M/s. Central Bank of IndiaMount Road BranchChennai 600 002 v. M.Govindasamy

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 12.06.2009CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE V.DHANAPALANW.A. NO. 2372 OF 2003M/s. Central Bank of IndiaMount Road BranchChennai 600 002, rep. byits Senior Manager... Appellant/2nd Respondent- Vs -1. M.Govindasamy2. Banking Ombudsman Office of the Banking Ombudsman Chellammal (VIII floor) 11/11-A, Sri Thiagaraya Road T.Nagar, Chennai 600 017.3. Export Credit Guarantee Corporation of India Spencer Tower, 7th Floor 770-A, Anna Salai Chennai – 2... Respondents/Petitioner and Respondents 1 & 3Writ Appeal filed under clause 15 of letters patent againstthe order dated 18th April, 2002, passed by learned single Judge inW.P. No.3645/98. This WP filed under Article 226 of theconstitution of India praying to issue a writ of certiorarifiedMandamus to call for the records relating to the order passed bythe I Respondent made in No.CH.OMBUDS/866/97-98 dated 17.10.97 andquash the same and conseqently direct the I Respondent to enquireinto the complaint No.C.172/97-98 dated 17.10.97 made by thepetitioner against the 2nd respondent within a period to bespecified by this Hon'ble Court.For Appellant: Mr.HariharanFor Respondents: Mr. AR.L.Sundaresan, SC, for M/s.P.Bhuvaneswari for R-1 https://hcservices.ecourts.gov.in/hcservices/ JUDGMENTS.J.MUKHOPADHAYA, J.The 1st respondent filed a complaint under clause 16 (3) ofthe Banking Ombudsman Scheme, 1995 (hereinafter referred to as the'Scheme') against the Bank claiming damages for business lossamounting to Rupees One Crore; compensation for mental agonyamounting to Rs.5 lakhs; loss on account of credit by the bank inthe accounts and excess interest to the extent of Rs.12 lakhs; LICloss at Rs.4 lakhs and cost of the petition of Rs.5,000/=. The 2ndrespondent, Banking Ombudsman, by order dated 17th Nov., 1997, heldthat it could not proceed in the matter as the Bank had alreadymoved the Debts Recovery Tribunal (hereinafter referred to as the'Tribunal') for recovery of its debts. The said order waschallenged by the 1st respondent in W.P. No.3645/98, which wasallowed by learned single Judge vide impugned judgment dated 18thApril, 2002, and directed the Banking Ombudsman to expedite thecomplaint filed by the 1st respondent-writ petitioner by givingsufficient opportunity to submit supporting materials and personalhearing.The main plea taken by the appellant-Bank is that the 1strespondent borrower cannot be allowed to take advantage of his ownwrong having failed to utilise the opportunity to make counterclaim u/s 19 (8) of the Recovery of Debts due to Banks andfinancial Institutions Act, 1993 (hereinafter referred to as the'DRT Act'). The claim as was made by the Bank before the DRT andthe damages as claimed by the 1st respondent, the two claims beinginterlinked, after decision of DRT the Banking Ombudsman cannotgive an independent finding.2. For disposal of the case it is necessary to notice relevantfacts as mentioned hereunder :-In Feb., 1997, the Bank filed O.A. No.156/97 against the 1strespondent u/s 19 of the DRT Act before the Tribunal for recoveryof dues from the 1st respondent. The 1st respondent had noknowledge of the same, who filed a complaint u/s 16 of the Schemeclaiming damages as mentioned above. After getting reply from theBank to the effect that the Bank has already filed an originalapplication before the Tribunal, the Banking Ombudsman, on 17thNov., 1997, observed that it was not proceeding further in thematter as the Bank has moved before the Tribunal. The said orderwas challenged by the 1st respondent and allowed by learned singleJudge.3. Learned counsel appearing on behalf of the Bank submittedthat the observation of learned single Judge that the Tribunalcould not entertain the claim filed by the borrower and that noaspect of defence can be gone into or examined by the Tribunal iserroneous; the Tribunal has jurisdiction to decide the counter https://hcservices.ecourts.gov.in/hcservices/ claim, including damage, if necessary, after taking intoconsideration the relevant evidence, if any counter claim is filedu/s 19 (8) of the DRT Act. Learned counsel placed reliance on Supreme Court decision inDurga Hotel Complex – Vs – Reserve Bank of India (2007 (5) SCC120). It was submitted that the Supreme Court held that theBanking Ombudsman serves as an alternative to the adversary systemfor resolving disputes, that it will be logical to postulate on aninterpretation of clause 16 of the Scheme that the Ombudsman loseshis jurisdiction over the subject matter on an adversaryadjudication forum seizen of the subject matter of the complaint.It is also held that the intention behind incorporating clause 16(3) (d) is to ensure that the relief the Ombudsman may give maynot conflict with a more comprehensive adjudication by Court,Arbitrator, Tribunal or Forum with wider powers. The SupremeCourt further held that the expression 'counter claim' in sub-section (8) to (11) of Section 19 of the DRT Act will take even aclaim for damages based on the same transaction and could alsoinclude even an independent claim that the respondent before theTribunal may have against the claimant-financial institution. Thedecision in Union Bank of India, Calcutta – Vs – Abhijit TeaCompany P. Ltd. & Ors. (2000 (7) SCC 357) and State Bank of India– Vs – Ranjan Chemicals Ltd. (2007 (1) SCC 97) are also relied on.Thus, according to the appellant, the Banking Ombudsman has nojurisdiction to adjudicate the complaint of the 1st respondent-borrower.4. It was argued on behalf of the 1st respondent that thecomplaint before the Banking Ombudsman was filed in the year 1997when there was no provision for counter claim. Section 19 of theDRT Act was amended in the year 2000, but much before the same theBanking Ombudsman had refused to interfere in the matter on theground of pendency of case before the Tribunal.In reply, learned counsel for the Bank requested to reject theaforesaid argument for the following reasons :-a) It is only on 1st Feb., 2001, the originalapplication filed by the Bank was finally closed bythe Tribunal as the borrower failed to comply withthe conditional order to set aside the ex-parteorder.The 1st respondent has also not filed a writtenstatement even after the year 2000 raising acounter claim and allowed the matter to be decreedex-parte on account of his default.The 1st respondent cannot be allowed to takeadvantage of his own wrong having failed to utilisethe opportunity even after the year 2000 by notfiling counter claim.b) It will not be open to the 1st respondent topress his objection and agitate his complaint anylonger as the original application has already been https://hcservices.ecourts.gov.in/hcservices/ closed in the year 2001.The counter claim of the 1st respondent is by wayof damage and reversal interest. It has been heldby Supreme Court in State Bank of India – Vs –Ranjan Chemicals Ltd. (2007 (1) SCC 97) that insuch cases, the cause of action for recovery suitof the Bank and the counter claim of the borrowerare referrable to cause of action arising out ofthe same transaction between the Bank and theborrower; that the decree of one or the other woulddepend upon ascertainment of the rights andobligations arising out of the loan transaction andthe state of the loan account. It is held that twoclaims are inextricably interlinked. In the saidcase, decision in Union Bank of India, Calcutta –Vs – Abhijit Tea Company P. Ltd. & Ors. (2000 (7)SCC 357) has been followed.5. We have heard the learned counsel for the parties andperused the records.6. The point that arose for consideration before learnedsingle Judge are :-“i) Whether the impugned proceedings of the 1strespondent declining to entertain the complaint issustainable in law.ii)Whether the proceedings for recovery of debtsinitiated by the 2nd respondent-Bank on thefile of the Debt Recovery Tribunal, excludesthe jurisdiction of the 1st respondent-Ombudsman.iii)To what relief, if any, the petitioner isentitled to.7. For taking a decision on the issue, learned single Judgerightly noticed the broad outline of the complaint submitted bythe petitioner, relevant of which reads as follows :-“The Bank authorities failed to adjust theamounts to the proper head of account viz., packingcredit account and adjusted towards TOD/CC accountswhich bear higher interest and thereby allowed theinterest to increase and also stopped furtherrelease of funds under P.C. Account as a result, weincurred heavy loss in the business and lostreputation. Though the error was brought to thenotice of the bank officials several times, theyhave not cared to adjust the amount to the relevanthead of account.Because of wrong credit by the Bank heavyinterest was charged under all accounts.Due to non co-operation by the Bank the company https://hcservices.ecourts.gov.in/hcservices/ incurred direct loss of Rs.1.00 Crore in ourbusiness.On account of the mistake done by the Bank, Ilost LIC policy for Rs.4,00,000/=.On account of the lethargic attitude of thebank, lost reputation in foreign countries and inlocal market.10. The relief prayed for in the complaint is asfollows :-(i)Business loss of Rs.1,00,00,000/=.(ii)Compensation for mental agony Rs.5,00,000/=.(iii)Because of wrong credit by the bank in allaccounts, excess interest paid approximatelyRs.12,00,000/=.(iv)LIC loss Rs.4,00,000/=.(v)Cost of petition Rs.5,000/=.8. As against the detail set out in the complaint, the Bankinstituted proceeding before the Tribunal, Chennai, with respectto the alleged outstanding dues against the 1st respondent u/s 17of the DRT Act. When such claim was filed in 1997, the only claimthat could be agitated or sought to be enforced is for recovery ofthe debts due to the Banks and financial institutions and not anydamage or compensation for omission or commission on the part ofthe Bank by the customer of the Bank. It is only the bank thatcould initiate action for recovery of the debts, besides ancillaryreliefs in order to see that the Banks relief for recovery of debtbecomes an executable decree.9. Section 2 (g) defines the expression “debt”. The claim fordamages or compensation or set off for alleged commission andomission on the part of the Bank could not have been the subjectmatter of the proceeding u/s 17 nor the 1st respondent could resistthe claim of the Bank on the basis of any commission or omissionon the part of the bank in the year 1997 when the OA was filed.At that time, if at all, what the Tribunal could adjudicate is thetotal quantum of money advanced, the total liability, less theamount, if any, already paid and not any other aspect or defencecould be gone into or examined by the Tribunal. It is not as ifthe complaint relates to or raised as a counter claim and set off.Therefore, in the year 1997, when the Banking Ombudsman refused toentertain the application, the pendency of the proceedinginitiated u/s 17 could not have been relied upon to refuse thecomplaint, claim made by Bank u/s 17 being totally distinct andseparate from the contents of the complaint. At that relevantpoint of time in the year 1997, the scope of the two proceedingswere distinct and separate.10. In terms of Section 35-A read with Section 56 of theBanking Regulation Act, 1949, the Reserve Bank of India framed thescheme, “The Banking Ombudsman Scheme, 1995”, which came into https://hcservices.ecourts.gov.in/hcservices/ effect from 15th June, 1995. Section 16 of the Scheme providesfor redressal of grievance against a Bank before the BankingOmbudsman. Clause 17 enables the Banking Ombudsman to call forinformation. Clauses 12 and 13 provides as to the powers of theBanking Ombudsman as well as its duties, which include thestatutory obligation/duty to receive complaints relating to theprovisions of the banking service as well as to consider suchcomplaint and facilitate their satisfaction, on settlement byagreement, by making recommendation or award in accordance withthe Scheme. Clause 13 in Chapter III of the Scheme prescribes thespecific ambit of the authority, which reads as follows :-“13. SPECIFIC AMBIT OF AUTHORITY :As regards banking services, the BankingOmbudsman's authority will include :-(a) All complaints concerning deficiency inservice such as :-(i)Non-payment/inordinate delay in the paymentof collection of cheques, drafts/bills etc.(ii)Non-acceptance, without sufficient cause,of small denomination notes tendered forany purpose, and for charging of commissionin respect thereof.(iii)Non-issue of drafts to customers andothers.(iv)Non-adherence to prescribed working hoursby branches.(v)Failure to honour guarantee/letter ofcredit commitments by banks.(vi)Claims in respect of unauthorised orfraudulent withdrawals from depositaccounts, etc.(vii) Complaints pertaining to the operationsin any savings, current or any otheraccount maintained with a bank, such asdelays, non-credit of proceeds to partiesaccounts, non-payment of deposit or non-observance of the Reserve Bank directives,if any, applicable to rate of interest ondeposits.(viii) Complaints from exporters in India suchas delays in receipt of export proceeds,handling of export bills, collection ofbills, etc., provided the said complaintspertain to the bank's operations in India;and(ix) Complaints from non-resident Indianshaving accounts in India in relation totheir remittances from abroad, deposits andother bank related matters.b) Complaints concerning Loans and Advances onlyinsofar as they relate to :- https://hcservices.ecourts.gov.in/hcservices/ i)Non-observance of Reserve Bank Directiveson interest rates.ii)Delays in sanction/non-observance ofprescribed time schedule for disposal ofloan applications; andiii)Non-observance of any other directions orinstructions of the Reserve Bank, as may bespecified for this purpose from time totime.”11. Clause 18 provides for settlement of complaints byagreement and Clause 19 provides for recommendation by settlement.The Bank relied on clause 16 (3) (d), which provision providesthat no complaint to the Banking Ombudsman shall lie unless thecomplaint is in the same subject matter, for which no proceedingbefore any Court, Tribunal, Arbitrator or any other Forum ispending or a decree or award or order of dismissal has alreadybeen passed by any such Court, Tribunal, Arbitrator or Forum. Butby all standards or reasons, the proceeding initiated by the Bankfor recovery of the debts due to it cannot be held to be thesubject matter of the complaint made by the 1st respondent beforethe Banking Ombudsman, nor such a complaint could be maintained byeither side before the Tribunal. There could be neither a claimfor damage or deficiency or omission of the bank in terms withSections 17 and 19 of the DRT Act as in 1997. Though sub-section(6) to Section 19 provides for the defendant to claim set offagainst the balance due of any ascertained sum of the moneylegally recoverable by him from such applicant, the defendant maypresent written statement containing particulars of debts to beset off. The set off being different from making an independentclaim towards compensation or damages for loss caused bydeficiency or omission or arbitrary refusal to follow RBIguidelines or alike, learned single Judge rightly allowed theclaim made by the 1st respondent.12. By way of repetition we may remind that the complaint ofthe 1st respondent made under clause 16 of the Scheme was notentertained by the Banking Ombudsman by order dated 17th Nov.,1997. We are supposed to answer the issue on the basis of the lawas was existing in the year 1997 when such rejection was made and,therefore, the Bank cannot take advantage of sub-section (8) toSection 19, which was introduced subsequently by Amending Act,2000.13. In view of the law as was in vogue at the time when theorder of rejection was passed (in 1997), we hold that theproceeding dated 17th Nov., 1997, of the Banking Ombudsman,declining to entertain the complaint, as unsustainable in law andthat the proceeding for recovery of debts initiated by the Bank onthe file of the Tribunal did not exclude the jurisdiction of theBanking Ombudsman in 1997. https://hcservices.ecourts.gov.in/hcservices/ We, having concurred with the findings of learned single Judgeand there being no merit, the writ appeal is dismissed. But thereshall be no order as to costs.GLNSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. Banking Ombudsman Office of the Banking Ombudsman Chellammal (VIII floor) 11/11-A, Sri Thiagaraya Road T.Nagar, Chennai 600 017.2. Export Credit Guarantee Corporation of India Spencer Tower, 7th Floor 770-A, Anna Salai Chennai – 2.3. The Senior Manager, Central Bank of India Mount Road Branch Chennai 600 002,+ 1 cc M/s. P. Bhuvaneswari, Advocate SR No.22648CK(CO)SR/16.6.2009 JUDGMENT IN W.A. NO. 2372 OF 2003