Orissa High Court Rules Bank's Deduction from Pension Account Unlawful

Landmark Judgment Upholds Pension Protection and Due Process in Unilateral Bank Transactions

In a significant ruling, the Orissa High Court declared the State Bank of India's unilateral deduction of Rs.5,00,000 from a pension account illegal and unconstitutional. The judgment, delivered by Justice Dr. Sanjeeb K Panigrahi, reaffirmed the inviolability of pension funds and underscored the necessity for banks to adhere to statutory protections and due process before affecting such transactions.

The case involved petitioner Bharat Chandra Mallick, a retired employee and pensioner, who challenged the bank's action of debiting funds from his joint account, shared with his wife. The funds were used to settle loan dues for which Mallick had stood as guarantor. The bank contended that the recovery was lawful, citing the joint liability of the borrower and guarantor.

However, the court emphasized that pension funds enjoy special protection under Section 60(1)(g) of the Code of Civil Procedure, 1908, which exempts them from attachment, even if deposited in a bank account. Justice Panigrahi highlighted that the deduction violated Article 21 of the Constitution, which safeguards the right to livelihood, and noted that pension is considered "property" under Article 300A, hence cannot be deprived without explicit legal sanction.

The judgment drew upon precedents such as Radhey Shyam Gupta v. Punjab National Bank and State of Jharkhand v. Jitendra Kumar Srivastava, reinforcing the principle that pensionary benefits retain their protected status despite being in a bank's possession.

Additionally, the court criticized the bank's failure to issue prior notice or offer an opportunity for the petitioner to be heard, labeling the action as arbitrary and violative of natural justice principles. It directed the bank to refund the debited amount within four weeks and cautioned against any future deductions from pension funds without due process.

The ruling serves as a pivotal affirmation of pension security and the rights of retirees, emphasizing that banks must pursue lawful avenues for debt recovery without infringing on constitutional protections.

Bottom Line:

Pension funds are protected under statutory provisions and cannot be unilaterally deducted by banks, even if held in a joint account and regardless of any guarantor obligations.

Statutory provision(s): Article 21, Article 300A of the Constitution of India, 1950; Section 60(1)(g) of the Code of Civil Procedure, 1908.

Bharat Chandra Mallick v. Branch Manager, State Bank of India, (Orissa) : Law Finder Doc Id # 2797097