medical allowance id being extended by a management of an organization to it's employees, on a consolidated amount basis or as a percentage on basic and D.A., but other than ESI covered employees. Now a days, medical benefits are routed through Medical Insurance by management with a specific amount.
In the case of your query, the subject medical allowance, if extended by the management, will not undergo a deduction if an employee goes on loss of pay, or any other salary deductions, whatsoever.
As such, no labour law is on medical allowance, because, it is the collective bargaining or as a policy of the management. No employer would like to or should touch the medical allowance. If done so, it is highly an unethical organization. HRD should put it's head down always.
Please put your head-up and try to practice lawful man management functions.
After all it is a reputation of the company and Social Responsibility.