No Privity Of Contract: Allahabad HC Imposes ₹1 Lakh Cost On Bank For Debiting Woman’s Account For Recovery Of Deceased Husband’s Loan

The High Court was considering a writ petition seeking issuance of a direction commanding the Respondent Bank to unconditionally and immediately credit the expropriated sum of INR 19,90,693 into the Petitioner's independent bank account.

The Bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary held, "However, presently the issue is not of withholding the gratuity by an employer but allegedly deducting an amount illegally from the bank account held by a third party, i.e., the wife of the deceased. In any case, 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."

“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. Learned counsel for the respondent-Bank failed to show us any law under which an amount recoverable from a husband can be straightaway debited from the wife's fixed deposit account,” it added.

Advocate Syed Mohammad Haider Rizvi represented the Petitioner while Advocate Anurag Srivastava represented the Respondent.

Factual Background

The petitioner's husband was an Assistant Professor at Medicine Hospital, Ring Road, Lucknow. The Assistant Professor had availed a personal loan from the State Bank of India for Rs 15 lakh. The petitioner was neither a signatory nor a consenting party thereto as a co-applicant, co-borrower, guarantor, surety, indemnifier or a nominee. The said personal loan was secured through an insurance cover arranged from SBI General Insurance, for which a premium of INR 8,803 was also allegedly paid by the husband of the petitioner. The husband of the petitioner left for his heavenly abode on account of Covid-19.

The petitioner claimed that the respondent-Bank, instead of pursuing steps as permissible under law for recovery of the personal loan amount extended to the deceased husband of the petitioner, started coercing the petitioner for payment, including issuing a legal notice calling upon her to make payment of the full outstanding of Rs 13,87,382 along with interest, failing which the Bank proposed to initiate legal proceedings against her. The parties started engaging in negotiations; however, in the intervening period, the respondent-Bank encashed the petitioner's fixed deposit and debited an amount of Rs 19,90,693 from her bank account maintained in the respondent-Bank.

Arguments

The petitioner submitted that the petitioner has no privity of contract with the Bank and the recovery sought to be made was not legally permissible and against all banking norms.

Reasoning

The Bench noted that the respondent-Bank had appropriated the money from the fixed deposit that was in the name of the petitioner, and the account had been opened by the petitioner in the year 2025 in Ashiyana Branch of the State Bank of India. The Bench found that this account was transferred allegedly on the request of the petitioner to Jankipuram Branch of the State Bank of India, wherein the loan had been taken by the petitioner's husband.

“Immediately, upon transfer of the account the amount was debited from the account of the petitioner and transferred to the State Bank of India (this amount was the amount that was due and payable by the petitioner's husband to the State Bank of India). Having done so, the account was once again transferred back to Ashiyana Branch of the State Bank of India. 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”, it stated.

The Bench also noted that the death of the petitioner's husband took place in the year 2021 due to COVID; the petitioner received the payment of gratuity and other retiral benefits in August, 2022 and the fixed deposit was opened by the petitioner in the year 2025. The Bench was of the view that the Bank may have a legal right to proceed against the petitioner as the legal heir of the deceased and recover the amount of dues with regard to the personal loan taken by the deceased, but the same has to be done as per the due process of law established in India and not in an arbitrary, capricious and whimsical manner.

“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 entire process is abominable and clearly an anathema to banking practice. The action of the Bank cannot be justified in any manner whatsoever”, it added.

The Bench thus directed immediate refund of the amount that was debited from the account of the petitioner along with interest at the fixed deposit rate that the petitioner was enjoying. The Bench concluded the matter by allowing the petition and asking the Bank to pay compensation of Rs 1 lakh to the petitioner.

Cause Title: Neha Mishra v. Reserve Bank Of India (Neutral Citation: 2026:AHC-LKO:63471-DB)

Appearance

Petitioner: Advocates Syed Mohammad Haider Rizvi, Asheesh Kumar, Shakti Kumar Verma

Respondent: Advocate Anurag Srivastava

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