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Can a bank deduct money from someone's account at will? Especially when pension money is deposited in that account? Odisha High Court has answered this question in an important decision, which is no less than a big relief for millions of elderly people and pensioners of the country. The High Court has clearly said that the bank cannot directly confiscate the pension fund of the guarantor, even in case of loan default. This whole matter is related to a retired person named Mr. Mallik. Mallik Saheb, who retired from the Rail Coach Factory, maintained a joint account with his wife in the State Bank of India (SBI). His monthly pension of about ₹ 35,000 used to come in this account. Mallik Saheb had become the guarantor of his wife's two transport vehicle loans.

Wrecked on husband who became guarantor

Mallik Saheb's wife had taken two vehicle loans worth Rs 5.9 lakh and Rs 8 lakh. After some time, she could not repay the installments of these loans and both the accounts were declared NPA in November 2018. The bank sent notices several times for recovery of the loan, but things did not work out. After this, the bank took a step which jeopardized Mallik Sahab's entire savings. On 17 and 19 February 2024, the bank deducted a total of Rs 5 lakh from the joint account of Mallik Sahab, without any prior notice or consent. The bank claimed that this amount was taken to settle the loan dues. Mallik Sahab argued that he was only the guarantor and not the main borrower. He also gave a request to the bank that he was in dire need of money for his daughter's marriage, hence the amount should be returned, but the bank did not pay any attention. Compelled, he approached the High Court for justice.

Pension is not alms, it is a constitutional right

The bench of Justice (Dr.) Sanjeev K Panigrahi, while hearing this petition on 17 October 2025, gave a historic decision. The court said that this case is not just a banking dispute, but is related to the right to livelihood guaranteed under Article 21 of the Constitution. The court clearly said that pension There is no alms or charity, rather it is the employee's hard-earned property, which gives him the right to live with dignity in old age. Citing several decisions of the Supreme Court, the court said that under Section 60(1)(g) of the Civil Procedure Code (CPC), government pension has legal protection from any kind of attachment. The court emphasized that, “What the law does not permit to do without any formal order, the bank cannot do indirectly by cutting the pension fund on its own will.”

Bank's arbitrariness in recovery from joint account

The bank had argued that Mallik Saheb was the guarantor and the account was also joint, hence the recovery was correct. But the High Court rejected this argument. The court said that even though the responsibility of a guarantor is equal to that of the principal borrower, the method of recovery must be legal and fair. For a loan of one person, the bank cannot withdraw the same amount from the account of another co-account holder. The court clarified that since Mallik Sahab's pension was in this account, the funds could not lose their pension protection merely because it was a joint account. This action of the bank was completely unilateral and violates the basic rules of natural justice, as no notice was given to Mallik Sahab.

Return 5 lakhs in 4 weeks

In its judgment, the High Court declared SBI's action of deducting Rs 5 lakh as "illegal and unsustainable in law". The court ordered the bank to deposit back the entire amount of ₹ 5,00,000 in Mallik Saheb's account within four weeks. However, the court also made it clear that this decision does not end the bank's right to recover the loan. The Bank is completely free to recover its dues by following legal procedures, such as enforcing security or filing a case in the appropriate tribunal. But, under no circumstances, the bank can directly confiscate the pensioner's means of subsistence i.e. pension.