Legal Question in Banking Law in India

An employee of an establishment has taken a loan from a bank. While availing the loan, the employer has given an undertaking to the Bank to make deductions from the salary of the employee if required by the bank and not to give his terminal benefits till a no objection is received from the bank. The employee has now defaulted in payment of the loan. Eventhough request was made to the employer to make deductions from the salary there is no response from the employer. The question is whether the employer can also be held liable for the loan amount and whether while filing suit the employer can also be added as a defendant and relief for the plaint amount be sought against the employer also.


Asked on 12/29/09, 8:50 am

2 Answers from Attorneys
RAJIV GUPTA (Cell: +91 9811284735) [email protected]

no, the employer cannot be impleaded as a party and only directions can be sought by the court to attach the salary of the debtor. the creditor needs to prove the amount sought by filing a suit and later file the execution.

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Answered on 12/29/09, 9:41 am
J. Radhakrishnan independent Practice

Employer's default to deduct the instalments of repayment of the loan would not make him liable to the lender. However in an action for recovery of the loan in civil court against the borrower, the salary to the permissible extent under Sec.60 Code of Civil Procedure can be attached before judgment. Terminal benefits like gratuity and provident fund are exempt from attachment. Employer cannot be made defendant but only as a garnishee in the attachment proceedings in the suit.

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Answered on 12/29/09, 7:23 pm


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