Orissa High Court: In the present petition, a retired Rail Coach Factory employee challenged the State Bank of India’s (‘Bank’) deduction of Rs 5,00,000 from his joint account, alleging it was taken from protected pension funds without notice or due process. He claimed this violated his right to livelihood and sought refund and protection against arbitrary action by the Bank.
A Single Judge Bench of Dr. Sanjeeb K Panigrahi, J., while allowing the petition held that the Bank’s debit of Rs 5 Lakh from the petitioner’s account, which contained his pension, was done without any court order or prior notice, and thus prima facie violates the principle that pension could not be taken except by due process. The Court emphasised that, given the continuing impact on the petitioner’s livelihood and the alleged violation of fundamental rights, a marginal delay did not defeat substantive justice.
Background:
The petitioner was a retired employee of the Rail Coach Factory, Mancheswar, and a pension holder with the Bank, receiving approximately Rs 35,000 monthly as his primary source of livelihood. His wife had availed two transport vehicle loans, Rs 5,90,000 on 12-06-2015 and Rs 8,00,000 on 07-12-2015 and a car loan of Rs 7,45,000 on 31-10-2017. The petitioner stood as guarantor for the transport vehicle loans and executed guarantee agreements, making both borrower and guarantor jointly and severally liable.
Due to default in repayment, the two transport vehicle loans were classified as Non-Performing Assets’s (‘NPA’) on 07-11-2018. Eventually, on 17-02-2024 and 19-02-2024, Rs 2,30,000 and Rs 2,70,000 respectively were debited from the petitioner’s joint account with his wife, totalling Rs 5 Lakh, which the Bank claimed was used to close the transport vehicle loan accounts. The petitioner contended he was only a guarantor and that the loans were already closed under the Credit Guarantee Fund Trust for Micro and Small Enterprises (‘CGTMSE’) scheme in 2023. He alleged the deductions were made without notice or due process, violating his constitutional rights.
The Bank asserted that the car loan remained an NPA with dues of Rs 6,02,650.50 as of 01-07-2024. It maintained that the joint account was not an exclusive pension account and that the petitioner was withdrawing his pension regularly since March 2024. The Bank argued the debit transactions were lawful, made from a jointly operated account, and that the petitioner was aware of the recovery since February 2024. It further contended that the petition suffered from delay, laches, and suppression of material facts.
Consequently, the petitioner made a representation dated 07-01-2025 to the Bank seeking release of the withheld amount for his daughter’s marriage but received no response. He claimed the recovery had no legal foundation, caused grave financial hardship, and violated his right to dignity under Article 21 of the Constitution. However, the Bank defended its action as lawful recovery of public money, emphasised joint liability and contractual obligations, and sought dismissal of the petition.
Analysis and Decision:
The Court highlighted that the case raised a narrow but important question whether a bank could, on its own, deduct money from a pensioner’s account to recover dues arising from a borrower’s default. The Court observed that, although it appeared at first glance to be a routine banking dispute, it in fact cut to the core of a larger issue: the protection of pension as a lifeline for survival in old age, and the limits of contractual power when weighed against the constitutional right to livelihood.
The Court noted that it was evident from the legal framework that pensionary benefits were accorded special protection, wherein Section 60(1)(g) of the Civil Procedure Code, 1908 exempted government pensions from attachment in execution of a decree. The Court further noted that, in the present case, the Bank’s debit of Rs 5 lakh from the petitioner’s account, which contained his pension, had been done without any court order or prior notice, and thus prima facie violated the principle that pension could not be taken except by due process.
The Court emphasised that the fact that the amount was taken from a joint account held by the petitioner and his wife did not legalise the recovery. The Court held that if a debt was owed by one person, the bank could not seize money from a joint account held with another who was not a co-debtor. Further, the Court emphasised that while both the petitioner (guarantor) and his wife (borrower) were liable for the loan, the joint account was treated as a convenient source without distinguishing whose funds were taken. The Court noted that the petitioner was a retiree whose contribution was his pension, which remained protected. Simply because the account was joint did not strip the funds of their pensionary nature.
The Court held that the recovery process failed basic norms of natural justice. It was undisputed that the Bank had not issued prior notice or obtained consent before debiting the amounts. Further, the Court observed that a unilateral debit from a customer’s account especially when it consisted of pension money was an extreme step. The petitioner was entitled to notice and an opportunity to be heard. However, the Court noted that by bypassing any process, the Bank’s action was arbitrary. The Court held that the proper course in case of loan default was to pursue lawful recovery channels, not self-help by dipping into a pension account.
The Court noted that the Bank contended the petition was vitiated by delay and laches, having been filed more than a year after the recovery, and alleged suppression of material facts such as the petitioner’s guarantor role and joint account details. However, the Court was not convinced that these technical objections foreclosed relief. The Court observed that the petitioner had made a representation to the Bank in January 2025, within eleven months of the disputed debit, seeking restitution, yet received no response.
Further, the Court held that, given the continuing impact on the petitioner’s livelihood and the alleged violation of fundamental rights, a marginal delay did not defeat substantive justice. The Court found no indication that the petitioner had acquiesced in the recovery; merely continuing to use the same account for pension credits could not be construed as consent to the Rs 5 lakh deduction. The Court clarified that, while monetary disputes ordinarily fell within the realm of civil courts or tribunals, that did not curtail writ jurisdiction where a public sector bank had acted with manifest illegality infringing constitutional guarantees.
Accordingly, the Court held that the Bank’s action in debiting ₹5 lakh from the petitioner’s joint account was illegal and unsustainable in law. It had violated statutory protections afforded to pension funds and the petitioner’s fundamental right to livelihood under Article 21. Consequently, the Court directed the Bank to reverse the sum of Rs 5 lakh to the petitioner’s account within four weeks. The petitioner was permitted to operate his account freely, and the Bank was restrained from recovering any amount from his pension in the future without adhering to due process.
Further, the Court clarified that the present judgment did not extinguish the underlying loan obligations as the Bank remained at liberty to recover any outstanding dues by lawful means. However, the Court held that under no circumstances could the Bank directly appropriate a pensioner’s entire pension or savings in violation of the guidelines discussed. Therefore, the petition was allowed accordingly.
[Bharat Chandra Mallick v. State Bank of India, 2025 SCC OnLine Ori 3891, decided on 17-10-2025]
Advocates who appeared in this case:
For the Petitioner: Braja Mohan Sarangi, Adv.
For the Opposite Party: Manoj Kumar Mohapatra, Adv.
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