2000 (9) TMI 977 - HC - Companies Law

Court Orders Bank to Comply with Ombudsman's Award, Emphasizing Enforceability and Compliance

The court directed the third respondent bank to comply with the Banking Ombudsman's award within four weeks, emphasizing the enforceability and compliance ... Reserve Bank of India - Powers to give directions Issues Involved:1. Legality of the Banking Ombudsman's order directing payment with surety.2. Compliance with the Banking Ombudsman's award.3. Statutory force of the Banking Ombudsman Scheme.4. Enforceability of the award in the writ petition.Detailed Analysis:1. Legality of the Banking Ombudsman's order directing payment with surety:The petitioner filed a writ of mandamus challenging the Banking Ombudsman's order dated 23-5-1998, which directed the third respondent bank to pay Rs. 13,07,135 to the petitioner upon furnishing one surety. The petitioner argued that the direction to release the amount upon furnishing surety was arbitrary and illegal, as the amount belonged to the petitioner, and thus, there should be no requirement for surety. The petitioner sought the payment of the amount with interest from 18-12-1996 at 18% per annum without the condition of furnishing surety.2. Compliance with the Banking Ombudsman's award:The third respondent bank contended that the award was not accepted and sought permission from the Reserve Bank of India (RBI) to challenge it. The bank argued that the award was illegal and contrary to law, claiming no negligence on its part. The bank referenced the Supreme Court decision in Indian Overseas Bank v. Industrial Chain Concern [1990] 1 SCC 484 to support its stance. The RBI stated that the Banking Ombudsman Scheme, 1995, required the award to be complied with within one month from the receipt of the award. The petitioner had accepted the award, making it binding on the petitioner.3. Statutory force of the Banking Ombudsman Scheme:The RBI framed the Banking Ombudsman Scheme, 1995, under section 35A of the Banking Regulation Act, 1949. This section empowers the RBI to issue directions to banking companies in the public interest, in the interest of banking policy, or to prevent detrimental conduct. Directions issued under this section have statutory force and are binding on banking companies. The scheme allows the Banking Ombudsman to pass awards after considering complaints, and such awards are binding if the complainant accepts them.4. Enforceability of the award in the writ petition:The court examined whether the award passed by the Banking Ombudsman could be enforced through a writ petition. The court noted that the scheme had statutory force, and the award became binding upon acceptance by the petitioner. The court emphasized that there was no provision for challenging the award within the scheme. The court referenced the Supreme Court decision in Canara Bank v. Mangesh Sitaram Chandekar AIR 1998 SC 3000, which affirmed that circulars issued under section 21 or 35 of the Banking Regulation Act are statutory and binding. The court concluded that the award had to be complied with unless challenged before an appropriate authority or court. The court directed the third respondent to comply with the award within four weeks, pending any directions from the RBI.Conclusion:The court disposed of the writ petition, directing the third respondent bank to comply with the Banking Ombudsman's award within four weeks, while noting that the RBI's directions were pending. The court did not delve into the legality of the award itself, focusing on the enforceability and compliance of the award as per the statutory scheme.