State Bank Of India And Ors vs Suresh Puri

$~3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 23.07.2026
+ LPA 217/2023 & CM APPL. 15577/2023
STATE BANK OF INDIA AND ORS .....Appellant
Through: Mr. Rajiv Kapur, Standing Counsel
with Mr. Akshit Kapur and Ms. Riya
Sood, Advocates.
versus
SURESH PURI .....Respondent
Through: Ms. Madhavi Khare and Mr. Apoorva
Bhumesh, Advocates
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE TEJAS KARIA
TEJAS KARIA, J. ( ORAL )
1. The present Letters Patent Appeal assails the Judgment dated
05.01.2023 (“ Impugned Judgment ”) passed by the learned Single Judge in
W.P. (C)12042/2018 (“ Writ Petition ”) filed by the Respondent.
FACTUAL BACKGROUND:
2. The Factual matrix leading to the filing of the present Appeal is as
under:
2.1. The Respondent joined the State Bank of Travancore in 1981.
Upon the subsequent merger of the State Bank of Travancore with
the State Bank of India, the Respondent became an employee of
the Appellant-Bank.
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 1 of 12

2.2. The Appellant-Bank issued a Circular dated 08.04.1986 governing
housing loans granted to its employees, which stipulated that a lien
be marked on the Provident Fund (“ PF ”) balance as security for
such loans.
2.3. On 15.10.2007, the Respondent availed a vehicle loan of
₹2,50,000/- (“ Vehicle Loan ”) from the Appellant-Bank.
2.4. On 04.08.2008, the Respondent availed an education loan of
₹7,50,000/-, pursuant to an agreement executed between the
Respondent’s daughter and the Appellant-Bank (“ Educational
Loan ”), repayable in 84 equated monthly instalments (“ EMIs ”) of
₹14,500/- commencing from September 2014. The Educational
Loan was secured by a lien on the PF balance.
2.5. Thereafter, the Respondent availed a housing loan of ₹20,00,000/-
(“ Housing Loan ”) from the Appellant-Bank. The Memorandum
dated 17.11.2011 conveying sanction of the Housing Loan
stipulated that a lien be marked on the Respondent’s PF balance as
security for the Housing Loan.
2.6. On 11.09.2015, disciplinary proceedings were initiated against the
Respondent on the allegation of unauthorised absence from duty,
with a consequential direction for recovery of ₹3,08,589/- towards
salary paid for the period from 19.10.2014 to 31.01.2015.
2.7. Thereafter, the Appellant-Bank issued two charge-sheets to the
Respondent: one pertaining to the alleged unauthorised absence
and the other concerning alleged lapses in relation to the Housing
Loan availed by the Respondent.
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 2 of 12

2.8. Pursuant to the disciplinary proceedings relating to unauthorised
absence, the Disciplinary Authority, vide order dated 07.02.2017,
imposed the penalty of reduction by one stage in the time scale of
pay from 07.02.2017 until the date of retirement.
2.9. In the disciplinary proceedings concerning the Housing Loan, the
Disciplinary Authority, vide order dated 16.03.2017 (“ Censure
Order ”), imposed the penalty of ‘ Censure ’ under Regulation 67(a)
of the State Bank of Travancore Officers’ Service Regulations,
1979 (“ SBT Regulations ”). The Censure Order further directed
the Respondent to commence repayment of the Housing Loan
from March 2017 until his retirement and stipulated that the
outstanding loan amount as on the date of retirement would be
adjusted against his terminal benefits.
2.10. On 30.06.2017, the Appellant-Bank declared the account
pertaining to the Educational Loan as a Non-Performing Asset
(“ NPA ”), with an outstanding amount of ₹9,05,000/- along with
interest from the date of classification as NPA.
2.11. The Respondent attained the age of superannuation on 30.11.2017.
On 22.12.2017, the Respondent’s PF amount was credited to his
personal overdraft account (“ OD Account ”), whereupon a lien
was marked thereon. Subsequently, on 01.01.2018, the gratuity
amount was credited to the Respondent’s pension account
(“ Pension Account ”), and a lien was similarly marked thereon.
2.12. On 15.02.2018, the account pertaining to the Educational Loan
was closed by the Appellant-Bank by appropriating amounts from
the Respondent’s terminal benefits.
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 3 of 12

2.13. On 23.02.2018, the accounts pertaining to the Housing Loan and
Vehicle Loan were closed by appropriating amounts from the
Respondent’s terminal benefits.
2.14. Aggrieved by the adjustment of his terminal benefits towards the
outstanding loan dues, the Respondent instituted the Writ Petition.
Although the Respondent had initially challenged the disciplinary
penalties imposed upon him in the Writ Petition, the same was not
pressed and the prayers were confined the challenge to the
appropriation of his terminal benefits towards the outstanding loan
dues as recorded in the order dated 09.12.2021 by the learned
Single Judge in the Writ Petition proceedings.
2.15. By the Impugned Judgment, the learned Single Judge held that the
adjustment of the Respondent’s terminal benefits towards the
outstanding loan dues was unsustainable. Aggrieved thereby, the
Appellant-Bank has preferred the present Appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT-BANK
3. The learned Counsel for the Appellant-Bank made the following
submissions:
3.1. The learned Single Judge erred in holding that recovery of the
outstanding amounts under the Housing Loan, Vehicle Loan and
Educational Loan from the Respondent’s terminal benefits was
unsustainable, as such adjustment was effected in compliance with
the Censure Order.
3.2. The Housing Loan was secured by a lien on the Respondent’s PF
balance. Reliance was placed on the Memorandum dated
17.11.2011 and Clause 3(g) of the Loan Agreement pertaining to
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 4 of 12

the Housing Loan to contend that the Respondent had expressly
acknowledged the Appellant-Bank’s right to mark a lien on the PF
balance and to appropriate the same towards the outstanding loan
amount. It was further submitted that the Respondent, being a
Branch Manager, was fully aware that marking of a lien on the PF
balance was a condition for sanction of the Housing Loan.
3.3. The Educational Loan account had become irregular and was
classified as an NPA on 30.06.2017 on account of persistent
defaults in repayment, with an outstanding amount of
approximately ₹9.05 lakhs along with applicable interest. In any
event, the Educational Loan, sanctioned on 04.08.2008, would
have ordinarily run its course and stood closed by August 2021
upon payment of the scheduled EMIs.
3.4. The Appellant-Bank clarified in its Rejoinder dated 16.09.2023
that the deduction of ₹10,136/- from the Respondent’s monthly
pension represented recovery towards pension commutation,
which had been voluntarily opted for by the Respondent. Pursuant
thereto, the commuted value of pension amounting to ₹11,93,210/-
was paid and adjusted towards the outstanding loan dues. The
State Bank of Travancore Employees’ Pension Regulations, 1995
specifically permit recovery of the Appellant-Bank’s dues,
including housing loans, advances and other recoveries, from the
commuted value of pension, pension or family pension. Such
adjustment, in fact, enured to the benefit of the Respondent by
reducing his liability towards future interest.
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 5 of 12

3.5. Therefore, the learned Single Judge erred in holding that
adjustment of the Respondent’s terminal benefits towards the
outstanding loan dues was unsustainable, and the Impugned
Judgment deserves to be set aside.
SUBMISSIONS ON BEHALF OF RESPONDENT:
4. The learned Counsel for the Respondent made the following
submissions:
4.1. The Respondent had been subjected to arbitrary disciplinary
proceedings and was ultimately visited with the minor penalty of
‘ Censure ’ by way of the Censure Order. Although the Respondent
had initially assailed the Censure Order in the Writ Petition, the
challenge to the penalty was not pressed. It was, however,
contended that the direction contained in the Censure Order
requiring adjustment of the outstanding loan dues against the
Respondent’s terminal benefits was de hors Regulation 67 of the
SBT Regulations and could not be sustained. Reliance was placed
on Regulation 67(d) of the SBT Regulations to submit that
recovery can be directed only where pecuniary loss has been
caused to the Bank by negligence or breach of orders and, in the
absence of any finding of such loss, the direction for adjustment of
terminal benefits was untenable.
4.2. Reliance was also placed on Gorakhpur University v. Dr. Shitla
Prasad Nagendra , (2001) 6 SCC 591, United Bank of India v.
Bidyut Baran Halder , 2018 SCC OnLine Cal 2551, and Hira Lal
v. State of Bihar , (2020) 4 SCC 346, to submit that PF, gratuity
and pension constitute statutory retiral benefits and cannot be
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 6 of 12

treated as bounty. Once the said amounts stood credited to the
Respondent, no lien could lawfully be exercised thereon, nor could
the same be attached, deducted or appropriated towards the
outstanding loan dues.
4.3. Although the sanction letter pertaining to the Housing Loan
stipulated marking of a lien on the PF balance, no corresponding
stipulation existed in respect of gratuity. The Appellant-Bank,
without issuing any prior notice, marked a lien on the gratuity
amount credited to the Pension Account and, thereafter, appropriated
the amounts standing to his credit towards closure of the loan
accounts, thereby depriving the Respondent of his retiral benefits.
4.4. The Housing Loan had been availed for purchase of an under-
construction residential unit; the construction whereof was delayed
by the builder. Reliance was placed upon the Circular dated
07.01.2012 issued by the Stressed Assets Management Department
of the Appellant-Bank to contend that, in cases where construction
had come to a standstill, and the builder is enjoying the loan
amount already disbursed, the prescribed course for the Appellant-
Bank was to proceed against the builder in terms of the tripartite
agreement. The Circular dated 10.09.2011 contemplated
continuance of the housing loan after superannuation upon
fulfilment of the stipulated conditions. Despite the Respondent’s
willingness to comply with such conditions, the Appellant-Bank
closed the Housing Loan by appropriating his terminal benefits.
4.5. The Education Loan had been sanctioned for a fixed tenure and
was prematurely closed by the Appellant-Bank by appropriating
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 7 of 12

the amounts from the Respondent’s terminal benefits. It was
submitted that the repayment schedule stood deferred in view of
Clause 1.11 of the Master Circular on Education Loans dated
30.06.2017, as the Respondent’s daughter had pursued a post-
graduate course.
4.6. Clause 1.31 of the said Master Circular specifically provided that
no lien ought to be marked against the PF balance of an employee
and, in any event, adequate security was already available by way
of the personal guarantee furnished by the Respondent’s wife.
4.7. The Educational Loan and Vehicle Loan were not the subject
matter of the disciplinary proceedings. The Appellant-Bank did not
issue any notice before closing the accounts pertaining to the
Educational Loan and Vehicle Loan by appropriating the amounts
from the Respondent’s terminal benefits.
4.8. The Appellant-Bank’s reliance upon the order dated 09.12.2021
passed in the Writ Petition is misconceived. Although the
Respondent did not press the challenge to the disciplinary penalty
imposed vide the Censure Order, the learned Single Judge
examined the legality of the consequential direction for adjustment
of terminal benefits and rightly held that, while the penalty of
‘ Censure ’ did not warrant interference, recovery of the outstanding
loan dues from the Respondent’s terminal benefits was
unsustainable.
4.9. In view of the foregoing submissions, the present Appeal deserves
to be dismissed.
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 8 of 12

ANALYSIS AND FINDINGS
5. We have heard the learned counsel for the Parties and perused the
material placed on record.
6. During the pendency of the Writ Petition, the Respondent did not
press the challenge to the disciplinary proceedings and to the penalties
imposed thereunder. The limited question that arises for consideration in the
present Appeal is whether the Appellant-Bank was justified in appropriating
the Respondent’s terminal benefits towards adjustment of the outstanding
amounts under the Housing Loan, Educational Loan and Vehicle Loan, and
whether the learned Single Judge was correct in holding such recovery to be
unsustainable.
7. The principal contention advanced on behalf of the Appellant-Bank
was that the adjustment of the outstanding loan dues was effected in
compliance with the Censure Order and was further supported by the
contractual stipulations governing the loan facilities, particularly the
condition requiring marking of a lien on the PF balance. It was submitted on
behalf of the Appellant-Bank that the Respondent had voluntarily accepted
such conditions and, therefore, is precluded from questioning the recovery
effected from his terminal benefits.
8. A perusal of the Censure Order indicates that, while imposing the
minor penalty of ‘ Censure ’, the Disciplinary Authority further directed that
the Respondent shall repay the Housing Loan from March 2017 until his
retirement, and that the outstanding amount as on the date of retirement
would be adjusted against his terminal benefits.
9. The learned Single Judge has held that although the penalty of
‘ Censure ’ fell within the ambit of the disciplinary proceedings, the
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 9 of 12

consequential direction permitting adjustment of the outstanding loan dues
from the Respondent’s terminal benefits could not be sustained merely on
the ground that it formed part of the disciplinary order.
10. Regulation 67 of the SBT Regulations sets out, in exhaustive terms,
the penalties that may be imposed in disciplinary proceedings and is
reproduced below:
“67. Without prejudice to any other provistons contained in these
regulations any one or more of the following penalties may be
imposed on any officer, for an act of misconduct or for any other
good and sufficient reason:
Minor Penalties
(a) Censure
(b) Withholding of increments of pay with or without cumulative
effect;
(c) Withholding of promotion,
(d) Recovery from pay or such other amount as may be due to him
of the whole or part of any pecuniary loss caused to the bank
by negligence or breach of orders.
(e) Reduction to a lower stage in the time scale of pay for a
period of not exceeding 3 years, without cumulative effect, and
not adversely affecting the officer's pension.
Major Penalties
(f) Save as provided for in (e) above reduction to a lower stage in
the time-scale of pay for a specified period, with further
directions as to whether or not the officer will earn increments
of pay during the period of such reduction and whether on the
expiry of such period the reduction will or will not have the
effect of postponing the future increments of his pay.
(g) Reduction to a lower grade or post
(h) Compulsory retirement Removal from service
(i) Dismissal.”
11. Upon a perusal of above Regulation 67 of the SBT Regulations, it is
evident that the said provision does not confer any authority upon the
Disciplinary Authority, while imposing the penalty of ‘ Censure ’, to direct
appropriation of the delinquent officer’s terminal benefits towards
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 10 of 12

liquidation of outstanding loan liabilities. The direction for adjustment of the
loan dues, thus, cannot be derived solely from the Censure Order.
12. Any recovery under Regulation 67(d) of the SBT Regulations
presupposes pecuniary loss caused to the Bank by negligence or breach of
orders. In the present case, there is no finding in the report of the Inquiry
Officer that any loss was caused to the Appellant-Bank on account of the
misconduct attributed to the Respondent, for which the penalty was
imposed.
13. The loan accounts in question were sanctioned for fixed repayment
tenures. Therefore, the stipulation relied upon by the Appellant-Bank
regarding marking of a lien on the Respondent’s PF balance cannot be
construed as authorising the Appellant-Bank to prematurely close the loan
accounts.
14. The Supreme Court in Hira Lal ( supra ) has reiterated that pension
and gratuity cannot be withheld, deducted or appropriated except under the
authority of law. In the present case, the Appellant-Bank appropriated the
gratuity amount credited to the Pension Account towards adjustment of the
loan accounts, notwithstanding the absence of any stipulation permitting the
marking of a lien on the gratuity amount. Further, the terms governing the
loan facilities did not empower the Appellant-Bank to prematurely close the
loan accounts merely on account of the Respondent having attained the age
of superannuation.
15. The Appellant-Bank has contended that the Educational Loan had
been classified as an NPA. However, such classification, by itself, did not
confer any authority upon the Appellant-Bank to prematurely adjust the
outstanding dues from the Respondent’s terminal benefits.
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 11 of 12

16. The challenge before the learned Single Judge, and consequently in
the present Appeal, is confined to the Appellant-Bank’s action of
appropriating the Respondent’s terminal dues towards adjustment of the
outstanding loan accounts. The learned Single Judge has, in any event,
preserved the Appellant-Bank’s liberty to avail such remedies as may be
available to it in accordance with law against the Respondent.
17. We, therefore, do not find any merit in the contention advanced on
behalf of the Appellant-Bank that, upon the Respondent not pressing the
challenge to the disciplinary order, the learned Single Judge was precluded
from examining the legality of recovery of the outstanding loan dues from
the Respondent’s terminal benefits.
18. In view of the Appellant-Bank’s lack of authority to appropriate the
outstanding loan amounts from the Respondent’s terminal benefits, we are in
complete agreement with the findings of the learned Single Judge that the
adjustment of the Respondent’s terminal benefits towards the outstanding
loan dues cannot be sustained. The Appellant-Bank has failed to make out
any ground warranting interference with the Impugned Judgment. We find
no infirmity in the reasoning adopted by the learned Single Judge to warrant
interference in the present Appeal.
19. Accordingly, the present Appeal is dismissed. Pending application(s),
if any, also stand disposed of. There shall be no order as to costs.
TEJAS KARIA, J
DEVENDRA KUMAR UPADHYAYA, CJ
JULY 23, 2026
Hk
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:29.07.2026
14:44:07
LPA 217/2023 Page 12 of 12