Pension cannot be attached to recover another person's loan even if retired employee stood as guarantor: J&K&L HC
The Jammu and Kashmir and Ladakh High Court has ruled that pensionary benefits of a retired government employee cannot be subjected to coercive recovery measures for repayment of a loan borrowed by another person, even if the retired employee had stood as a guarantor for the loan.
Allowing an appeal filed by a retired police personnel, Justice Moksha Khajuria Kazmi set aside a trial court order that had refused interim protection to the appellant. The High Court restrained Jammu and Kashmir Bank from deducting any amount from his pension account towards repayment of the loan obtained by the principal borrower, reported LiveLaw.
The court observed that pension is a welfare measure intended to safeguard the financial security of retired employees and their families. It is meant to protect them from financial dependence, destitution and hardship and, therefore, cannot be subjected to coercive recovery merely because an employee had stood as a loan guarantor during his service.
However, the court clarified that the bank would remain free to recover its outstanding dues from the principal borrower through legally permissible means.
The appellant, Nazir Ahmad Kuchay, a retired police personnel and senior citizen, had stood as a guarantor for an individual who obtained financial assistance from Jammu and Kashmir Bank.
After the principal borrower defaulted on loan repayments, the bank allegedly began deducting the outstanding amounts from Kuchay's bank account.
By that time, Kuchay had retired from government service and was dependent on his pensionary benefits to meet his and his family's living expenses.
He approached the bank and informed it about his retirement and dependence on pension income. According to his submissions, the bank assured him that no further deductions would be made from his pension account. However, the deductions allegedly continued despite the assurance.
He subsequently approached a trial court seeking recovery of the deducted money and an injunction restraining the bank from making further deductions. He also sought interim relief.
The Srinagar trial court rejected his application for interim protection, holding that the liability of a guarantor was co-extensive with that of the principal borrower.
It observed that Kuchay, having voluntarily executed the guarantee agreement, was bound by its contractual obligations and could be held liable for repayment of the loan.
Aggrieved by the decision, the retired employee approached the High Court, challenging the trial court's order and seeking protection of his pension account.
Opposing the appeal, the bank argued that the appellant was liable for the outstanding loan under the principle of joint and several liability applicable to guarantors under contract law and banking practice.
High Court relies on Supreme Court ruling
After examining the submissions of both parties and the trial court's reasoning, the High Court found that the approach adopted by the lower court was not based on sound reasoning or the true spirit of law.
The High Court relied on the Supreme Court's decision in Radhey Sham Gupta v. Punjab National Bank, AIR 2009 SC 930, which recognised protection available to pension and other retiral benefits against attachment and coercive recovery measures.
The court noted that Kuchay was a senior citizen and retired government employee whose livelihood and family expenses depended on his pension income.
It held that the protection available to pensionary benefits had to be considered while examining the bank's recovery action.
Setting aside the trial court's order, the High Court restrained Jammu and Kashmir Bank from recovering any amount from Kuchay's pension bank account towards repayment of the loan taken by the principal borrower.
Justice Kazmi said: “A pension is a regular payment made to a Government employee upon his superannuation as a financial assistance so that the said Government employee does not feel dependent on someone else and he is protected from vagrancy and destitution in his olden days.”
The court, however, made it clear that the order would not prevent the bank from initiating legally permissible recovery proceedings against the actual borrower.
On Kuchay's claim for a refund of amounts already deducted, the High Court left the matter open for adjudication before the trial court.
It said that deciding the refund claim would involve examination of evidence and other relevant factual considerations.
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