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M/s.Fidelity Finance Ltd. v. Banking Ombudsman at Chennai - WRIT PETITION No. 7750 OF 1998  RD-TN 288 (25 April 2002)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
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.
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,
W.P.No: 7750 of 1998
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