Bank Can't Unilaterally Deduct Money From Pension Account Of Retired Employee To Recover Guaranteed Amount: Orissa High Court

The Orissa High Court has held that a Bank has no legal authority to unilaterally deduct/debit money from the pension account of a retired employee/pensioner merely on the ground that such employee stood as guarantor in a loan which could not be repaid.

While asking the Bank to refund the deducted amount to the petitioner, the Bench of Dr. Justice Sanjeeb Kumar Panigrahi remarked –

“The manner in which the recovery was effected also fails basic norms of natural justice…A unilateral debit from a customer's account, especially when it consists of pension money, is an extreme step. The petitioner was entitled to at least a notice or demand, and an opportunity to be heard on why the sum was being taken.”

The petitioner, who is a retired government employee, stood as a guarantor for the transport vehicle and car loans taken by his wife from the State Bank of India through different loan accounts. Due to default in repayment of the said loans, the said accounts were declared as Non-Performing Assets (NPA). The Bank alleged that despite of repeated requests, neither the borrower nor the guarantor repaid the loans.

In February 2024, the Bank deducted an amount to the tune of rupees five lakhs from the joint account held by the petitioner and his wife and used the same for closing the loan accounts. Though the petitioner furnished representation to the Bank for release of the withheld amount, the Bank did not respond. Therefore, the present writ petition was filed.

Justice Panigrahi viewed the issue with a magnifying lens of constitutional wisdom. Though the dispute pertained to a default in repayment of loan arising out of contractual liability, the Judge sought to balance the scales of justice by adjudicating the limits of contractual liability when it directly wounds the constitutional right to livelihood of a retired employee, who is dependent on his pension.

Relying upon the dictum of the Apex Court in Radhey Shyam Gupta v. Punjab National Bank (2008) and citing the statutory prohibition under Section 60(1)(g) of the Code of Civil Procedure (CPC) against attachment of stipends and gratuities to government pensioners, the Court held that if a thing is forbidden by the law by way of formal attachment, it cannot be indirectly accomplished by the bank unilaterally adjusting or debiting pension funds.

Further giving reference of State of Jharkhand v. Jitendra Kumar Srivastava (2013), the Court emphasized that pension is not a matter of charity or a bounty from the State, rather it is a hard-earned benefit which is payable to a retired employee for ensuring his right to life with dignity in the afternoon of worldly existence. It reiterated that a person cannot be deprived of pension without the authority of law, as pension is considered 'property' under Article 300A of the Constitution.

The Bank contended that in order to recover the public money, it ventured into deducting the same from the joint account held by the petitioner and his wife. However, such argument could not satiate the Court which held that when a debt is owed by one person, the bank cannot simply seize money from a joint account held with another person, especially who is not a co-debtor.

“The petitioner was entitled to at least a notice or demand, and an opportunity to be heard on why the sum was being taken. He could have, for instance, pointed out his contention that the loans had been settled under a credit guarantee scheme, or offered an alternate repayment plan. By bypassing any dialog or process, the Bank's action was arbitrary,” it added.

Accordingly, the unilateral act on the part of the Bank was held to be illegal and unsustainable in the eyes of law. Consequently, the Bank was directed to reverse the sum of ₹5,00,000/- to the petitioner's account within four weeks. However, the respondent was given liberty to recover the outstanding dues/loans by resorting to lawful means and/or by approaching appropriate forum(s).

Case Title: Bharat Chandra Mallick v. Branch Manager, State Bank of India

Case No: W.P.(C) No. 19648 of 2025

Date of Judgment: October 17, 2025

Counsel for the Petitioner: Mr. Braja Mohan Sarangi, Advocate

Counsel for the Respondent: Mr. Manoj Kumar Mohapatra-1, Advocate

Citation: 2025 LiveLaw (Ori) 139

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