Hello,
Let us get the fundamentals clear:
1) I assume that the Payment Wages Act is applicable.
2) I assume that the loan is by a cooperative bank or a cooperative society.
The legal position if these assumptions are correct is:
1) Yes, the employer is authorized to deduct installments and to send these to the coop bank/coop scty.
2) Not only that, under the cooperative society act, it is mandatory to deduct the said installments and remit.
3) If the employer fails or refuses to comply with this position then the concerned coop institute is entitled to get these recovered from the said employers as "arrears of land revenue" by following due legal process.
However other noteworthy points are:
1) There can not be TWO or more loans outstanding against an individuals. (Coop institutes often violate this)
2) While the total deduction from the earned wages of an employee can not be more that 50% under normal circumstances, if there is a coop loan the deduction can go up to 75% of earned wages.
3) The Payment of Wages Act stipulates under Sec 6 or 7 the various deductions can be made by the employer and the conditions attached.
If any doubts are created by this response, you may revert!
Regards
samvedan
December 22, 2012
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