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Can a bank deduct money from someone's account at will? Especially if pension funds are deposited in that account? The Odisha High Court has answered this question in a significant decision, providing significant relief to millions of senior citizens and pensioners across the country. The High Court has clearly stated that a bank cannot directly seize a guarantor's pension funds, even in the event of a loan default. This case concerns a retired man named Mr. Mallick. Mr. Mallick, who retired from the Rail Coach Factory, held a joint account with his wife at the State Bank of India (SBI). This account held his monthly pension of approximately ₹35,000. Mr. Mallick had stood as a guarantor for two transport vehicle loans for his wife.

Husband who acted as guarantor faces wrath.
Mallick's wife had taken out two vehicle loans worth ₹5.9 lakh and ₹8 lakh. After some time, she failed to pay the installments on these loans, and in November 2018, both accounts were declared NPAs. The bank sent several notices to recover the loans, but nothing worked. Subsequently, the bank took a step that threatened Mallick Saheb's entire savings. On February 17 and 19, 2024, without prior notice or consent, the bank deducted a total of ₹5 lakh from Mallick Saheb's joint account. The bank claimed the amount was taken to settle the loan balance. Mallick Saheb argued that he was only a guarantor, not the primary borrower. He also submitted a request to the bank, stating that he urgently needed the money for his daughter's wedding and demanded the return of the funds, but the bank ignored it. Forced to seek justice, he approached the High Court.

Pension is not alms, but a constitutional right.
On October 17, 2025, a bench headed by Justice (Dr.) Sanjiv K. Panigrahi delivered a landmark judgment while hearing this petition. The court stated that this matter is not merely a banking dispute, but rather concerns the right to livelihood guaranteed under Article 21 of the Constitution. The court clearly stated that a pension is not alms or charity, but rather the hard-earned wealth of an employee, which entitles him to a dignified life in old age. Citing several Supreme Court judgments, the court explained that under Section 60(1)(g) of the Code of Civil Procedure (CPC), government pensions are legally protected from attachment. The court emphasized, "What the law prohibits without a formal order, the bank cannot do indirectly by deducting the pension fund at its own discretion."

Bank's Arbitrary Recoveries from Joint Account
The bank argued that Mr. Mallick was the guarantor and the account was joint, making the recovery justified. However, the High Court rejected this argument. The court stated that while a guarantor's responsibility is equal to that of the primary borrower, the recovery process must be legal and fair. The bank cannot simply withdraw funds from the account of another co-account holder for a loan owed to one individual. The court clarified that since Mr. Mallick's pension was credited to this account, the funds cannot lose their pension protection merely because it is a joint account. The bank's action was completely unilateral and violated basic rules of natural justice, as no notice was given to Mr. Mallick.

Return the 5 lakh in 4 weeks.
In its decision, the High Court declared SBI's action of deducting 5 lakh rupees as "illegal and legally unsustainable." The court ordered the bank to refund the full amount of ₹500,000 to Mallick Sahib's account within four weeks. However, the court also clarified that this decision does not absolve the bank's right to recover the loan. The bank is completely free to recover its outstanding amount by following legal procedures, such as enforcing security or filing a case in the appropriate tribunal. However, under no circumstances can the bank directly seize the pensioner's means of sustenance, i.e., the pension.

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