Bank Cannot Unilaterally Withdraw Money From Joint Account To Recover Loan Owed By One Of The Holders: Orissa High Court

The Orissa High Court has recently ruled that a bank cannot unilaterally withdraw money from a joint account to recover a loan owed by only one of the account holders.

The Court was dealing with a petition filed by Bharat Chandra Mallick, a retired railway employee, who challenged the State Bank of India's deduction of Rs 5 lakh from a joint account he held with his wife without prior notice. The deduction was made towards a loan owed by his wife.

A bench of Justice Sanjeeb K Panigrahi in an order passed on October 17, observed that such a deduction is not permissible only when one of the account holders owe the debt. Further, it added that since the joint account was used by the Malick as a pension account, it would enjoy the same statutory protection accorded to a pensionary account against any attachment actions.

“if a debt is owed by one person, the bank cannot simply seize money from a joint account held with another person who is not a co-debtor. In this case, while the petitioner (guarantor) and his wife (borrower) are both liable for the loan, the joint account was effectively being treated as a convenient source without distinguishing whose funds were being taken. The petitioner is a retiree whose contribution to that account was his pension, which is protected. Simply because the account was joint does not strip the funds of their pensionary nature in his hands”, the court observed. 

The dispute arose after Mallick, a retired employee of the Rail Coach Factory, Mancheswar, found that Rs 5 lakh had been withdrawn from a joint savings account he shared with his wife, Susila Mallick.

The couple's joint account was used for crediting Mallick's monthly pension of about Rs 35,000. His wife had taken two transport vehicle loans from SBI in 2015, one for Rs 5.9 lakh and another for Rs 8 lakh, for which Mallick had stood as guarantor.

When the loans became non performing assets in 2018, the Bank, without giving prior notice, debited Rs 2.3 lakh and Rs 2.7 lakh from the joint account in February 2024, claiming that the money was used to close the defaulted loans.

Mallick argued that the deductions were made from his pension savings, which were his only source of livelihood, and that the Bank's unilateral action was unlawful. He also stated that the loans had already been settled under a government guarantee scheme and that the recovery caused him financial hardship.

The Bank maintained that as guarantor, Mallick was equally liable for the debt, and since the account was jointly held, the recovery was lawful. It also argued that the case had been filed after a delay of one year from the debit and is not maintainable. It also submitted that the claim that the Mallick's pension was withheld is factually incorrect, demonstrating through the account statement that the he has been regularly withdrawing his monthly pension since March 2024 without any obstruction

Rejecting the Bank's defence, the Court held that pensionary benefits retain their protected character even after being credited to a bank account. 

“what the law forbids by way of formal attachment cannot be indirectly accomplished by the bank unilaterally adjusting or debiting pension fund,” the Court said.

While clarifying that the Bank may still recover dues through lawful means, the court directed that it must not interfere with the petitioner's pension account without following due process

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

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

For Petitioner : Advocate Braja Mohan Sarangi

For Respondent : Advocate Manoj Kumar Mohapatra

Click here to read/download judgment