Bank Has No Right to Appropriate Widow's Pension and Gratuity Towards Deceased Husband's Loan: Andhra Pradesh High Court

Case Overview

Case Name: Arevarapu Indira Vs Indian Overseas Bank
Court: Andhra Pradesh High Court
**Writ Petition No.😗* 7055 of 2021
Date of Order: 03/05/2021

The Andhra Pradesh High Court delivered a significant ruling affirming the statutory protection granted to pension, gratuity, and other terminal benefits, holding that a bank cannot freeze a widow's savings bank account or unilaterally appropriate amounts credited therein towards loans that were outstanding in her deceased husband's name. The ruling reinforces the well-settled legal position that such terminal benefits retain their protected character even after being received by the beneficiary.

Background and Facts of the Case

The petitioner, Arevarapu Indira, was the wife of late Sri R. Vijaya Kumar, who served as a lecturer at Andhra Loyola College, Vijayawada. He passed away on 15.04.2020 due to COVID-19, leaving behind the petitioner, a son (Thomas), and two married daughters as his legal heirs.

Following his death, the relevant authorities processed the terminal benefits due to his legal heirs:

• The Office of the Accountant General (A&E), Andhra Pradesh, Amaravati issued a letter dated 12.11.2020 fixing the monthly family pension payable to the petitioner at Rs. 73,950/- per month for the period from 16.04.2020 to 15.04.2027, and thereafter at Rs. 44,370/- per month from 16.04.2027 onwards.
• Gratuity of Rs. 6 lakhs each was sanctioned to the petitioner and her son, payable equally out of the total gratuity of Rs. 12,00,000/-.
• The petitioner was allotted CMFS ID No. 14438505 and was directed to open a bank account to receive the pension and other terminal benefits.

Accordingly, the petitioner opened a Savings Bank Account No. 153101000028695 with the first respondent bank (Indian Overseas Bank) on 21.05.2020, with an initial deposit of Rs. 1,500/-. The following amounts were subsequently credited into this account from the treasury through NEFT:

The bank, however, froze the petitioner's account without prior notice, citing an outstanding loan availed by her deceased husband. When the petitioner made enquiries, she was informed that the account had been frozen due to dues owed by her husband to the respondent banks.

The Loan and Undertaking

It emerged from correspondence obtained by the petitioner that her husband had availed a loan of Rs. 5.00 lakhs on 22.11.2019 from the second respondent bank, repayable in 60 equal monthly instalments of Rs. 11,000/-. A separate loan of Rs. 15,00,000/- had also been availed from the first respondent bank, as evidenced by an "Irrevocable Letter of Undertaking by the Borrower" dated 22.01.2018, in which the deceased had undertaken, among other things, to:

• Authorise the bank to deduct EMI from his loan-linked savings bank account.
• Deposit the cheque received from PF authorities towards terminal benefits into his savings bank account linked to the loan account, to enable settlement of the loan in the event of resignation, retirement, or termination.

An employer undertaking letter dated 03.01.2018 from the third respondent college also undertook to deduct a fixed sum from the deceased's monthly salary and remit it to the bank.

After the petitioner filed the writ petition and the bank's Standing Counsel filed a Vakalat, the first respondent bank on 31.03.2021 debited Rs. 12,09,251/- and Rs. 87,364/- from the petitioner's account through a computer-programmed recovery mechanism, without prior intimation or a show-cause notice. The bank confirmed in its counter-affidavit that these debits were made to liquidate the two loan accounts of late R. Vijaya Kumar.

Arguments Raised

Petitioner's Contentions

Counsel for the petitioner advanced the following key submissions: