2026 (1) TMI 1215 - HC - GST

Erroneous bank transfer to wrong beneficiary account results in bank being directed to re-credit remitter after verification and consent.

Dispute concerned an erroneously executed interbank transfer and the legal consequence of reversing funds. The court examined the bank report, an ... Seeking transfer back of amount which was erroneously transferred to wrong beneficiary account - applicability of Section 79(1)(c)(i) of the CGST/WBGST Act, 2017 - HELD THAT:- This Court considered the entire documents, the report submitted by the bank and the affidavit submitted by the added respondent as well as an order passed by the Ombudsman. This Court finds that the last four digit of the account of the beneficiary that is, M/s Mortex International is “8005” and the added respondent is “8025” - There was mistake on the part of the petitioner while transferring the amount in the account of M/s. Mortex International and inadvertently the amount has been transferred in the account of the added respondent. This Court also found that the added respondent in whose account the amount has been transferred, has categorically stated that he has no business relationship with the petitioner and has also stated that he has no objection for transferring the said amount in the account of the petitioner. The respondent no. 8, the Yes Bank Limited is directed to transfer the amount o in the account of the petitioner no. 1 within a period of one week from the date of receipt of the copy of this order. Application disposed off. Issues: Whether the amount of Rs.25,00,000/- erroneously credited to a third party's account by clerical/typographical error should be transferred back to the petitioner and whether Section 79(1)(c)(i) of the CGST/WBGST Act, 2017 empowers tax authorities to require the bank to appropriate such amounts from the third party in the facts of this case.Analysis: The Court examined the bank records, the affidavit of the added respondent and the Ombudsman order. The credited account's last four digits differ from the intended beneficiary's account, demonstrating a clerical/typographical error in the beneficiary account number resulting in mistaken transfer. The added respondent has no business relationship with the petitioner and has affirmatively stated it does not claim the funds and has no objection to reversal. The bank had placed the amounts on hold and relied on communications from tax authorities invoking Section 79(1)(c)(i) of the CGST/WBGST Act, 2017; the Court considered whether that provision applies to permit appropriation or retention of amounts held by a third party where the transfer arose from a mistake and the third party does not assert entitlement. The Court found Section 79(1)(c)(i) inapplicable on the facts and refused to allow the tax notice contention to override the clear mistake and the recipient's non-claim and consent to refund. Having regard to the documents and admissions, the Court directed the bank to remit the mistaken amounts back to the petitioner's specified accounts within one week.Conclusion: The petitioner is entitled to repayment of Rs.20,00,000/- and Rs.5,00,000/- wrongly transferred to the added respondent; Section 79(1)(c)(i) of the CGST/WBGST Act, 2017 is not applicable to permit appropriation of these funds in the present circumstances. The bank (Yes Bank Limited, Dalhousie Branch) is directed to transfer Rs.20,00,000/- to the petitioner's SBI account and Rs.5,00,000/- to the petitioner's ICICI account within one week from receipt of the order.Ratio Decidendi: Where funds are credited to a third party by mistake and the third party does not assert entitlement and consents to refund, the bank must reverse the mistaken transfer and statutory recovery powers under Section 79(1)(c)(i) do not authorize appropriation of such funds in those circumstances.