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2026 DAILYLAW 737 (KER)

R. S Santhosh Kumar v. South Indian Bank Ltd.

2026-03-06

Harisankar V Menon

body2026
JUDGMENT : Harisankar V. Menon, J. The petitioners have obtained certain credit facilities by pledging gold ornaments with the 1 st respondent herein, through its different branches. The petitioners contend that the rate of interest which ought to have been satisfied by them was 14.5% alone; however, the 1 st respondent bank unilaterally increased the same to 17%, in total disregard of the guidelines issued by the Reserve Bank of India. In such circumstances, the petitioners submitted Ext.P1 complaint before Banking Ombudsman (the 4 th respondent herein). The 1 st respondent Bank also submitted their written statement. Later, the Ombudsman issued Ext.P3 dated 18.08.2014, finding that the Bank had sanctioned the cash credit facilities to the petitioners below the BPLR, which was changed to the above base rate, and the same was also communicated to the petitioners from time to time, and therefore, the allegations raised by the petitioners were incorrect. In such circumstances, exercising the power under Clause 13 (1)(a) of the Banking Ombudsman Scheme, 2006 (hereinafter referred to as the ‘Scheme’), the complaint filed by the petitioners was rejected. The afore order was challenged before this Court by filing W.P.(C) No.4151 of 2015, which came to be disposed of by Ext.P5 dated 07.11.2022. While passing the judgment as above, this Court noticed that the power under Clause 13(1)(a) of the Scheme could be exercised only with reference to “frivolous, vexatious, or mala fide” complaints and the Ombudsman never had such a case. Therefore, this Court allowed the afore writ petition, setting aside Ext.P3, directing the Banking Ombudsman to reconsider Ext.P1 complaint and pass “a reasoned order” in accordance with the procedure prescribed. The petitioners state that in the meantime, the Scheme for making a complaint to the Ombudsman, having undergone a sea of change, as evidenced by Ext.P7 Scheme, they submitted a fresh complaint, as evidenced by Ext.P6. They further contend that they were called for a hearing by the Ombudsman, as evidenced by the record of proceedings of the Ombudsman dated 15.02.2023 at Ext.P8. A perusal of the afore proceedings would show that the Ombudsman considered the complaint raised by the petitioners, the response made by the 1 st respondent herein, the points for consideration, and thereafter issued the following directions:- “7. The Ombudsman directed the bank to submit the credit policy of the bank during the tenure of the loan. A perusal of the afore proceedings would show that the Ombudsman considered the complaint raised by the petitioners, the response made by the 1 st respondent herein, the points for consideration, and thereafter issued the following directions:- “7. The Ombudsman directed the bank to submit the credit policy of the bank during the tenure of the loan. The bank was also advised to submit a table showing the interest rate (base rate+spread) for the three loans during the tenure of the loan. The Ombudsman on conclusion informed that the complaint shall be examined on merits taking into account all information submitted in the hearing.” (Underlining supplied) 2. The petitioners state that although they were expecting intimation from the Bank pursuant to the observations of the Ombudsman at paragraph 7 referred to above, or at least a communication from the Ombudsman, they did not receive any communication from the Bank or the Ombudsman. Instead, it is the case of the petitioners that they were served with Ext.P9 dated 18.03.2023 by the Ombudsman, wherein the complaint at Ext.P6 was rejected for the following reasons: - “2. It is observed that the credit facilities sanctioned were at floating rate of interest under Base Rate system during 2011-12. The complainant is contesting the increase in RoI to 17% from 14.5% in 20,11-12. It ls observed that the bank had increased the spread in all Gold Power scheme borrowers in 2011-12 as per its Asset Liability Committee's decision across the board for all borrowers under the said loan product. As per the Base Rate system which was in force during the period of dispute (2011-12), the banks can 'determine the range of spread for a given category/type of loan as per their approved policy. It is observed that the spread was increased by 2.5% and there was no discrimination towards this particular borrower. The revised interest rate was accepted by the borrower in the revised agreement.” It is seeking to challenge Ext.P9 decision of the Banking Ombudsman that the petitioners have instituted the captioned writ petition. 3. I have heard Sri. Jaju Babu, the learned senior counsel instructed by Sri. Nikhil Rajeev, the learned counsel for the petitioner, as well as Sri. Keerthivas Giri, learned counsel for respondents 1 to 3 and Sri. Paulose C. Abraham, the learned counsel for the 4 th respondent herein. 4. 3. I have heard Sri. Jaju Babu, the learned senior counsel instructed by Sri. Nikhil Rajeev, the learned counsel for the petitioner, as well as Sri. Keerthivas Giri, learned counsel for respondents 1 to 3 and Sri. Paulose C. Abraham, the learned counsel for the 4 th respondent herein. 4. The sustainability or otherwise of the findings contained in Ext.P9, issued by the 4 th respondent, is the short issue arising for consideration in the case at hand. 5. As already noticed, the petitioners have approached the Ombudsman complaining about the alleged increase in the rate of interest to 17%. The Ombudsman has considered the issue elaborately, as evidenced by Ext.P8 proceedings. The Ombudsman has issued as many as two directions to the 1 st respondent Bank, for an effective adjudication/resolution of the complaint filed by the petitioners. The first direction was to the 1 st respondent herein to inform about the credit policy of the Bank during the tenure of the loan, the second being the advice to the Bank to produce a table showing the interest (base rate+spread) for the loans obtained by the petitioner. More importantly, the Ombudsman had promised an adjudication on the grievance of the petitioners after receipt of the above information. 6. However, it is noticed that in the impugned order at Ext.P9, the 4 th respondent herein has went on a tangent and found that there is no basis for the alleged discrimination pointed out by the petitioners herein. The said order is silent as to whether the details sought pursuant to Ext.P8 were furnished by the 1 st respondent herein or whether they were also communicated to the petitioners. The petitioners are justified in contending that they ought to have been informed about the details sought for in paragraph 7 by the Ombudsman in Ext.P8 proceedings, before proceeding to finalize the complaint raised by them. 7. Sri. Paulose C. Abraham, the learned counsel for the 4 th respondent, with reference to the nature of the powers of the Ombudsman, made an attempt to sustain the afore order by contending that it is not an adjudication in the true sense that is being carried out by the Ombudsman, but only a “resolution of the complaints”. However, I am not in a position to agree with the afore proposition for more than one reason. However, I am not in a position to agree with the afore proposition for more than one reason. Firstly, as pointed out by the learned senior counsel Sri.Jaju Babu, this Court, while issuing the judgment at Ext.P4, had categorically directed the Ombudsman to pass a “reasoned order”. The Ombudsman has also rightly proceeded in that direction, as seen from Ext.P8. But midway, the Ombudsman proceeded to pass an order in the nature of Ext.P9. Secondly, in my opinion, when the Ombudsman himself admitted that there is a requirement for an adjudication, as seen from the minutes at Ext.P8, he ought to have passed a reasoned order as directed in Ext.P4 judgment. 8. The Apex Court in Kranti Associates Private Limited and Another v. Masood Ahmed Khan and Others [ (2010) 9 SCC 496 ] , has spoken about the necessity of passing reasoned/speaking orders as under: - “47. Summarising the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. (i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. (j) Insistence on reason is a requirement for both judicial accountability and transparency. (k) If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. (l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber- stamp reasons” is not to be equated with a valid decision-making process. (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor.) (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain [(1994) 19 EHRR 553] EHRR, at 562 para 29 and Anya v. University of Oxford [2001 EWCA Civ 405 (CA)], wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”. (o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “due process”.” The afore principles would also apply to an adjudication being carried out by the 4 th respondent Ombudsman. 9. This Court also notices the contention raised by Sri. Paulose C. Abraham, with reference to the averments in paragraph 5 of the counter affidavit filed by the 4threspondent, to contend that whatever details required were already intimated to the Ombudsman. However, the affidavit is silent as to whether these details have been communicated to the petitioners or not. 9. This Court also notices the contention raised by Sri. Paulose C. Abraham, with reference to the averments in paragraph 5 of the counter affidavit filed by the 4threspondent, to contend that whatever details required were already intimated to the Ombudsman. However, the affidavit is silent as to whether these details have been communicated to the petitioners or not. Furthermore, the impugned order at Ext.P9 is also silent as to whether the details have been received from the Bank and have been adjudicated thereafter. Therefore, this contention also cannot be accepted. 10. Before parting with this matter, this Court notices that Ext.P9 order has been issued in the form of a letter and signed by an unknown person attached to the Reserve Bank of India. From a perusal of Ext.P7, this Court notices that a detailed procedure has been prescribed for consideration of the complaints filed before the Ombudsman. The award under Clause 15/rejection of a complaint under Clause 16, etc., requires to be carried out by the Ombudsman. It would be better for the Ombudsman to pass orders, signed and sealed, and not relegate the same to an officer who is stated to be working with the Reserve Bank of India, that too with no name. 11. In such circumstances, I am of the opinion that Ext.P9 order is unsustainable. Therefore, this writ petition would stand allowed, setting aside Ext.P9 directing the 4 th respondent herein to pass fresh orders on the complaint filed by the petitioners at Ext.P6, in accordance with the observations/findings in this judgment, as expeditiously as possible, at any rate within a period of four months from the date of receipt of copy of this judgment. Needless to say, all contentions raised by the respective parties are left open for consideration by the 4 th respondent.