Calling the process “abominable” and “clearly an anathema to banking practice”, the Lucknow bench of the Allahabad high court has pulled up the State Bank of India (SBI) for debiting ₹19.90 lakh from a widow’s fixed deposit (FD) towards her deceased husband’s loan dues.
A division bench of Justice Shekhar B Saraf and Justice Abdhesh Kumar Chaudhary passed the judgment on September 10, uploaded recently, on a petition filed by Neha Mishra.
The court held that SBI had failed to show any legal basis for debiting the said money from Neha Mishra’s account to cover her husband’s dues. Mishra’s husband, an assistant professor at a Lucknow hospital, had taken a ₹15 lakh 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 paid a premium of ₹8,803 for the cover. He died of Covid 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 placed Mishra’s salary account on hold on September 12, 2025. She approached the Reserve Bank of India Ombudsman, following which 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.
{{/usCountry}}The bank placed Mishra’s salary account on hold on September 12, 2025. She approached the Reserve Bank of India Ombudsman, following which 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.
{{/usCountry}}The FD had been opened at SBI’s Ashiyana branch in 2025. The bank transferred the account to its Jankipuram branch from 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 petitioner’s husband when he took the loan.
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.
After hearing the matter, the court 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 compensation.