IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 25/04/2002
Coram
THE HON'BLE MR.JUSTICE E.PADMANABHAN
WRIT PETITION No. 7750 OF 1998
M/s.Fidelity Finance Ltd.,
16-F, Whites Road,
II Floor, Chennai-14
rep. by its Law Officer ..Petitioner
Vs.
Banking Ombudsman at Chennai
State of Tamil Nadu/U.T.of Pondicherry
and A & N Islands
Challa Mall, 8th floor,
11/11-A, Sir Theagaraya Road,
T.Nagar, Chennai-17 ..Respondents
For petitioner :: Mr.T.K.Seshadri
For respondents:: Mr.J.Radhakrishnan
Writ petition filed under Art.226 of The Constitution of India praying
for the issue of a writ of certiorari, as stated therein.
:O R D E R
The petitioner a company, registered under the Indian Companies Act,
carrying on non banking finance activities engaged in hire purchase, lease,
bill discounting and other financial service activities seek for the issue of
a writ of certiorari to call for and quash the proceedings of the respondent
relating to letter No.BOS/T.N & P.A.N/101 8, dated 15.12.1997.
2. This court ordered notice of motion on 10.6.1998. The respondent
entered appearance through Mr.J.Radhakrishnan, learned counsel, and also filed
a counter. The petitioner subsequently filed a reply affidavit. The writ
petition was taken up for hearing on 15.4.2002 with the consent of counsel for
either side.
3. The petitioner while complaining that Bank of Madura Limited
failed to honour ILC No.3/94-95 also pointed out various omissions and
commissions on the part of the Banker, and moved the respondent by lodging its
complaint dated 11.11.1997. The complaint runs to 60 pages in all under
various heads. It is not necessary to refer to to the details set out in the
complaint. The petitioner moved the respondent for redressal of its grievance
and complained against the bankers since the respondent has been constituted
for redressal of such grievances and taking action on such complaints against
banks.
4. The respondent by the impugned communication passed a final order
on the complaint submitted by the petitioner against the Bank of Madura
Limited. The impugned order reads thus:-
“We refer to your complaint dated 6.10.1997 against the captioned
bank.
We took up the mater with the concerned bank and we note from their
reply that the bank was in order in returning the bill in view of the fact
that the bill was not drawn in accordance with the terms of LC and that the
number of LC was not mentioned in the bill.
Hence we regret our inability to entertain the complaint.”
5. Challenging the said rejection of the complaint, the present writ
petition has been filed. Mr.T.K.Seshadri, learned counsel for the petitioner
contends that the order passed by the respondent merely proceeds as if the
reply submitted by the Bank is in order and therefore the complaint cannot be
entertained or probed further. According to Mr. T.K.Seshadri, it is a
failure to exercise the jurisdiction vested in the respondent. The rejection
of the complaint is arbitrary, without application of mind and without
affording necessary opportunity.
6. Per contra, Mr.J.Radhakrishnan, learned counsel appearing for the
respondent contends that the complaint is barred by limitation, the petitioner
has no right to reopen the complaint which has already been rejected, that a
complaint, if any, should be filed within one year from the date of alleged
omission or commission or breach of R. B.I notification or circulars or other
statutory provisions and that the respondent is well founded in rejecting the
complaint.
7. In the counter filed by the respondent it is contended that the
Scheme does not envisage any particular procedure for disposal of the
complaints and that the respondent is only a mediator or a conciliator and
therefore the rejection of the complaint will in no way prejudice the
petitioner since the petitioner has other remedies before competent forum. It
is also contended that the respondent’s decision is not conclusive in the
dispute between the petitioner and the bank and it is well open to the
petitioner to proceed against the bank before any other competent forum. It
is contended that the respondent is not a quasi judicial authority. But the
decision of the respondent is based on subjective satisfaction on the matters
brought before the respondent. It is contended that the rejection of the
complaint is not arbitrary, nor unfair, nor it could be held that it is a
failure to exercise the jurisdiction or powers under the Ombudsman Scheme.
All these contentions advanced by Mr.Radhakrishnan, learned counsel for the
respondent and as set out in the counter affidavit are raised for the first
time before this court and they do not find a place ex-facie in the order
passed by the first respondent or from the file.
8. It is well settled law that in an answer to writ of certiorari,
the order sought to be impugned has to be sustained on the basis of the
reasons assigned therein or at least such reasons should find exfacie on the
face of the record. It is not open to the respondent to invent and assign new
reasons in the counter and seek to defend the impugned order. This is the
well settled principle.
9. The impugned proceedings extracted above would show that it is a
refusal to exercise the jurisdiction vested in the respondent as the
respondent had failed to examine the merits of the petitioner’s complaint and
after affording an opportunity. The impugned proceedings is also vitiated by
non application of mind, in that, the respondent had not applied its mind to
any portion of the complaint or materials placed by the petitioner. Except
saying that the reply of the Banker is in order and rejecting the complaint on
that sole reason, there is no examination of the complaint and the objections
raised by the respondent Bank on merits.
10. While exercising the power of judicial review, this court has to
examine the decision making process and find out whether any reasonable person
would have arrived at such a conclusion or pass such order in a given
situation. It is essential to refer to The Banking Ombudsman Scheme, 1995 as
framed by the Reserve Bank of India under Section 35.A of the Banking
Regulation Act, 1949.
11. In terms of Section 35A read with Section 56 of the Banking
Regulation Act, 1949, the Reserve Bank of India has framed the scheme on 15th
June 1995 called as “The Banking Ombudsman Scheme, 1995”. Clause 16 of the
Scheme provides for redressal of grievance against a Bank before the first
respondent. Clause 17 enables the first respondent to call for information.
Clause 12 and 13 provides as to the powers of the Banking Ombudsman as well as
its duties which include the statutory obligation/duty to receive complaints
relating to the provision of Banking services as well as to consider such
complaints and facilitate their satisfaction, or settlement by agreement, by
making recommendation, or award in accordance with the scheme.
12. Clause 13 in Chapter III, of the Scheme prescribes the ambit of
the authority and power of the said authority. The said clause 13 reads
thus:-
“13. SPECIFIC AMBIT OF AUTHORITY:
As regards banking services, the Banking Ombudsman’s authority will include:-
(a) ALL COMPLAINTS CONCERNING DEFICIENCY IN SERVICE SUCH AS:-
i) Non-payment/inordinate delay in the payment of collection of cheques,
drafts/bills etc.,
ii) non-acceptance, without sufficient cause, of small denomination notes
tendered for any purpose, and for charging of commission in respect thereof;
iii) non-issue of drafts to customers and others; iv) non-adherence to prescribed working hours by branches; v) failure to honour guarantee/letter of credit commitments by banks; vi) claims in respect of unauthorised or fraudulent withdrawals from deposit accounts, etc., vii) Complaints pertaining to the operations in any savings, current or any
other account maintained with a bank, such as delays, noncredit of proceeds to
parties accounts, non-payment of deposit or nonobservance of the Reserve Bank
directives, if any, applicable to rate of interest on deposits;
viii) complaints from exporters in India such as delays in receipt of export
proceeds, handling of export bills, collection of bills, etc., provided the
said complaints pertain to the bank’s operations in India; and
ix) complaints from non-resident Indians having accounts in India in
relation to their remittances from abroad, deposits and other bankrelated
matters.
(b) COMPLAINTS CONCERNING LOANS AND ADVANCES ONLY INSOFAR AS THEY RELATE T:-
i) non-observance of Reserve Bank Directives on interest rates.
ii) delays in sanction/non-observance of prescribed time schedule for
disposal of loan applications and
iii) non-observance of any other directions or instructions of the Reserve
Bank, as may be specified for this purpose, from time to time.”
13. The learned counsel for the respondent contended that Ombudsman
is not exercising quasi judicial function or statutory power, but it is only
an administrative function. This is a misconception. The Ombudsman exercises
the power in terms of the Scheme which has been framed in exercise of
statutory power and has to act as per the Scheme and it is a quasi judicial
exercise. This court holds that the Ombudsman is a quasi judicial authority.
Since it has a legal authority, it has to determine questions affecting the
rights of the parties, it has the duty to act judicially and assign reasons in
support of its conclusion. On the basis of the Scheme, it is clear that the
Ombudsman has to act quasi judicially in respect of the complaints presented
before it and act in terms of the Scheme.
14. In Canara Bank Vs. Upadhyaya, reported in 1998 (6) SCC 526, it
has been held by the Apex Court that Ombudsman is appointed by virtue of the
Scheme framed under section 35.A of the Banking Regulation Act, 1949 and he is
obliged to comply with the directions, circulars and notifications issued by
the Reserve Bank of India under section 35 or 21 of the Act and the Ombudsman
is required to issue directions to Banks based on those directions/circulars
and ensure their compliance. It has been further held by the Apex Court in
the said decision that an Ombudsman appointed under the Scheme is obliged to
regulate working of the Bank and issue directions to them to carry out the
directions and circulars issued by the RBI under sections 21 or 35 of the Act.
Therefore, it is clear that Ombudsman exercises quasi judicial functions in
terms of the Statutory Scheme. The contentions advanced in this respect by
Mr.Radhakrishnan, learned counsel for the respondent cannot be sustained.
15. Mr.T.K.Seshadri, learned counsel for the petitioner is well
founded in his contention that the complaint is not barred, nor it is belated,
nor it has already been decided on any earlier occasion. The earlier
complaint filed had been returned for being presented before the appropriate
Ombudsman hearing jurisdiction over the area. The Ombudsman for the area in
question was not appointed for a considerable period and the complaint was
kept pending by the authorities and thereafter it has been forwarded to the
Ombudsman. Therefore the plea of delay or latches will not arise. However,
it has been pointed out that no such reason finds a place ex facie. The
impugned proceedings do not disclose any other reason except stating thus:-
“We took up the mater with the concerned bank and we note from their reply
that the bank was in order in returning the bill in view of the fact that the
bill was not drawn in accordance with the terms of LC and that the number of
LC was not mentioned in the bill.”
This would mean that the Ombudsman had failed to apply its mind. There is a
failure to exercise the jurisdiction vested in the Ombudsman. The Ombudsman
has to act in terms of the Scheme. No other reason has been assigned. That
apart, before rejecting the complaint, the Ombudsman had not afforded an
opportunity to the petitioner, nor the remarks or objections received from the
Bank had been forwarded to the petitioner, no the petitioner had been heard at
all. Admittedly, on receipt of the remarks or reply from the bank, the
Ombudsman had just stated that the bank was in order. But it is not supported
by any reason. The petitioner’s complaint runs to more than 50 pages
containing very many details. Therefore equally, the respondent bank should
have forwarded its objection or remarks running to number of pages to
Ombudsman. That reply or objection of the bank had not been forwarded to the
petitioner, nor the petitioner had any opportunity to know as to what is the
stand taken by the Bank in respect of the complaint.
16. Rejection of a complaint without recording reasons, without
affording opportunity to the petitioner to substantiate its complaint or
without hearing the petitioner after communicating the objections or remarks
of the bank is also fatal. The decision making process adopted by the
Ombudsman cannot be sustained at all. The respondent had failed to follow
even the minimum procedure.
17. In Style (Dress Land) v. Union Territory, Chandigarh, (1999) 7
SCC 89, the Apex Court held thus:-
“11. Even the administrative orders and not (sic only) quasijudicial are
required to be made in a manner in consonance with the rules of natural
justice, when they affect the rights of the citizens to the property or the
attributes of the property. While exercising the powers of judicial review
the court can look into the reasons given by the Government in support of its
action but cannot substitute its own reasons. The Court can strike down an
executive order, if it finds the reasons assigned were irrelevant and
extraneous. The courts are more concerned with the decision-making process
than the decision itself.”
18. In the circumstances, this court holds that the order passed by
the Ombudsman is vitiated by non application of mind, and suffer with error
apparent on the face of the record, besides it is a failure to exercise the
jurisdiction vested in it. The first respondent has acted in violation of
principles of natural justice and it had not even followed the minimum
requirements in that forwarding the copy of objection or reply received from
the Bank and getting remarks of the petitioner or reply thereon and affording
opportunity of hearing or calling upon the petitioner to come before the
Ombudsman and substantiate its grievance or complaint. Therefore the impugned
order is also violative of principles of natural justice. In all
determination, even in respect of complaints, where certain redressal is
sought for, it is fundamental that principles of natural justice should be
followed and before rejecting the complaint at least an opportunity should be
afforded, besides the stand or objection or version of the respondent, against
whom complaint has been made should also be disclosed or conveyed to the
complainant.
19. For all the above reasons, this court holds that this is
eminently a fit case where the impugned proceeding has to be quashed and the
matter should be remitted back to the respondent for fresh proceedings
according to law.
20. The writ petition is allowed. The impugned proceedings are
quashed and the respondent is directed to restore the complaint to its file
forward copy of the remarks or objections if any received from the Bank
against whom the complaint has been made, call upon the petitioner to state
any further remarks or substantiate its grievance or complaint with respect to
the contents of the complaint viz., alleged omissions and commissions on the
part of the respondent bank by placing materials and afford necessary
opportunity of hearing if so desired by either parties and thereafter pass
orders in accordance with the Scheme.
Internet:yes
Index:yes
gkv
25-04-2002
Copy to:-
Banking Ombudsman at Chennai
State of Tamil Nadu/U.T.of Pondicherry
and A & N Islands
Challa Mall, 8th floor,
11/11-A, Sir Theagaraya Road,
T.Nagar, Chennai-17
E.PADMANABHAN.J.,
Order in
W.P.No: 7750 of 1998