Delhi HC Rebukes RBI Banking Ombudsman for Passing Orders Mechanically without Giving Reasons
Moneylife Digital Team 27 October 2023
Coming down heavily on the banking ombudsman (BO) of the Reserve Bank of India (RBI), the Delhi High Court (HC) says the BO, a quasi-judicial body, is reasonably expected to pass a well-reasoned order and any empty formality deserves to be weeded out. While setting aside three orders of BO, the HC remitted the matter back to the ombudsman for fresh consideration. 
In an order earlier this month, the Delhi HC bench of justice Purushaindra Kumar Kaurav said, "The ombudsman scheme, which seeks to achieve an earnest, cost-effective and speedy resolution of the complaints of consumers against the regulated entities, cannot be reduced to a tantalising promise as it bridges the gap between the regulated entities and countless individuals meandering for justice. While deciding upon the complaint, the Ombudsman must fathom out appropriate reasons for rejection to uphold the integrity of its office and prevent it from becoming a mare's nest." 
"Under the facts of the present case, this court finds that the Ombudsman was required to pass a detailed order after dealing with the submissions made by the complainant in its detailed complaint and also after providing sufficient opportunity of hearing to the respective parties. Since the same has not been done, therefore, the impugned orders dated 30 December 2022, 20 April 2023 and 9 May 2023 are set aside," the bench says.
The HC observed that orders passed by the BO in April and May this year are based on a complaint filed by MB Power (Madhya Pradesh) Ltd on 15 April 2023. "These orders are also wretchedly inadequate, inasmuch, as they do not record into writing the reasons of rejection, assailing the tenets of natural justice principles on the face of it."
The case is related to power purchase agreements (PPAs) signed between MB Power, PTC India Ltd and Torrent Power Ltd. PTC had issued a revolving letter of credit (LoC) through ICICI Bank Ltd in favour of MB Power. As per the PPAs, MB Power supplied power to Torrent, but when the company failed to make payments, MB Power invoked the LoC. However, ICICI Bank refused to make payments by raising some discrepancies. MB Power filed a formal complaint with the principal nodal officer of ICICI Bank with a copy to the BO. 
While taking cognisance of the letter, the BO, on 30 December 2022, sent a pre-emptive rejection to MB Power. On 15 April 2023, the company filed a formal complaint before the ombudsman. However, the BO rejected the complaint. Due to multiple modes of complaints, the BO rejected the complaint of MB Power twice on 20 April 2023 and on 9 May 2023.
MB Power then approached the Delhi HC. The HC issued notices to BO and ICICI Bank. However, since no one appeared on behalf of the BO, the HC decided to proceed ex-parte.
During the hearing, MB Power stated that it had filed its main complaint with ICICI Bank, with a copy to the BO, but it did not file a formal complaint before the ombudsman. However, the BO treated it as a complaint under clause 10(2) of the ombudsman scheme. "Assuming that the said complaint was treated to be the one under Clause 11 of the Ombudsman Scheme, the same ought to have been decided in accordance with the mandate of the scheme. Unfortunately, the complaint was rejected vide order dated 30 December 2022 without assigning any reason, much less a good reason," the HC noted.
It further observed that the ombudsman has not dealt with any of the submissions made on behalf of the company in its complaint. "The order dated 30 December 2022 is seemingly an empty formality bereft of any reasoning. The case of MB Power is that not only the order dated 30 December 2022 is unsustainable in the eyes of the law, rather, even a subsequent comprehensive complaint filed by the petitioner in terms of Clause 11 of the Ombudsman Scheme came to be dismissed without dealing with the averments made in the complaint."
The bench noted that no formal complaint was made to the ombudsman as per the mandate of the ombudsman scheme, rather, only a copy of the complaint made to the regulated entity was sent to the BO. 
Therefore, it says, "Firstly, in the absence of there being a formal complaint made by the petitioner to the Ombudsman, the same ought not to have been dealt with by passing an order without assigning any reasons therein. Secondly, when the detailed complaint was filed by the petitioner before the Ombudsman, the Ombudsman was required to decide the same, giving fair consideration to the principles of natural justice. It is also seen that without seeking any response from ICICI Bank, the formal complaint of the petitioner was also unilaterally rejected by an unreasoned order."
In its first order on 30 December 2022, the BO rejected the 'complaint' only with a comment that there was no deficiency of services. Since the ombudsman has provided no explanation or grounds for the rejection, it only amounts to a mechanical acceptance of the stand taken by ICICI Bank, the HC noted. 
The following two orders are only a reiteration of the earlier stand taken by the BO. In these orders, while classifying the complaint as non-maintainable and closing it, the BO says, "Complaint is non-maintainable under Clause 10 (2) (b) (i) of the Reserve Bank - Integrated Ombudsman Scheme, 2021: the complaint is 'pending before / dealt with / settled by an Ombudsman'."
Justice Kaurav says, in the instant case, it is appalling to see a high-handed approach of the ombudsman in facilitating the resolution of complaints about services rendered by the Bank. "If such an authority passes an order without assigning any reasons, defying the statutory mandate and principles of natural justice, it would only erode public trust in its functioning and consequently undermine the democratic values. Therefore, any attempt of the Ombudsman to wield power in an arbitrary manner is an inexpedient exercise of powers, which deserves to be rebuked."
RBI's banking ombudsman passing such orders is, however, not new. Many bank customers, who copied mails to senior officials of RBI, continue to receive replies similar to what MB Power had received. Even formal complaints lodged with the BO, after following due process, face the same fate. 
As Sucheta Dalal, managing editor of Moneylife, had pointed out in her weekly column, regulators have become post-offices for forwarding any grievance or complaint by a customer and, in the process, have mastered the art of closing the matter without any inquiry. 
"If regulators think they are not answerable to the people and adopt such tactics to avoid action, can one expect any better from the entities that they regulate, lecture to and penalise? Our regulators set an example with such callousness and get away with it, because their administrative ministry and the joint parliamentary committee for finance, which is supposed to oversee them, are just as aloof from the people as regulators sitting in ivory towers and bhavans," she wrote. (Read: RBI and SEBI: Post-office Regulators and the Art of Closing Complaints without Inquiry)
(WP(C) 12682/2023 Date: 12 October 2023)
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Thariyan Tharayil
7 months ago
Banks like ICICI has become very big that nothing happens to their business, even if they choose to ignore or unfairly treat 10000 customers a year. Just try dialing their Customer care You will be lucky if you get to talk to someone even after waiting for half an hour in queue. They dont provide any mechanism for escalation.
8 months ago
To be Frank, most of the bank depositors don't know that there is an institution
like " BANKING OMBUDSMAN" working in R B I. Very few bank employees know about RBI'S BANKING OMBUDSMAN" and
Iignorent about its functions. What is its role in solving the grievances of the Bank customers
Some education is needed to the public at large about its functioning and rendering help to the common public. Even if some person complains, the reply from RBI is generally aristocratic and the actual problem is not solved.
RBI and M F GOI should look into the matter and widely publicise about the
8 months ago
The extant Ombudsman scheme is a useless set up which works like a Post Office, without application of mind. I read somewhere that govt is considering to revamp it. Good Luck.
8 months ago
Moneylife deserves highest appreciation due to highlighting a very pertinent question of snubbing the BO officials suffering from the" Symptoms of Satisfactory Underpermance ", that most government official are habituated leaving aside Good performance. They never think what they do can be done much better from what they did. HC has rightly reprimanded the lackadaisical attitude of BO Officials ignoring the Principles of Natural Justice, an ultimate objectives objectively analyzed to the interests of Complainant. Thanks to Madam Sucheta Dalal.
8 months ago
Less said the better about Banking Ombudsman. It is a mere eye wash and joke on the public. Leave alone resolving issues, lodging a complaint is as complicated as the people sitting as Ombudsman. It is another place crated for retired officials to curry favour and enjoy the loaves of office at the cost of public.
8 months ago
Ombudsman is known not to scrutinize but pass the buck on some other authority.22 ombudsman in India have a dismal rate of success which is less than 1 percent.
Ombudsman should be made accountable for all' complaints received and action should be taken for non decision
Dilip Modi
8 months ago
I have suffered an identical treatment, now 3 times, for the same complaint at the hands of RBI. I have solid evidence of deficiency in service by bank and abuse of RBI Integrated 2021 scheme rules by RBO BO, but all doors are shut within RBI. At the age of 80 where do I go to seek a fair hearing?
8 months ago
Very well put by the court reflecting the ground realities the customers encounter every now and then with all banks without exception. With technology invasion and jane do attitude and insensitivity of Customers because of helplessness to get a complaint redressed by the service providers even from the Ombudsman whether integrated or not , the suffering and losses incurred by the customers get overlooked or rather ignored is the realistic position and the Customers suffer silently without any recourse further. Both banks and their Insurance associates cheat customers as a matter of routine and when taken up with IRDA or Banking Ombudsman or banks ' own grievance mechanism, either the customers get a standardised reply saying that the complaint has been dealt with satisfactorily or the customers helplessness to move further higher ups is fully exploited. The aged customers suffer the worst and both the banks and regulators can afford to ignore them . Even writing to the top executives of banks and the regulators is of no use as seldom they read the letters or even acknowledge it. In this back ground, the High Court's verdict on such issues is welcome but how far the customers grievances
would get redressed is a million dollar question as the Governance in such issues is the missing factor and insensitivity of the authorities is growing day by day. May God save the Customers and hope wiser counsel would prevail upon the Human Resources of both banks and Regulators alike. Happy to note that Money Life acts as a watch dog these days on the entire financial system despite having their own limitations to fight all sorts of complaints and grievances.
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