LAHORE (Muhammad Ashfaq) - The Lahore High Court (LHC) has dismissed an appeal seeking adjustment of a former bank employee’s outstanding loan against approximately Rs1.5 million in provident fund, gratuity and other employment dues, ruling that a bank cannot be compelled to recover a loan from such benefits.
A two-member bench comprising Justice Khalid Ishaq and Justice Muhammad Usman Ghani heard the appeal filed by Gul Hassan Khan and others against a private bank. Justice Usman Ghani Rashid Cheema authored the 10-page written judgment.
According to the judgment, the appellants contended that approximately Rs1.5 million belonging to a former bank employee in the form of provident fund, gratuity and other employment benefits was held by the bank. They argued that the outstanding loan amount should be deducted from these dues before the bank pursued recovery of the remaining debt.
Rejecting the plea, the court observed that the fact that a bank held money belonging to a former employee did not mean it was legally bound to use those funds to settle the employee’s loan.
The judgment clarified that the payment of employment benefits and the recovery of a loan were two separate legal matters. While a bank may, subject to applicable legal requirements, adjust funds held in one account against a liability in another, the exercise of this right remains the bank’s discretion and cannot be imposed on it by a customer through court proceedings.
The court further observed that provident fund, gratuity and other employment-related dues were held by the bank in its capacity as an employer, rather than as a banker. Any grievance regarding delay or non-payment of such benefits could be taken to the relevant competent forum, whereas a banking court dealt with matters relating to loan recovery.
The judgment stated that even if a bank employee borrowed money from the same institution where they worked, they could not compel the bank to deduct the outstanding loan from their provident fund, gratuity or other employment benefits.
Upholding the banking court’s decision, the LHC ruled that there was no legal error in the decree issued in favour of the private bank for Rs10,177,705. The court dismissed the appeal filed by the former employee and other appellants, maintaining the decision for recovery of the outstanding loan.