SBI Illegally Debits ₹19.90 Lakh From Widow's FD For Husband's Loan: Allahabad High Court Orders Refund, ₹1 Lakh Compensation
The Allahabad High Court last week directed the State Bank of India (SBI) to refund ₹19,90,693 that it had debited from a widow's fixed deposit towards her deceased husband's outstanding personal loan and to pay ₹1 Lakh as compensation.
The Court held that the Bank had no legal basis to recover the husband's dues straightaway from the wife's account.
A Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary observed that the entire process adopted by SBI, transferring the widow's fixed deposit account from one branch to another, debiting the amount towards the husband's loan and then transferring the account back, "stinks of mala fide action".
The Court further described the process as "abominable and clearly an anathema to banking practice" and held that SBI's action could not be justified.
Case in brief
The petitioner's husband, an Assistant Professor at a hospital in Lucknow, had availed a ₹15 lakh personal loan from SBI on November 3, 2020.
The Court noted that the petitioner-wife was neither a signatory nor a consenting party to the loan as a co-applicant, co-borrower, guarantor, surety, indemnifier or nominee.
The husband died due to Covid-19 on May 6, 2021. Thereafter, instead of pursuing the steps permissible under law for the recovery of the personal loan, the Bank began coercing the petitioner-wife into making payment.
A legal notice was issued on September 23, 2025, to her, demanding payment of the outstanding loan amount of ₹13,87,382 along with interest, failing which the Bank threatened to initiate legal proceedings.
The Bank also placed the widow's salary account on hold on September 12, 2025. The hold was subsequently removed following the intervention of the RBI Ombudsman.
While negotiations between the parties were continuing, SBI encashed the petitioner's fixed deposit and debited ₹19,90,693 from her bank account.
The fixed deposit was opened by the petitioner in 2025 at SBI's Ashiyana Branch; however, the account was subsequently transferred to the Jankipuram Branch, where the husband's loan was taken.
Immediately after the transfer, the amount was debited and transferred to SBI towards the amount payable by the deceased husband. The account was thereafter transferred back to the Ashiyana Branch.
High Court's observations
The Court took serious exception to the manner in which the transaction was carried out. It observed thus:
"The entire process stinks of mala fide action on the part of the State Bank of India not only with regard to the procedure adopted in debiting the fixed deposit account but also with regard to substantive law that did not allow the State Bank of India from debiting an account of an individual with whom they had no privity of contract or any relation under law".
The Bank's counsel also failed to show any law under which an amount recoverable from a husband could be straightaway debited from the wife's fixed deposit account. Hence, the Court observed thus:
"Apparently, the Bank tried to take advantage of the situation and has merely debited the bank account of the petitioner…this is a serious breach of trust reposed on the Banks, who were merely custodian of the bank account and were holding the money in trust for and on behalf of the petitioner".
The Court clarified that SBI may have the right to proceed against the petitioner, as the legal heir of the deceased, and recover the dues relating to the personal loan.
However, it held that such recovery has to be made "as per the due process of law established in India", and not in an "arbitrary, capricious and whimsical manner".
The Bench relied on the Supreme Court's judgment in Radhey Shyam Gupta v. Punjab National Bank, wherein it was observed that retiral benefits such as pension, gratuity and provident fund retain their character even after being received by the employee and are exempt from attachment in the circumstances discussed therein.
Describing the Bank's conduct as 'deplorable', the High Court directed SBI to immediately refund ₹19,90,693 debited from the petitioner's account, along with interest at the fixed deposit rate that the petitioner was enjoying.
The amount is to be refunded within four weeks from the date of the order.
The Court further held that the Bank's action warranted exemplary and punitive compensation. Although the petitioner had claimed ₹25 lakh for alleged mental agony, emotional trauma and violation of her fundamental rights, the Bench considered ₹1 lakh appropriate in the circumstances.
SBI was accordingly directed to pay ₹1 lakh compensation to the petitioner within four weeks.
The writ petition was accordingly allowed.
For Petitioner: Advocates Syed Mohammed Haider Rizvi, Mohammad Hasan, Asheesh Kumar and Shakti Kumar Verma
For Respondents: Advocate Anurag Srivastava
Case Title - Neha Mishra vs. Reserve Bank Of India Thru. Governor Central Office Building Mumbai And 5 Others 2026 LiveLaw (AB) 720
Case Citation: 2026 LiveLaw (AB) 720