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Section 23: Deductions for recovery of loans

The Code on Wages, 2019 (Act No. 29 of 2019) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter III: Payment of Wages
Competent Labour Forum
Act No. 29 of 2019
Section 22 All 67 Sections of Code on Wages, 2019 Section 24

Legal Commentary & Landmark Judgments: Section 23

Section 23 authorizes and regulates wage deductions for the recovery of loans granted to an employee for house-building or other welfare purposes from approved employer or government funds, together with authorized interest.

  • Approved Purpose Requirement: Permits deductions for the recovery of loans granted from approved house-building funds or employee welfare funds sanctioned by the appropriate Government.
  • Installment and Interest Regulation: Requires loan recovery installments and interest calculations to strictly conform to approved fund schemes and statutory deduction ceilings.
  • Exclusion of Unapproved Commercial Loans: Bars employers from deducting private commercial loans, personal IOUs, or unauthorized debt instruments through payroll without explicit statutory fund sanction.
Key Landmark Precedents:
  • Workmen of The Indian Bank v. Management of Indian Bank (1985) 1 SCC 642: The Supreme Court held that recovery of staff loans from employees must adhere strictly to statutory welfare guidelines and fair installment schedules to preserve worker sustenance.
  • Syndicate Bank v. R.V. Bhat (2007) 8 SCC 345: The Supreme Court affirmed that institutional loan recoveries through salary deductions must operate within statutory ceiling limits to prevent undue hardship.
Courtroom Practice & Strategic Litigation Guidance:

Welfare loan agreements must explicitly reference the approved statutory welfare scheme under which the advance is extended. Human resources must ensure that loan recovery installments, when aggregated with tax, PF, and other permitted deductions, never exceed the 50% statutory threshold mandated by Section 25.

Section 22 All 67 Sections of Code on Wages, 2019 Section 24