Deduction from final settlement of deceased employee

Querist : Anonymous (Querist) 14 November 2010 This query is : Resolved
Normally employees are taking various loans.
One employee of our company has directly taken loan of Rs. 175000/- from the registered Credit co-oprative society managed by employees of our company. After taking loan, within 4-5 months, the said employee expired.
Now Credit co-oprative society has written to Company Management, to deduct the money equivalent to out-standing loan amount from the amount payable to legal hires of the deceased employee and company to pay directly to said Credit co-oprative society.

The Company Management has stated that any money payable to legal hires of the deceased employee, will be paid to late. employee's nominee/s. And denied any payment by company to said Credit co-oprative society.

Please let us know the right legal stand.
Are we correct? in above stand.

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Querist : Anonymous (Querist) 14 November 2010
Dear Sir,

Yes you are perfectly correct in denying the the deduction from late employee's full and final payment. Nominee is the correct person to receive any payment from the company.

Parthasarathi Loganathan (Expert) 14 November 2010
However, the Society is entitled to recover the loan dues from the legal heirs of the deceased.

Khaleel Ahmed Mohammed (Expert) 14 November 2010
yes.

Kirti Kar Tripathi (Expert) 14 November 2010
So for as terminal dues of an employee are concerned only gratuity and provident fund can not be deducted. but an employers has a right to deduct the lone or any other amount from other terminal dues such as due wages or leave encasement or bonus ete. in the present case, the amount asked to be deducted is not a loaned amount of employer but from Co-operative society. in case there exist any settlement between workman or union p reveling in the industry and employer, which authorizes employer to deduct the loaned amount from terminal benefits of an employee, no amount can be deducted from the terminal dues of workman.

Devajyoti Barman (Expert) 14 November 2010
Unless the Bank has got lien over those benefits, the bank has got no authority to ask for the amount to be deducted from his benefits. However , once the money is given to the legal heirs or prior to it the bank can file suit for recovery of money from the legal heirs n the even the loan was a secured one.