and emphasized that the bank cannot reverse credit entries without the account holder's consent. Citing a Supreme Court decision, the court held that once money is deposited in a customer's account, it becomes the customer's money, and the bank cannot reverse the credit entry without consent (Para. 11-12). Ultimately, the court dismissed the appeal, confirming the judgment and decree of the lower appellate court. It held that the plaintiff was entitled to the decree as prayed for, emphasizing that the bank's unilateral reversal of credit entries without the account holder's consent was irregular and not permissible (Para. 13).
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