![]() ![]() The Calcutta High Court in Jagdish Prosad Pannalal v. Dunlop Rubber Co, it was held that if money is paid under a mistake of fact and is re-demanded from the person who received it the same shall be payable to the person demanding such a refund. The same precedent was followed in the case of the Imperial Bank of Canada v. In such cases, however careless the party paying may have been, omitting due diligence to inquire into the fact a valid ground for recovery of such money would still stand true. Solari, it was held that in cases where the money is paid to another under a mistake of fact that made the transferor believe that the transferee was entitled to the money and the same would not have been paid if the transferor would have known that the fact was a mistaken belief, then there would be a legally valid ground for instituting a suit towards the recovery of such amount as it would be against conscience as well as the law to retain it. The “Unjust Enrichment” Conundrum: What do the Indian Laws Say?Īs per Section 72 of the India Contract Act, a person to whom a commodity has been delivered or money has been paid by mistake is bound to repay or return it to the person who transferred it mistakenly. Along with this, Citibank, a leading financial institution in the world, could make a mistake of billions was quoted by the court to be borderline irrational to assume and so the lender cannot be held liable for handling the money with a mala fide intent. This principle finds its roots in the case of Banque Worms v Bank America. ![]() The beneficiary should not be expected to consider what has to be done with the funds but is expected to consider the transfer of funds as a final transaction. It discharges the liability of returning the mistaken credit when the beneficiary receives money to which it is entitled, in this case, the principal plus the incurred interest on money lent to Revlon amounted to the wired sum, and hence, has a bonafide belief that it is entitled to such amount and should retain the funds. The discharge-for-value principle that was used in the case is generally operational in cases where a claim for unjustified enrichment has been made. The New York Court’s Ruling: Understanding ‘discharge-for-value’ Principle Justifying its stance, the court held that the amount wired “ by mistake” was to be held as “ final and complete transactions, not subject to revocation” and under no condition can be returned as it was barred under the principle of “ discharge-for-value-defence“, which provides that in case of accidental transfers, the lenders can keep the money if it discharges an existing liability and they didn’t know it was an accidental transfer. Aggrieved by the denial to return the wired funds, the bank approached the New York Court which to the bank’s dismay ruled in the favour of the lenders. ![]() However, one of the lenders believed that the transfer was intentional and hence, declined to return the money wired to them by the bank. The bank put on the defence that the money was transferred as a result of human error and believing it, some lenders co-operated by returning the money. Co-incidentally, the total amount received as a result of such wire transfer was equivalent to the total amount (principal and the incurred interest) which Revlon owed to its lenders. However, owing to a human error, the bank not only wired the $7.8 million which constituted Revlon’s interest but along with it the bank also wired an additional amount of nine hundred million dollars ($900 million) of its own money as well. had intended to wire $7.8 million in interest payments to Revlon’s lenders. In August 2020, Citibank (“the bank”) acted as an administrative agent for a syndicated term loan taken by Revlon, Inc. The Citibank Case: Background and Factual Matrix In light of the above judgment, this article tries to analyze the questions of law involved, the reasoning behind the judgment, and its potential impact on the banking industry wherein the principles deliberated upon in the case are expected to set precedents. However, a lot of hue and cry surrounds the matter as the overall reasoning behind the judgment and the potential impact are unclear to the public at large. Bank America International which also involved a similar question of a wire transfer worth $2 million. The present judgment finds its roots in the precedent established in the 1991 case of Banque Worms v. The US District Court in the Southern District of New York on 16th February 2021 declared that In the Re Citibank Wire Transfers case, the “ discharge-for-value” principle stands applicable and the defendants (the lenders for Revlon Inc.) in the case were entitled to retain funds sent by the plaintiff (Citibank) under a credit facility to which the defendants were a party. ![]() Raj is a student at the National University of Study and Research in Law, Ranchi and Krati is a student at the Rajiv Gandhi National University of Law, Punjab. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |