CANARA BANK OVERSEAS BRANCH REP. BY SENIOR MANAGER versus ARCHEAN INDUSTRIES PRIVATE LIMITED AND ANOTHER

Citation: [2026] 4 S.C.R. 151 · Decided: 17-03-2026 · Supreme Court of India · Bench: J.B. PARDIWALA · Disposal: Dismissed

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Judgment (excerpt)

[2026] 4 S.C.R. 151 : 2026 INSC 247
Canara Bank Overseas Branch Rep. by Senior Manager 
v. 
Archean Industries Private Limited and Another
(Civil Appeal No. 13861 of 2024)
17 March 2026
[J.B Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
(i) Whether there is a valid undertaking by way of a guarantee 
executed by Defendant No.1 and whether Defendant No.1 can 
absolve from its liability; (ii) Whether the reasons adopted by the 
Division Bench of the High Court warrant interference by this Court.
Headnotes†
Contract Act, 1872 – ss.126, 127, 128, 137, 138, 140, 141 – 
Plaintiff-Goltens Dubai carried out extensive repair works on 
the vessel Master Panos at request of the owner – Defendant 
No.1 had entered into a Charter Party Agreement dated 
09.03.1998 with the vessel owner for shipment – Under the 
said arrangement, it was agreed that out of the freight payable 
by Defendant No.1 to the vessel owner, a sum of US $100,000 
would be paid directly by the owner to the plaintiff in partial 
discharge of the vessel owner’s liability towards repair 
charges – Defendant No.1 addressed a letter to its banker, 
Defendant No.2, namely Canara Bank, to remit US $ 100,000 by 
telegraphic transfer to the account of the plaintiff – However, 
instead of remitting the amount to the account of the plaintiff as 
instructed, Defendant No.2 erroneously transferred the amount 
to the account of the vessel owner – As the amount remained 
unpaid, the plaintiff instituted a recovery suit – The Single 
Judge of the High Court by judgment dated 18.11.2010 decreed 
the suit in favour of the plaintiff and held that Defendant No.1 
was liable to pay the suit amount – Aggrieved, Defendant No.1 
preferred appeal – The Division Bench allowed the appeal 
to the limited extent by granting Defendant No.1 the benefit 
of a third-party decree against Defendant No.2 for recovery 
* Author
152
[2026] 4 S.C.R.
Supreme Court Reports
of the amount which had been erroneously remitted by the 
bank, while affirming the liability of Defendant No.1 towards 
the plaintiff – Correctness:
Held: In C.A.No.13862 of 2024 filed by Defendant No.1, a perusal 
of the record reveals that Defendant No.1 had executed multiple 
documents expressing its commitment to pay the plaintiff including 
the letter dated 25.04.1998 styled as a “Corporate Guarantee” – In 
the instant case, the owner of the vessel had instructed Defendant 
No.1 to pay a sum of US $100,000 to the plaintiff towards discharge 
of its liability for the repairs carried out to the vessel – By a letter 
dated 22.04.1998, Defendant No.1 addressed the plaintiff assuring 
that a sum of US $100,000 would be paid after the cargo was 
cleared, in clear and unequivocal terms – The contents of the said 
letter also indicate that Defendant No.1 had undertaken to make 
the payment and had requested that the arrangement should not 
be disclosed to the owner of the vessel – A conjoint reading of the 
documents on record, particularly the letter dated 22.04.1998 and 
the Corporate Guarantee dated 25.04.1998, clearly establishes that 
the undertaking to pay was not merely a freight-sharing arrangement 
but an independent guarantee satisfying the requirements of ss.126 
to 128 of the Contract Act – Exhibits P10 and P11 constitute a 
valid undertaking by Defendant No.1 to discharge the liability of 
the vessel owner in the event of its default in payment of the repair 
charges – Further, after the cargo had been delivered by the owner 
of the vessel, and upon the plaintiff demanding payment, Defendant 
No.1, by Exhibit P14, requested Defendant No.2 Bank to transfer a 
sum of US $100,000 to the plaintiff – This conduct clearly reflects 
the intention of Defendant No.1 to honour the undertaking given by 
it – This Court, therefore, concur with the findings recorded by the 
High Court – There is a valid undertaking by way of a guarantee 
executed by Defendant No.1, and Defendant No.1 cannot absolve 
from its liability – Further, the interests of Defendant No.1 are 
protected as its right to recover the amount from the owner of 
the vessel is preserved u/s.140 of the Contract Act, and the High 
Court has also granted a third-party decree in its favour against the 
Bank – In CA. No.13861 of 2024 filed by Defendant No.2 Bank, the 
Division Bench of the High Court concurred with the findings of the 
trial Court that the Bank had been instructed by Defendant No.1 
through Exhibit P14 and the accompanying Form A-2 to remit a su

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