Mistaken Payments: Are They Free Gifts from Banks to Their Customers?

Abstract

Due to the common misconception that moneys in bank accounts are owned by their account holders (who are usually the bank customers), and, the complicated nature of the principles of banking law, sometimes, it may be thought that a mistaken payment resulting from an erroneous credit entry in a customer account is a free gift from the bank to its customer. However disappointing it may be for the customers, this is not so. The purpose of this article is to examine this position with reference to the remedies provided in both civil law and criminal law of Sri Lanka. More specifically, Part I of this article will examine the civil law remedy of “action for money had and received”, which would be available to banks to recover money that has been mistakenly paid to their customers, and, its application in Sri Lankan law. Part II of this article will examine the applicability of criminal law, in particular, the offences of theft and criminal misappropriation under the Penal Code of Sri Lanka, in situations where customers have obtained mistaken payments from their banks with dishonest intention.