The Supreme Court held Canara Bank couldn’t divert funds against customer instructions, upholding the Madras HC order. The bank must follow client mandates or seek clarification—not unilaterally remit to another party.
[18/03, 07:44] sekarreporter1: ”
TOP STORIES
SUPREME COURT & HIGH COURTS
IBC
IPR
GST/VAT/CST
CUSTOMS/EXCISE/SERVICE TAX
Top Stories
Supreme Court & High Courts
IBC
IPR
GST/VAT/CST
CUSTOMS/EXCISE/SERVICE TAX
INCOME TAX
OTHER TAXES
COMPANY LAW/LL/MSME
ARBITRATION
SECURITIES LAW
COMMERCIAL COURTS ACT
RERA
COMPETITION LAW
MERGER/ACQUISITION
COMPLIANCE/REGULATORY
BANKING/NBFC
DEBT RECOVERY LAWS
DIGESTS
COLUMNS
LAW FIRMS
INTERVIEWS
PMLA/FEMA
Home/Top Stories/Bank Cannot Remit Funds Contrary To…
Bank Cannot Remit Funds Contrary To Customer Mandate: Supreme Court Upholds Madras HC Ruling Against Canara Bank
Kirit Singhania
17 Mar 2026 5:37 PM
(3 mins read )
Share this
The Supreme Court on Tuesday held that Canara Bank could not unilaterally divert funds contrary to the instructions of its customer while deciding a dispute arising from a remittance transaction involving Archean Industries Pvt Ltd, Canara Bank Overseas Branch, and Goltens Dubai.
A Bench of Justices J.B. Pardiwala and R. Mahadevan was hearing cross appeals arising from a judgment of the Madras High Court dated August 16, 2021. Holding that Canara Bank could not have remitted the amount to the vessel owner contrary to the instructions issued by its customer Archean Industries, the court observed,
Also Read – “Urgent And Alarming Need”: Delhi HC Calls For CPC, IT Rules Reform To Address Tech-Era Enforcement Issues In Trademark Infringement
“The communication regarding the processing of documents with the Reserve Bank of India (Exhibit P13) was not addressed to the Bank. Once clear instructions had been issued by its customer, the Bank was required either to comply with those instructions or to seek clarification regarding the necessity of regulatory approval and whether such approval had been obtained to facilitate the remittance. The Bank could not have unilaterally remitted the amount to the vessel owner.”
Also Read – Supreme Court Refuses To Interfere With Bombay High Court Order Dismissing Plea Against WeWork India IPO
The case arose from ship repair dues owed to Goltens Dubai, where Archean Industries had undertaken to remit US$100,000 from freight payable to the vessel owner. Archean issued clear instructions to Canara Bank on May 21, 1998, along with requisite documentation, to transfer the amount to Goltens Dubai. However, the bank mistakenly remitted the amount to the vessel owner instead of the plaintiff.
Also Read – Supreme Court Upholds SAT Order Setting Aside SEBI Action Against CARE Ratings Ex-MD Rajesh Mokashi
The bank sought to justify its action on the ground that Reserve Bank of India approval was required for such remittance and had not been obtained. Rejecting this contention, the court noted that the communication regarding RBI processing was not addressed to the bank.
It held that once specific instructions were issued by the customer, the bank was duty-bound either to comply with them or seek clarification regarding regulatory requirements. The court observed that the bank had no authority to unilaterally decide the recipient of the funds. Even in the absence of RBI approval, the court said, the bank ought to have withheld the transaction or sought further instructions instead of transferring the amount to a third party.
Also Read – Supreme Court Allows Zoomcar To File GST Appeal After Rajasthan HC Disposed Its Writ Without Granting Liberty
Holding the bank’s unilateral action to be unjustified, the Supreme Court upheld the Madras High Court’s view permitting Archean Industries to recover the amount from the bank under third-party proceedings. The court also affirmed Archean’s liability to Goltens Dubai.
Click Here To Read/Download Madras HC Judgment
Tags
SupremeCourtJustice JB Pardiwala and Justice R MahadevanNBFC
Case Title : Canara Bank Overseas Branch vs Archean Industries Pvt Ltd And Anr.
Case Number : C.A. 13861 OF 2024
CITATION : 2026 LLBiz SC 116
To Read the full text of the Order CLICK HERE
Next Story
About Us
Contact Us
Advertise with us
Careers
Privacy Policy
Terms & Conditions
Top Stories
INCOME TAX
MSME
Know the Law
Compliance
Other Tax
[18/03, 07:44] Meta AI: The Supreme Court held Canara Bank couldn’t divert funds against customer instructions, upholding the Madras HC order. The bank must follow client mandates or seek clarification—not unilaterally remit to another party.
