'Abominable': Allahabad High Court Pulls Up SBI For Debiting Wife's FD For Husband's Loan

The Allahabad High Court at Lucknow has pulled up the State Bank of India for debiting ₹19.90 lakh from a woman's fixed deposit towards her deceased husband's loan dues, calling the process “abominable” and “clearly an anathema to banking practice”.

A bench of Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary held that SBI had failed to show any legal basis for debiting the account of Neha Mishra, who had no privity of contract with the bank, towards her husband's dues.

Mishra's husband, an Assistant Professor at Medicine Hospital, Ring Road, Lucknow, had taken a ₹15 lakh Xpress Credit Loan from SBI on November 3, 2020

The order records that Mishra was neither a signatory nor a consenting party to the loan and was not a co-applicant, co-borrower, guarantor, surety, indemnifier, or nominee.

The court therefore recorded that there was no privity of contract between Mishra and SBI.

The loan was secured through an insurance cover arranged from SBI General Insurance. The order records that Mishra's husband had allegedly paid a premium of ₹8,803 for the cover.

He died from Covid-19 on May 6, 2021. SBI subsequently sought payment of the loan dues from Mishra and issued her a legal notice dated September 23, 2025, demanding ₹13,87,382 along with interest.

The bank had placed Mishra's salary account on hold on September 12, 2025. She approached the Reserve Bank of India Ombudsman, following whose intervention the hold was removed.

The parties thereafter started engaging in negotiations. In the intervening period, SBI encashed a fixed deposit held in Mishra's name and debited ₹19,90,693 from her account.

The fixed deposit had been opened at SBI's Ashiyana branch in 2025. The bank transferred the account to its Jankipuram branch, where Mishra's husband had taken the loan.

The amount was then debited from Mishra's account and transferred to SBI towards the dues payable by her husband. The account was subsequently transferred back to the Ashiyana branch.

SBI defended the recovery by relying on an irrevocable standing instruction given by the deceased when he took the loan.

Under the instruction, the borrower had authorised SBI to collect amounts payable towards provident fund, gratuity, pension or similar dues on his behalf if he retired, resigned, was terminated, or otherwise discontinued his service. He had also agreed that the authorisation would remain irrevocable until the loan and interest were fully paid.

Mishra's counsel argued that she had no contractual relationship with SBI and that the recovery was not legally permissible. He also relied on Supreme Court judgments holding that retiral benefits such as gratuity cannot be treated as a lien or forfeited except in circumstances permitted by law.

SBI, in response, relied on judgments concerning recovery of loan dues from gratuity and other retiral benefits. Its counsel argued that although gratuity could not be forfeited without following the procedure prescribed by law, recovering dues from such benefits was not barred.

The court found the judgments relied upon by SBI distinguishable. It observed that those cases concerned gratuity being forfeited or withheld by an employer, while the present case concerned money being deducted from the bank account of a third party.

SBI was not the deceased borrower's employer. The court also found no documents showing what amount of gratuity received after the husband's death, and in what circumstances, was traceable to the amount debited from Mishra's account.

The court then examined the manner in which the debit was carried out. When asked whether the same mechanism could have been used if Mishra's account had been maintained with another bank, SBI's counsel fairly submitted that it would not have been possible.

“Apparently, the Bank tried to take advantage of the situation and has merely debited the bank account of the petitioner, as the petitioner had a fixed deposit in the respondent-Bank,” the bench observed.

The bench held that banks are custodians of their customers' money and described the action as “a serious breach of trust” reposed on banks, which were holding Mishra's money in trust.

The court noted that Mishra's husband died in 2021, she received gratuity and other retiral benefits in August 2022, and she opened the fixed deposit only in 2025.

The bench observed that SBI “may very well have a legal right to proceed against the petitioner as the legal heir of the deceased” to recover the dues relating to the personal loan. It held, however, that such recovery had to be made through due process of law and not in an “arbitrary, capricious and whimsical manner”.

The bench further criticised the transfer of the fixed deposit between SBI's branches before and after the debit.

“The entire process that has been adopted by the Bank of surreptitiously transferring the fixed deposit from one Branch to another to debit the same and upon debiting the same once again transferring the account back clearly indicates that the intention of the Bank was to achieve its purpose in a surreptitious manner,” it observed.

It directed SBI to refund ₹19,90,693 to Mishra with interest at the fixed deposit rate she was enjoying within four weeks.

The bank was also directed to pay ₹1 lakh to Mishra as exemplary and punitive compensation.

The writ petition was accordingly allowed.

For Petitioner: Advocates Syed Mohammed Haider Rizvi, Asheesh Kumar and Shakti Kumar Verma

For Respondents: Advocate Anurag Srivastava