banks Many types of rights are given to the lender for recovery of loan. However, in one case, the Allahabad High Court has given an interim order to the State Bank of India (SBI) to return the amount deducted from the account of the deceased’s wife. Ambesh Kumar, who worked as a headmaster in a primary school in Kaushambi district, had taken a personal loan from SBI. Ambesh died in a road accident in June last year.
SBI had deducted Rs 17.30 lakh from the widow’s account.
According to Live Law, SBI had deducted Rs 17,29,999 from his wife’s account to recover the loan given to Ambesh. Ambesh had also taken a life insurance, for which Rs 50 lakh came into his wife’s account. SBI had deducted Rs 17,29,999 from this amount. Ambesh’s wife challenged this action of the bank in the court. She said in her plea that she had not taken a loan from the bank nor was she a guarantor for that loan. In such a situation, the bank has no right to deduct money from their account.
What did the court say in the hearing
Justice J.J. A bench of Justice Munir and Justice Indrajit Shukla, while hearing the case, said that Clause 18(iii) of the SBI loan agreement is written very broadly. However, prima facie, these do not give the bank the right to recover the loan of the deceased from the insurance money received by the widow. The court said that the insurance money received by the woman is not the property of the deceased, but the property of the beneficiary. The court said that the insurance amount does not form part of the estate left by the deceased to his heirs, but is a social security measure or benefit which the beneficiary receives in his independent capacity. The next hearing on this matter will be on October 7, 2026.
What is Clause 18(iii) of the loan agreement?
Clause 18(iii) of the loan agreement gives banks the right to make set-off. This right is linked to the default loan. Under this, a borrower gives the bank the right and consent without any condition that the bank can set-off or adjust the money deposited in any of his other accounts like savings account, RD, FD for the recovery of loan, penalty, interest etc. without giving any prior notice.
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