Summary of this article
J&K High Court bars bank from deducting loan dues from pension.
Retired guarantor's pension was his family's primary income source.
Bank can pursue recovery against the defaulting principal borrower.
A retired government employee in Jammu and Kashmir will not have to face further deductions from his pension account to repay a loan taken by another person, following an order of the Jammu and Kashmir and Ladakh High Court.
The case concerns Nazir Ahmad Kuchay, a former police employee who had stood as guarantor for a bank loan while in service. After the borrower failed to repay the money, Jammu and Kashmir Bank began taking instalments from Kuchay's account. But the high court has now barred the bank from making further deductions, taking into account his retirement and dependence on pension to support his family.
Loan Recovery From Retired Guarantor
Kuchay had guaranteed a loan obtained by another individual from Jammu and Kashmir Bank. When repayments stopped, the bank turned to his account to recover the unpaid amount.
By then, Kuchay had retired from the police department. He approached the bank and explained that his pension was needed to meet his family's expenses. He also sought an end to the deductions, but the loan recovery did not stop.
He subsequently moved a civil court. Apart from seeking the return of the money already deducted, he wanted an order preventing the bank from taking any more money from his account.
The trial court rejected his application for interim relief on November 2, 2020. Its decision was based on the legal position that a guarantor is responsible for the debt in the same way as the principal borrower. Kuchay challenged that order before the high court.
Pension Dependence Becomes Key Factor In High Court Order
In its November 13, 2026 judgment, Justice Moksha Khajuria Kazmi examined previous decisions on the protection available to pension and retirement benefits.
The court referred to the Supreme Court judgment in Radhey Shyam Gupta v. Punjab National Bank, besides earlier rulings dealing with pension-related recovery.
An important part of the case was the timing of the guarantee. Kuchay had accepted the responsibility when he was still in government service. His financial position had changed after retirement, with pension becoming the principal source of income for his family.
The high court rejected the trial court's order and barred the bank from deducting further amounts from his pension account towards the loan.
The relief, however, is limited. The borrower is still liable to repay the loan, and the bank can take legal action against him. The court also did not direct the bank to return the money it had already deducted. Kuchay can pursue that demand separately before the trial court.
February Judgment Involved A Different Recovery Dispute
Incidentally, the high court had dealt with another pension recovery case in February 2026. In Chuni Lal v. Jammu and Kashmir Bank, it permitted the bank to recover Rs 4.64 lakh from the account of a retired Forest Department employee.
The employee had secured a housing loan of Rs 15 lakh. When the borrowers failed to repay, the bank was able to get back what was owed from his account. The court decided that pension funds, after being credited to the bank account, may be recovered for contractual obligations. The two decisions indicate that pension-related recovery disputes can depend on the circumstances of each case.
