SRINAGAR: The Jammu Kashmir and Ladakh High Court has restrained Jammu and Kashmir Bank from recovering loan dues from the pension account of a retired police personnel who had stood as guarantor for a borrower, holding that pensionary benefits are protected from coercive recovery measures and constitute a welfare safeguard for retired government employees.
Allowing an appeal filed by Nazir Ahmad Kuchay, Justice Moksha Khajuria Kazmi on November 13 set aside an order passed by the 3rd Additional District Judge, Srinagar, on November 2, 2020, which had declined interim protection to the retired employee against deductions from his pension account.
The High Court, however, clarified that the bank remained free to recover its outstanding dues from the principal borrower through legally permissible means. It also left the question of refund of amounts already deducted from Kuchay’s pension account to be decided by the trial court in the pending civil suit.
The court observed that pension was a welfare measure intended to protect retired employees and their families from financial dependence and destitution in old age.
The appellant, it said, was a senior citizen whose pension was the sole source of sustenance for himself and his family and could not be subjected to coercive recovery merely because a borrower, for whom he had stood as guarantor, had defaulted on repayment.
Loan Guarantee
According to the case record, Kuchay, a retired police personnel, had stood as guarantor for an individual who obtained financial assistance from the bank. After the borrower failed to repay the stipulated instalments, the bank began deducting the outstanding amounts from Kuchay’s bank account.
By then, Kuchay had retired from government service and was dependent on his pensionary benefits for his livelihood.
He approached the bank and informed it about his retirement and dependence on the pension account. The bank initially assured him that no further deductions would be made from his pension account, but the deductions allegedly continued.
Left with no option, Kuchay instituted a civil suit before the 3rd Additional District Judge, Srinagar, seeking recovery of money and an injunction restraining the bank from making further deductions.
He also filed an application for interim relief. The trial court dismissed the application on November 2, 2020, prompting him to approach the High Court through FAO No. 10/2020.
Arguments
Appearing for the appellant, advocate Aamir Latoo argued that the bank was not legally justified in recovering loan instalments from the pension account of a retired government employee, particularly when pension was his only source of sustenance.
Latoo relied upon the Supreme Court judgment in Radhey Shyam Gupta versus Punjab National Bank, reported as AIR 2009 SC 930, besides judgments of the Jammu and Kashmir High Court in Farooq Ahmad Khan versus Mehbooba Khan, decided on May 11, 2022, and J&K Bank Limited and Another versus Chander Udey Singh, decided on August 1, 2025.
He also cited a judgment of the Orissa High Court in Bharat Chandra Mallick versus Branch Manager, State Bank of India.
Opposing the appeal, advocate Rabinder Singh, appearing for J&K Bank, maintained that Kuchay had voluntarily stood as guarantor and was consequently liable, along with the principal borrower, to repay the loan.
The bank argued that the liability of a guarantor was joint and several with that of the borrower under established principles of contract law and banking practice. It maintained that no illegality had been committed in making the recoveries and that the trial court had rightly declined interim relief.
Singh relied upon the Supreme Court judgment in Union of India versus Jyoti Chit Fund and Finance, reported as AIR 1976 SC 1163.
Court’s Findings
Justice Khajuria Kazmi examined the trial court’s reasoning, which had proceeded on the principle that a guarantor’s liability was co-extensive with that of the principal borrower.
While acknowledging that the trial court had passed a detailed order, the High Court held that its conclusions were not founded on sound reasoning or the true spirit of law governing the protection available to pensionary benefits.
The court relied particularly on the Supreme Court’s judgment in Radhey Shyam Gupta versus Punjab National Bank, observing that the apex court had laid down the authoritative legal position concerning the protection of pension and other retirement benefits from attachment and coercive recovery.
It also referred to its own subsequent judgments in Farooq Ahmad Khan and J&K Bank Limited versus Chander Udey Singh, which had affirmed that pension received by retired government employees was insulated from coercive recovery measures.
Explaining the significance of pension, the court observed that it was a regular payment made to a government employee after superannuation to ensure financial security and independence in old age.
“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 judgment stated.
The court further observed that pension was a welfare measure intended to secure the interests of retired employees and their families and could not be subjected to coercive recovery because of a default by a borrower for whom the pensioner had stood as guarantor.
An important consideration in the case, the court noted, was that Kuchay had stood as guarantor when he was still in active government service and maintained a different bank account at another branch. His present pension account was the source of his family’s sustenance after retirement.
Final Directions
Allowing the appeal, the High Court set aside the November 2, 2020, order of the 3rd Additional District Judge, Srinagar, and restrained J&K Bank from recovering any amount from Kuchay’s pension account towards repayment of the financial assistance obtained by the principal borrower.
The court, however, made it clear that its order did not prevent the bank from pursuing recovery against the borrower.
“Having said that this Court does not preclude the respondent Bank from securing its debt from the principal borrower,” Justice Khajuria Kazmi observed, leaving the bank free to proceed against the borrower through legally permissible means.
On the question of refund of money already deducted from the pension account, the High Court declined to adjudicate the claim at the appellate stage, holding that it involved evidentiary considerations to be examined by the trial court.
Kuchay was accordingly given liberty to pursue the refund claim in the pending civil suit.
The court directed the trial court to decide that issue independently on its merits, without being influenced by any observations made in the High Court judgment.
The appeal, along with all connected applications, was disposed of. The Registry was directed to communicate the judgment to the trial court and the concerned respondents for compliance.
