The Karnataka High Court has directed Federal Bank to re-transfer ₹3.25 lakh to the petitioner's account within three days from the date of receiving the court order. According to reports from The Times of India, Justice C.M. Poonacha passed the order on September 9, 2026, in Writ Petition No. 6683 of 2026 (GM-RES), filed under Articles 226 and 227 of the Constitution. The petition was filed by a woman who inadvertently transferred the money to a dormant account belonging to M/s Standard Engineering Works.
The money transfer error occurred due to a misalignment of account numbers by four digits. As reported by The Times of India, the intended account ended in 1619 while the unintended beneficiary account ended in 1916. The woman intended to transfer the money to her father's account but inadvertently sent it to another account that belonged to M/s Standard Engineering Works. The amount was credited to the unintended beneficiary account on December 17, 2025.
The bank relied on Enhanced Due Diligence (EDD) reports and claimed that the transaction was not in line with the petitioner's business activities. According to the court records, the bank received a request stating that the disputed ₹10,00,000 credit had been erroneously transferred into the petitioner's account by Ninja Ferro Tec Private Limited. The bank stated that the account had been partly frozen since March 2026 and submitted that the amount had been retained due to suspected mule money operations. However, the court observed that "there is no report that there is any fraud transaction or any illegal transaction is made in the account of the petitioner."
The court examined the statutory basis relied upon by the bank, specifically Clause 59 of the RBI Master Direction. As reported by The Times of India, the court recorded that the provision requires banks to undertake diligence and meticulous monitoring to identify accounts operated as money mules and take appropriate action, including reporting suspicious transactions to FIU-IND. However, the court stated that "even though the said provision enables the bank to take appropriate action, including suspicious transactions to FIU-IND but it does not specifically authorize freezing of accounts." The court further observed that the bank had not submitted any Suspicious Transaction Report in the present case and noted that "the bank in the present case has not submitted any Suspicious Transaction Report."
The court's decision was based on the straightforward circumstances presented. As reported by The Times of India, the court faced a clear problem: ₹3.25 lakh had been transferred to the wrong account, the account was dormant, the intended recipient had not received the money, and the person connected with the unintended beneficiary account could not be served. The court consequently partly allowed the writ petition and directed Federal Bank to re-transfer the money 'forthwith, in any event, not later than three days from the date of receipt of a copy of this order'. The court also directed that the bank take appropriate decision regarding the disputed amount of ₹10,00,000 after giving opportunity of hearing to the petitioner and Ninja Ferro Tec Private Limited within six weeks from the date of receipt of this order.
