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The Allahabad High Court has directed the State Bank of India (SBI) to refund ₹19,90,693. SBI had taken this money from a widow’s fixed deposit to cover her dead husband’s personal loan. The Court also ordered SBI to pay ₹1 lakh as exemplary and punitive compensation.
A Division Bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary passed the order while hearing a writ petition filed by Neha Mishra.
Mishra’s husband worked as an Assistant Professor at Medicine Hospital, Ring Road, Lucknow. He took a ₹15 lakh Xpress Credit Loan from SBI on November 3, 2020. He died of Covid -19 on May 6, 2021.
The Court noted that Mishra had no part in the loan. She was neither a co-applicant nor a co-borrower, guarantor, surety, indemnifier or nominee. The Bench therefore held that “there exists no privity of contract between the petitioner and the respondent-State Bank of India.”
The loan was also said to have been covered by an insurance policy taken through SBI General Insurance.The husband had allegedly paid a premium of ₹8,803 for it.
SBI asked the widow to pay:
Following her husband’s death, SBI issued a legal notice to Mishra on September 23, 2025, demanding ₹13,87,382 along with interest towards the outstanding loan.
The Bank also put her salary account on hold. Mishra approached the RBI Ombudsman, after which the hold on her account was removed.
While discussions between the parties were underway, SBI encashed a fixed deposit belonging to Mishra and deducted ₹19,90,693 from her account.
Mishra herself had opened this FD in 2025 at SBI’s Ashiyana Branch. According to the judgment, the account was subsequently transferred to the Jankipuram Branch, where her husband had obtained the loan. After the money was taken, the account was moved back to the Ashiyana Branch.
Court rejects SBI’s use husband’s instruction:
SBI relied on an irrevocable standing instruction signed by Mishra’s husband when he took the loan. The instruction allowed the Bank to collect certain dues, such as provident fund, gratuity, pension and similar dues in specific situations.
However, the High Court found that the standing instruction could not justify taking money from the widow’s own, separate fixed deposit.
The Bench said the judgments SBI relied on were different from this case. It stressed that here, money was taken from the account of a third party, the dead borrower’s wife.
The Court observed:
“Bank is not the employer of the deceased husband of the petitioner and there are also no documents on record to show as to what amount and as to in which circumstances any gratuity amount received after the death of the husband of the petitioner is traceable to the amount debited from the wife’s account.”
SBI’s method of recovery questioned:
The Court also examined how the fixed deposit was transferred between SBI branches before the money was taken.
The FD was moved from Ashiyana Branch to Jankipuram Branch, after which ₹19,90,693 was debited towards the husband’s outstanding loan. The account was then transferred back to Ashiyana Branch.
The Bench strongly criticised this procedure, observing:
“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 Court also noted that SBI’s counsel could not point to any legal provision that allowed the Bank to take money directly from the wife’s FD to recover her husband’s debt.
When questioned about whether the same recovery could have been made if Mishra’s account had been with another bank, SBI’s counsel conceded that such a mechanism would not have been possible.
The Court therefore remarked:
“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 court described this conduct as “a serious breach of trust reposed on the Banks.” It noted that banks are custodians of their customers’ money.
Heir can be pursued, but only by law:
The High Court made clear that its ruling does not mean that a bank has no right to pursue a deceased borrower’s legal heir for dues that are legally recoverable.
The Bench observed that SBI “may very well have a legal right to proceed against the petitioner as the legal heir of the deceased” and recover the outstanding amount.
But, the Court said that such recovery must be carried out in accordance with due process of law and not through one sided or arbitrary action.
The Bench held that the Bank could not recover the dues in an “arbitrary, capricious and whimsical manner.”
Court calls SBI’s conduct “abominable”:
The High Court also took serious note of the manner in which the FD was moved between branches.
It observed:
“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.”
The Court further stated:
“The entire process is abominable and clearly an anathema to banking practice. The action of the Bank cannot be justified in any manner whatsoever.”
SBI ordered to refund ₹19.90 lakh:
The Court directed SBI to refund ₹19,90,693 to Mishra along with interest at the rate applicable to her fixed deposit. The amount is to be paid within four weeks.
Considering the manner in which the recovery was made, the Bench also directed SBI to pay ₹1 lakh as exemplary and punitive compensation to Mishra.
The writ petition was accordingly allowed.
Case: Ms. Neha Mishra v. Reserve Bank of India Through Governor, Central Office Building, Mumbai & 5 Other
