Pension Can Be Used to Recover Loan Dues After Credit, Rules Jammu Kashmir High Court | Kashmir Life

SRINAGAR: The High Court of Jammu Kashmir and Ladakh has ruled that pension funds, once credited to a retiree’s bank account, can be used to recover loan liabilities arising from a guarantor agreement, dismissing a petition filed by a Rajouri resident challenging such recovery by the bank.

Delivering the judgment, Justice MA Chowdhary held that there was no illegality in the action of Jammu Kashmir Bank Ltd. in deducting loan dues from the petitioner’s account after his pension had been credited, in view of his contractual liability as a guarantor.

The petitioner, a 67-year-old retired Range Officer from the Forest Department, had approached the court after the bank deducted over Rs 4.64 lakh from his pension account. The recovery was made against a housing loan of Rs 15 lakh availed by two borrowers, for whom the petitioner had stood as a guarantor.

He contended that the deductions were made without prior notice and violated legal protections available to pensioners, arguing that pension is exempt from attachment under the Pensions Act, 1871.

The court examined the legal position on whether pension retains immunity from recovery after being credited to a bank account. Referring to multiple Supreme Court rulings, the court drew a distinction between pension amounts before and after disbursement.

It held that while pension enjoys protection from attachment while it remains with the government or disbursing authority, this protection ceases once the amount is credited to the pensioner’s account.

“The pensionary amount… having been credited to his account… can be subjected to attachment with regard to his liability as a guarantor,” the court observed.

The court further emphasized that the petitioner had voluntarily entered into a guarantor agreement with the bank and was therefore legally bound to repay the loan in case of default by the principal borrowers.

It ruled that the bank was within its rights to recover the outstanding amount from the petitioner’s account, noting that a guarantor’s liability is co-extensive with that of the borrower.

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On the issue of maintainability, the court held that the dispute arose out of a contractual obligation between the petitioner and the bank. Citing settled legal principles, it observed that writ jurisdiction under Article 226 cannot ordinarily be invoked in matters governed by private contracts.

Accordingly, the court declared the petition non-maintainable on this ground as well.

Concluding that the petitioner had failed to establish any legal infirmity in the bank’s action, the court dismissed the writ petition along with connected applications, holding it to be “bereft of merit and substance.”

The ruling clarifies the legal position on pension protection in recovery proceedings and reinforces the enforceability of guarantor obligations in banking transactions.