Lal Budha, 44, has agreed a payment from the MoD of 55,000, cutting short a tribunal in Croydon, south London.

Mr Budha, of High Wycombe, Buckinghamshire, claimed his Army pension was 95 a month and was a fifth of that a British soldier would get.

He said: “This will help me help other Gurkhas, not financially but mentally.”

The tribunal had heard the father-of-two, who has medals for long service and good conduct, was discharged in 2002 on medical grounds and given indefinite leave to stay in the UK.

Liver transplant

Before then Mr Budha - who comes from a long line of Gurkhas - had served for nearly 24 years in Hong Kong, Brunei, South Korea and the Falklands.

But he was put on light duties after suffering jaundice and hepatitis, which led to him being airlifted to the UK from Hong Kong for a liver transplant.

He was discharged in the UK - thought to be the first Gurkha to be so, where the cost of living is higher than in Nepal.

After paying for his wife and children to join him, Mr Budha was left so poor he ohio national life insurance
begging, the tribunal heard.

“My bank balance was so getting so low I was thinking of living on the street and becoming a beggar,” he said.

He also claimed he was paid 38,000 less in his career than a British soldier would have been and that he did not receive a terminal grant of 18,000 discharge or benefit from any National Insurance lincoln national life insurance
.

‘Living in poverty’

Commenting on the case, Mr Budha’s solicitor Turhan Wishart said the case should “shame the MoD into stopping this iniquity”.

“They are going to literally have Gurkhas discharged in the UK national health insurance company
living in poverty unless they do
something about it, ” he said.

“Mr Budha’s case may well cause them to think very carefully about what they
do.”

Padma Shrestha, a founder of the Gurkha Veterans’ Foundation, said he wanted Gurkhas to have equal pensions and the right to live in Britain.

He said: “It will inspire the Gurkhas to fight the British Army for equality, especially equal pensions.”

He believed there were about 1,000 retired Gurkhas living in Britain.

The British Army has recruited Gurkhas from hill tribes in Nepal since 1815 after their potential as warriors was first realised at the height of British empire-building.

Following the partition of India in 1947, an agreement between Nepal, India and Britain meant four Gurkha regiments from the Indian army were transferred to the British Army, eventually becoming the Gurkha Brigade.

Since then, the Gurkhas have fought for the British all over the world, winning 13 Victoria Crosses between them.