Balla Rama Rao vs Office of the Banking Ombudsman and Others

V.V.S. Rao, J.—The writ petition is filed questioning the order in Complaint No. 378 of 1999-2000, dated May 17, 2000, passed by the Banking Ombudsman, Andhra Pradesh, Hyderabad, the first respondent herein, inter alia, on the ground that the impugned order is contrary to law and facts of the case and that the Andhra Bank has played fraud in all respects to avoid the claims of interest by the petitioner on the delayed payment of rent.

The wife of the petitioner, Smt. B. Narayanamma leased out the building/premises to the third respondent, Andhra Bank, Gollaprolu, East Godavari District in 1982. She died. According to the petitioner, Andhra Bank defaulted in payment of rent from June, 1992, till February 1997 and after the death of his wife when he approached the bank he was paid an amount of Rs. 3,09,562.50 on February 14, 1997. As the bank did not pay interest on the delayed payment of rent, he filed a complaint before the first respondent under paragraphs 12 and 13 of the Banking Ombudsman Scheme, 1995 (hereafter called "the Scheme"). By the impugned order, after considering all the aspects in the matter, the first respondent rejected the claim under paragraph 21 of the Scheme holding that "the complaint is made by the petitioner without any sufficient cause and there is no merit in the same".

I have heard learned counsel for the petitioner, Mr. A.V. Gopal Rao and learned counsel for the bank, D.S.N.V. Prasad Babu.

Learned counsel for the petitioner submits that as there was inordinate delay in payment of rent it was incumbent on the part of the bank to pay interest as claimed and that the Banking Ombudsman committed an error in denying the claim. He also submits that during the conciliation meeting, the representative of the bank admitted that an amount of Rs. 1,35,184 is payable by way of interest for the delay that occurred in paying the rent. Therefore, learned counsel submits, the order of the first respondent is unsustainable.

Learned counsel for the respondent-bank refutes all the allegations. He raised the question of jurisdiction of the Banking Ombudsman. He also submits that though the order impugned in the writ petition is in favour of the bank, but still the bank is entitled to raise the question of jurisdiction of the Ombudsman to decide the dispute between the bank and the landlord/landlady who let out the premises for banking operations. He submits that the transaction between the landlord and the tenant does not come within the meaning of banking service. Learned counsel placed reliance on paragraph 13 of the Scheme.

Learned counsel for the petitioner argued the merits of the case. In view of the order proposed by this court, it may not be proper to adjudicate the disputed question of fact. Therefore, the only question that arises for consideration is as to whether the Banking Ombudsman constituted under the Scheme is entitled to adjudicate and decide the dispute between the landlord and tenant when the tenant is one of the banks mentioned in the Schedule appended to the Scheme.

The Banking Ombudsman was appointed by virtue of the scheme framed u/s 35A of the Banking Regulation Act, 1949 ("the Act"). An Ombudsman appointed under the Scheme is obliged to regulate the working of the bank and issue directions to them to carry out the directions. Considering the extent and scope as well as limitations of power of the Banking Ombudsman in Canara Bank Vs. P.R.N. Upadhyaya and Others, , a three-judge Bench of the Supreme Court observed (page 576) :

"...A critical examination and application of those circulars was necessary to decide the complaint filed by the respondents against the appellant-bank, which unfortunately the learned Ombudsman did not do. Since, an Ombudsman is appointed by virtue of the Scheme framed u/s 35A of the Banking Regulation Act, 1949, he is obliged to comply with the directions/circulars and notifications issued by the Reserve Bank of India u/s 35 or 21 of the Act. He is also required to issue directions to banks, based on those directions/circulars and ensure their compliance. The learned Ombudsman could not have ignored the circulars and directions while dealing with the complaint filed by the respondent. The impugned award having been made ignoring various circulars/directions issued by the Reserve Bank of India, the same cannot be sustained."

Learned counsel for the petitioner has also placed reliance on the observations of the Supreme Court and submits that all disputes between the bank and a citizen are within the purview of the Banking Ombudsman and on that score the impugned order does not suffer from any jurisdictional error. I am afraid, I cannot agree with the submission of learned counsel.

At this juncture, I may briefly notice the salient features of the Scheme. It is necessary to extract paragraphs 12, 13 and 14.

Salient features :

General.--The Banking Ombudsman''s powers and duties will be,--

(a) to receive complaints relating to the provision of banking services ;

(b) to consider such complaints and facilitate their satisfaction, or settlement by agreement, by making a recommendation, or award in accordance with this Scheme.

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 or 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, non-credit of proceeds to parties'' account, non-payment of deposit or non-observance 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 bank related matters ;

(b) Complaints concerning loans and advances only in so far as they relate to Matters;

(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.

(c) Such other matters as may be specified by the Reserve Bank from time to time in this behalf.

Other powers and duties.-- (1) General superintendence and control.--The Banking Ombudsman shall exercise general superintendence and control over his office and shall be responsible for the conduct of business thereat.

(2) Power to incur expenditure.--The Banking Ombudsman shall have power to incur expenditure on behalf of the office. In order to exercise the aforesaid power, the Banking Ombudsman will draw up an annual budget for his office in consultation with the Reserve Bank. The Reserve Bank will indicate the shares to be borne by the concerned banks. The Banking Ombudsman shall exercise the powers of expenditure within the approved budget."

There cannot be any doubt that powers and duties of the Banking Ombudsman will be in relation to banking service. Section 5(b) of the Act defines banking as to mean "accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise". Therefore, the service rendered by a banking company in relation to its banking operations is a banking service. By no stretch of imagination, the transactions and contracts entered by the bank with citizens and other banks in respect of other activities can be termed as banking service.

A reading of Chapter III of the Scheme, especially paragraphs 12, 13 and 14 clearly shows that the powers and functions and jurisdiction of the Banking Ombudsman are clearly delineated and defined. By reading the Scheme together with Section 35 of the Act, it is clear that the Banking Ombudsman cannot act outside the Scheme. No doubt, under the Scheme, power is reserved to the Reserve Bank of India to enlarge the jurisdiction of the Banking Ombudsman by issuing a notification. No notification is brought to my notice which enlarges the jurisdiction of the first respondent to entertain the complaints by landlords in the event of the bank defaulting in the payment of rent. Therefore, I must hold that the order passed by the Banking Ombudsman is wholly without jurisdiction and accordingly the same is set aside.

Learned counsel for the petitioner submits that if at this stage, the petitioner is relegated to other common law remedy of filing a suit for claiming the interest on the delayed payment of rent, the same would be barred by limitation. The submission is misconceived. I fail to understand as to how the provisions of Section 14 of the Limitation Act, 1963, cannot be applied to a case of this nature where the petitioner, under the impression that he is entitled to interest on the delayed payment of rent by the bank, approached an authority i.e., Banking Ombudsman and agitating the matter. It is well settled that pursuing a right remedy in a wrong forum would be a circumstance that can be brought within the purview of Section 14 of the Limitation Act. I may hasten to add that it is for the petitioner to take further necessary action if so advised. Further, merely because the petitioner might be deprived of any other remedy on the ground of limitation, this court cannot refrain from deciding the issue of jurisdiction of the Banking Ombudsman to entertain the complaint by the landlord for payment of interest which was wholly without jurisdiction. An order passed by an authority without jurisdiction renders itself void and a void order can neither be resurrected nor enforced.

In the result, the impugned order is set aside and the writ petition is disposed of giving liberty to the petitioner to approach the civil court or such other forum as per law. No order as to costs.