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2026 DAILYLAW 293 (KER)

K. C. Ajayakumar v. Banking Ombudsman

2026-03-17

Viju Abraham

body2026
JUDGMENT : Viju Abraham, J. The above writ petition is filed challenging Ext.P1 order passed by the 1 st respondent-Banking Ombudsman. The brief facts in the writ petition are as follows: The petitioner’s wife late Dr.Sindhu K.C. has availed a housing loan under the “Subha Gruha Scheme” from the 2 nd respondent Bank. It was agreed that the loan was for a principle sum of Rs.7 Lakhs, which is repayable with interest at the rate of 7.5% per annum on floating rate basis and the same was agreed to be repaid in 168 equated monthly installments [EMI] of Rs.7,742/- each from October, 2005 and the petitioner was the guarantor for the loan advanced by the 2 nd respondent. The petitioner submits that the EMI was regularly deducted at the rate of Rs.6,742/- every month without any default. When exorbitant amount was charged on the loan account, the petitioner apprehended a change in interest and sought information in this regard, to which Ext.P3 reply was submitted, wherein it was declared that the Central Assistant Public Information Officer of the respondent Bank is not obliged to provide any clarification, because the information sought does not exist in any available documents or file. Later, petitioner submitted a request before the 2 nd respondent for issuance of a closure certificate pointing out that the petitioner had paid all the EMIs as per Ext.P1 and sought for release of the security furnished. While so, the petitioner got information over phone stating that there was an overdue amount to the tune of Rs.3,99,979.45 with accrued interest. The petitioner sought clarification vide Ext.P5. Petitioner’s case is that though as per Ext.P1 the interest rates were agreed to be on floating basis, the 2 nd respondent Bank had to make such intimations duly, when the rates of interest changes, which has not been done by the respondent-Bank. 2. Reliance was placed on Exts.P6 & P7 Circulars issued by the Reserve Bank of India [RBI] and the relevant pages of the Banking Codes and Standards Board of India [for short, ‘BCSBI Code’] and the Code of Commitment to Customers, 2014. Ext.P6 mandates that Banks have the freedom to offer all categories of loans on fixed or floating rates, subject to conformity to their Asset-Liability Management (ALM) guidelines and the methodology of computing the floating rates should be objective, transparent and mutually acceptable to counter parties. Ext.P6 mandates that Banks have the freedom to offer all categories of loans on fixed or floating rates, subject to conformity to their Asset-Liability Management (ALM) guidelines and the methodology of computing the floating rates should be objective, transparent and mutually acceptable to counter parties. Relying on Ext.P7, the learned Counsel for the petitioner submits that if at all any change is made in the rates of interest, that should be informed to the customers either by way of a letter, e-mail or SMS and also display the same in the notice board of the Branches and also in the website of the Bank. 3. The specific grievance raised by the petitioner is that the rate of interest was changed without any such intimation as mandated in Exts.P6 & P7. Aggrieved by the same, the petitioner approached the 1 st respondent-Banking Ombudsman raising a complaint. During the course of the proceedings, the 1 st respondent issued various advisories and in one of the advisories, the Bank was advised to reverse the excess interest applied, ie. the difference between Benchmark Prime Lending Rate [BPLR] and Marginal Cost of Funds Based Lending Rate [MCLR], to the account of the petitioner and also advised the Bank to pay Rs.50,000/- to the petitioner as compensation for the lost time and mental agony, as evident from Ext.P10. The learned Counsel on both sides submit that the Bank has complied with one of the advisories and credited the excess interest [difference of BPLC to NCLR] amount of Rs.45,630.75 to the account of the petitioner on 31.03.2020. 4. As regards the further direction for payment of compensation, the Banking Ombudsman, relying on Ext.R2(a) letter dated 05.03.2011 issued by the Bank, intimating the petitioner that there may be a change of interest, did not further proceed with the complaint preferred by the petitioner and closed the same as per Ext.P11 relying on Clause 13(a) of the Banking Ombudsman Scheme, 2006 (As amended up to July, 01, 2017) [for short, ‘the Scheme, 2006’]. The petitioner would submit that the order issued as per Ext.P11 is absolutely arbitrary and unjust inasmuch as the complaint has been closed without any valid reason. It is under these circumstances that the present writ petition has been filed. 5. The petitioner would submit that the order issued as per Ext.P11 is absolutely arbitrary and unjust inasmuch as the complaint has been closed without any valid reason. It is under these circumstances that the present writ petition has been filed. 5. A detailed counter affidavit has been filed by the 2 nd respondent Bank stating that the award of the Ombudsman is not binding on the petitioner unless the petitioner accept the same in writing and, therefore, there is no cause of action for the petitioner to agitate in the present writ petition against the orders of the Ombudsman and that he will have to agitate the same before the competent Civil Court or other Forums and not in a writ petition. It is further submitted that during the pendency of the writ petition, the loan account was closed on 05.09.2022 and the original title deeds were released to him and, therefore, no further grievance subsists. Relying on Ext.R2(a) letter dated 05.03.2011 it is contended that the 2 nd respondent has duly informed the petitioner about the availability of extension of tenure. 6. In reply to the same, the learned Counsel for the petitioner submits that he has not received Ext.R2(a) letter and that the loan was closed after deducting the amount in the account of the petitioner and that he has received the title deeds of the document under protest. 7. Heard the rival contentions on both sides. 8. A perusal of Exts.P7 & P8 would show that the bank is obliged to inform the customer any change in interest rate by the methods envisged in Ext.P7 ie., through letter, e-mail and SMS and also by displaying the same in the notice board and also in the website of the Bank. The complaint was considered by the 1 st respondent and as revealed from Ext.P10, it was found that the Bank has not informed the borrower or guarantor of the change from BPLR to MCLR as require under the BCSBI Code and hence the Bank has to reverse the excess interest (difference of BPLR to MCLR) of Rs.45.630.75 to the guarantor. It is the admitted case that the said aspect has been accepted by the Bank and has reversed the said amount to the account of the guarantor. It is the admitted case that the said aspect has been accepted by the Bank and has reversed the said amount to the account of the guarantor. Thereafter the complaint was closed as per Ext.P11 relying on Clause 13(a) if the Banking Ombudsman Scheme, 2006 (As amended up to July, 01, 2017). 9. The petitioner contends that due to the closing of the complaint rather than passing an award, he could not file any appeal before the Appellate Authority as provided under the Clause 15 of the Scheme, 2006, wherein complainant could file an appeal only against an award under Clause (6) or rejection of a complaint for the reasons referred to in sub-clause (d) to (g) of Clause 13. 10. The Ombudsman has relied on Clause 13(a) to reject the complaint of the petitioner. Clause 13(a) provides that the Banking Ombudsman may reject a complaint at any state if it appears to him that the complaint made is not on the grounds of complaint referred to in Clause 8 or for the other reasons stated in Clause 13. Clause 8 deals with the grounds of complaint, of which Clause 8(1) provides that any person may file a complaint with the Banking Ombudsman having jurisdiction on grounds alleging deficiency in banking, including internet banking or other services and sub-clause (h) of Clause 8 mandates that delays, non-credit of proceeds to parties’ accounts, non-payment of deposit or non- observance of the Reserve Bank directives, if any, applicable to rate of interest on deposits in any savings, current or other account maintained with a bank is a ground for preferring a complaint before the Banking Ombudsman. That exactly what is done by the petitioner as revealed on a perusal of Ext.P8 and also subsequent proceedings as evidenced from Exts.P10 & P11. When a complaint has been placed regarding the non- observance of the Reserve Bank directives and when in Ext.P10 the Ombudsman has found that there is violation of the same, since the Bank has not informed the borrower or guarantor about the change of BPLR to MCLR and directed the Bank to reverse excess interest of Rs.45,630.75 to the guarantor and that the Bank has complied with the same, I am of the view that the rejection of the complaint relying on Clause 13(a) of the Scheme, 2006 is absolutely without any basis and liable to be interfered with. 11. 11. In the light of the above, I am of the view that the matter requires reconsideration at the hands of the 1 st respondent-Banking Ombudsman and hence the writ petition is disposed of with the following directions: (i) Ext.P11 is set aside. (ii) There will be a direction to the 1 st respondent-Banking Ombudsman to reconsider Ext.P7 complaint preferred by the petitioner after affording sufficient opportunity to the petitioner and the 2 nd respondent Bank to produce necessary documents in evidence to substantiate their contention and after considering the same on merits, fresh decision shall be taken by the 1 st respondent without any delay, at any rate, within an outer limit of three months from the date of receipt of a certified copy of this judgment.