STATE BANK OF INDIA AND ANR vs EMPLOYEES STATE INSURANCE CORPORATIN AND ORS

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IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
APPELLATE SIDE
Present:
The Hon’ble Justice Shampa Dutt (Paul)

WPA 6508 of 2025
State Bank of India & Anr.
Versus
Employees State Insurance Corporation & Ors.


For the Petitioners : Mr. Soumya Majumder, ld. Sr.Adv.
Mr. Debashis Saha,
Mr. Avirup Roy Sanyal,
Ms. Sucheta Pal,
Mr. Jyotishman Sarkar.

For the Respondent/ESIC : Mr. Shiv Shankar Banerjee,
Mr. Siddharth Chaurasia,
Mr. A. Narayan Banerjee.



For the RBI : Ms. Suchismita Ghosh,
Ms. Aradhita Banerjee.


Judgment reserved on : 03.09.2026
Judgment delivered on : 23.09.2026
Shampa Dutt (Paul), J.:

1. The writ application has been preferred being aggrieved by a
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garnishee order dated 14 February, 2025 and 11 March, 2025,
issued by the Recovery Officer under the EPF Act.

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2. The Recovery Officer in the order 14 February, 2025, held as
follows:-
“Apparently as per issued prohibitory order dated
25/06/2021 the branch manager was prohibited and
restrained till further order from making payment and/or
transfer from the account (s), but you have failed to comply
the order of recovery officer and allowed debts from the
accounts of the defaulter circumventing the Prohibitory
Order. To explain as to why he/ State Bank of India, C-
Zone, Durgapur Branch, Type-IV, Banglow No.D-II/10 (1 &
D-2/10). CMERI (Residential Complex), Durgapur 713205,
should not be declared as DEEMED DEFAULTER of the
amount specified in the Show Cause Notice dated
12/11/2024 , they have failed to transfer the dues to ESI
Corporation.”

3. Subsequently, by another order dated 11.03.2025, the Recovery
Officer directed as follows:-
“WHEREAS, it has became necessary to initiate co-receive
steps against State Bank of India . C-Zone Durgapur
Branch as DEEMED DEFAULTER by possession
accordance with the provisions of the ESI Act 1948 read with
the Second and Third Schedule of Act, 1961 for effecting
recovery of the arrears dues and whereas, there is
information that Reserve Bank of India , is acting as the
Banker of State Back of India. C-Zone Durgapur Branch
Apropos, money is due to State Bank of India, C-Zone
Durgapur Branch or is likely to become due from the
Reserve Bank of India being the Depositor.”

4. And issued the said garnishee order to the Reserve Bank of India,
as follows:-

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“…..the Reserve Bank of India to remit/transfer an amount
of Rs.9084887/-(Rupees Ninety lakh eighty-four thousand
eight hundred eighty-seven only). Further interest @ Rs.
2034.08/- per day i.e. 12% per annum from 12.03.2025
onwards up to the date of payment in rupees only, from and
out of the account of State Bank of India, C-Zone
Durgapur Branch by way of Account payee Demand Draft
drawn in favour of the Employees’ State Insurance Fund
Account No. 1. Durgapur ( To be handed over to ESIC officer
serving the notice/or immediate dispatch, through post )
Separate orders with regard to interest till the date of
payment and any farther cost, charges and expenses
incurred in the recovery proceedings for realizing the arrears
liable to be recovered under the ESI Act. 1918 read with Rule
5 of the Second Schedule of the Income Tax Act, 1951 shall
be issued on the receipt of Demand Draft from the Bank.
WHEREAS, it is further ordered that after receipt of these
orders, no further debit transactions from the said bank
account shall be allowed without first transferring the
amount in full as ordered above and such transaction shall
be prohibited forthwith”

5. Being aggrieved, the State Bank of India is before this Court
stating that Pascas Associate (respondent no. 3) is a constituent
of SBI, Durgapur C-Zone Branch having a Current Account No.
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3296298908. The constituent had a zero balance from 31
December, 2020 and the account was showing "inoperative".
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6. On 25 June, 2024 a prohibitory order under Section 45H of
the ESI Act was issued for recovery of dues of Pascas Associate,
as a covered establishment under the ESI Act.
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7. A show cause notice dated 12 November, 2024 was also issued
by ESIC to Pascas Associate for failing to remit the ESI dues.
8. Subsequently, by order dated 14th February, 2025, ESIC
declared SBI as a "deemed defaulter" under Section 45G (3) (x) of
the ESI Act.

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9. Petitioner submits that since Pascas Associates is only a
constituent/customer of the Bank and there was no question of
any amount being due to SBI from Pascas Associate, the account
of the constituent was lying "inoperative", there was no question
of SBI remitting any amount from such account of the customer
to ESIC towards satisfaction of ESI dues.

10. Subsequently, a garnishee order dated 11th March, 2025 was
issued to RBI by ESIC under Section 45G of ESI Act read with
Second and Third Schedule of I.T. Act, 1961 and I.T. (Certificate
Proceedings) Rules, 1962 by mentioning SBI, C-Zone, Durgapur
Bench as "deemed defaulter for recovery of a sum of
Rs.90,84,887/-. It was further ordered that no further debit
transactions from the Bank account of Pascas Associate be
allowed without first transferring the amount in full to ESIC.
11. It is further stated by the petitioner that in any event, SBI could
not have remitted any amount to ESIC from an "inoperative"
account of the customer (respondent No. 3). Therefore, to brand
SBI as a "deemed defaulter" in relation to dues of the respondent
no. 3 was without any application of mind and in violation of the
principles of natural justice.
12. Consequently, the garnishee order to RBI is also devoid of
merit. The writ petition should therefore be allowed by
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quashing the orders dated 14 February, 2025 and 11 March,
2025.

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13. In course of hearing the Reserve Bank of India had deducted
the said amount from the account of the petitioner bank.

14. Learned counsel for the Reserve Bank of India subsequently
placed documents before this Court on 25.08.2026, wherein it
appears that the amount which was debited has now been
credited to the account of the State Bank of India.

15. Affidavit-in-opposition filed by the ESI Authorities shows that
as allegedly, the respondent no. 3 herein failed to pay arrear
dues, the order under Section 45A of the ESI Act was passed.

16. By the prohibitory order, the petitioner bank was directed to
handover any sum of money, which had been received from the
respondent no. 3 in his account, by the petitioner no. 1 to the
respondent no. 1.

17. It is the case of the respondent no. 1 that in spite of receiving
the prohibitory order, the petitioner allegedly released some
amount in favour of the respondent no. 3 (no proof).

18. It appears from the records, that the respondent no. 3
maintained an account with SBI, C-Zone, Durgapur Branch.

19. Considering that the prohibitory order in the present case is
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admittedly dated 25 June, 2024, when the account
maintained with the petitioner bank has been with ‘0’ balance
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on and from 31 December, 2020 and the account was

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‘inoperative’, the garnishee order issued against the petitioner
bank is erroneous and not in accordance with law, as the
petitioner in view of the nature of account maintained by the
respondent no. 3, was under no such obligation to prohibit any
operation of an account in 2024, when the account was
inoperative since 2020.

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20. Accordingly, garnishee orders dated 14 February, 2025 and
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11 March, 2025, issued by the Recovery Officer under the
EPF Act, being not in accordance with law and an abuse of the
process of law, are hereby quashed and set aside.
21. WPA 6508 of 2025 is allowed.
22. Applications, if any, connected thereto stand disposed of
consequently.
23. Interim order, if any, stands vacated.
24. Photostat certified copy of this Judgment, if applied for, be given
to the parties on priority basis upon compliance of all formalities.


(Shampa Dutt (Paul), J.)