Employee Resigns with an Outstanding Loan: Can the Employer Deduct It from Gratuity?

An employee resigns after several years of service. During the full-and-final settlement, HR discovers that the employee has an outstanding company loan. The employee is entitled to gratuity, but the employer wants to adjust the unpaid loan against the gratuity amount. Can the employer legally deduct the loan? What if the employee has already signed an undertaking permitting such recovery? This is a practical questio…