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M/S Durga Hotel Complex v. Reserve Bank of India & Ors, (2007) 5 SCC 120

M/S Durga Hotel Complex v. Reserve Bank of India & Ors, (2007) 5 SCC 120


FACTS-

  • A partnership firm (the appellant) sought a loan from a bank (the third respondent Bank) to establish a hotel.
  • In April 1997, the bank sanctioned a loan of Rs. 15 lakhs, disbursing Rs. 11,58,750/-.
  • The appellant requested an additional advance, but the bank did not accept the proposal and recalled the loan after crediting Rs. 3,41,250/-.
  • The appellant filed a complaint before the Banking Ombudsman for the State of Bihar alleging unauthorized or fraudulent withdrawal and non-credit of proceeds.
  • The bank opposed the complaint, questioning the jurisdiction of the Banking Ombudsman.
  • The bank later approached the Debts Recovery Tribunal for recovery of alleged dues.
  • The Banking Ombudsman proceeded with the complaint despite objections from the bank.
  • The Banking Ombudsman passed an award directing the bank to disburse the remaining sanctioned loan and make further advances as per certain recommendations.
  • The bank sought permission from the Reserve Bank of India to challenge the award in court.
  • The appellant filed a writ petition before the High Court of Patna seeking implementation of the Banking Ombudsman's award. Whereas, the bank filed a separate writ petition challenging the Banking Ombudsman's award.

ISSUE-

  • Whether the subsequent filing of the claim by the bank before the Debts Recovery Tribunal would oust the jurisdiction of the Banking Ombudsman in a complaint earlier instituted before him.
  • Whether the claims put forward before the Banking Ombudsman by the appellant fell within the jurisdiction of the Ombudsman under the Banking Ombudsman Scheme, 1995, and if the directions issued by him were within his province under the Scheme.

RULE-

  • Banking Ombudsman Scheme, 1995:
  • Clause 13(b): This clause specifies the jurisdiction of the Banking Ombudsman regarding complaints concerning loans and advances. It includes instances of non-observance of Reserve Bank Directives on interest rates, delays in sanctioning loans, and non-observance of other directions from the Reserve Bank of India.
  • Clause 16(3)(d): This clause outlines conditions under which a complaint to the Banking Ombudsman shall not lie, including if proceedings are pending before any court, tribunal, or arbitrator on the same subject matter.

HELD-

  • An ombudsman has limited jurisdiction under clause 16 of the Banking Ombudsman Scheme, 1995, the ombudsman can entertain continuous jurisdiction till no other complaint is made and accepted by any tribunal or court. 
  • As soon as the complaint is entertained by any tribunal or court, the ombudsman losses his jurisdiction over the complaint.
  • The Banking Ombudsman lacks authority to interfere with agreements regarding repayment schedules or financing ratios between the bank and the borrower, nor can they dictate the terms of loan moratorium or repayment schedules.
  • The court affirmed the High Court's finding that the Banking Ombudsman had exceeded jurisdiction by issuing directions that fell outside the purview of Clause 13(b) of the Scheme.
  • Hence, both the issues were decided against the appellant and HC’s decision was affirmed by the court.
  • Appeal dismissed.

COMMENTARIES RATIO/NOTE-

 

  • Banking Ombudsman Scheme, 2006 [S. 452]

 

 

A complaint was rejected by the Banking ombudsman on the ground that the deficiency in service could be attributed to the agency, that is, RBI cards and Payment Services P. Ltd The rejection being on merits, the ombudsman was bound to give reasons. The remedy of appeal is not an absolute bar to the maintainability of a writ petition questioning an unreasoned decision of the statutory authority such as a banking ombudsman. He was exercising a quasi-judicial power particularly when the decision was given in violation of the principles of natural justice specially incorporated in clause 12(1) of the Scheme  [Arati Goswami (Dr) v RBI, AIR 2008 (NOC) 600 (Cal)].