Writ scrutiny of Banking Ombudsman closure upheld where interest hike, charges and non-speaking disposal were found unfair.

A writ petition challenging a Banking Ombudsman's closure order was held maintainable because the impugned action arose under the Banking Ombudsman Scheme, 2006 and was amenable to writ scrutiny. The Court noted that unilateral enhancement of interest and levy of annual maintenance charges were not justified where the lender could not show a transparent, objective and consensual basis, valid notice, or acceptance consistent with RBI directions on fairness and disclosure. It also found that the complaint was closed without effective opportunity to object and without a reasoned determination, treating the closure as mechanical rather than a speaking order. The closure order was therefore set aside and the matter remitted for fresh consideration after hearing both sides.

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Issues: (i) Whether the writ petition was maintainable to challenge the Banking Ombudsman's order notwithstanding the private status of the bank; (ii) whether the unilateral increase in interest and levy of annual maintenance charges were permissible under the loan contract and RBI guidelines; (iii) whether the Banking Ombudsman's closure of the complaint complied with the requirements of notice, opportunity of objection, and a reasoned decision.

Issue (i): Whether the writ petition was maintainable to challenge the Banking Ombudsman's order notwithstanding the private status of the bank.

Analysis: The challenge was directed primarily against the order of the Banking Ombudsman passed in exercise of powers under the Banking Ombudsman Scheme, 2006, and not merely against the private bank as such. A decision rendered in that statutory framework was held to be amenable to writ scrutiny.

Conclusion: The objection to maintainability was rejected, and the writ petition was held maintainable.

Issue (ii): Whether the unilateral increase in interest and levy of annual maintenance charges were permissible under the loan contract and RBI guidelines.

Analysis: The loan was sanctioned at a stated variable rate, but the material on record did not establish a transparent, objective, and mutually acceptable method for the substantial increase in the effective rate of interest. The Court found that the lender had charged a materially higher rate than the agreed rate, without proof of valid notice or consent, and had also levied annual maintenance charges not shown to have been contractually accepted. The RBI circulars and directions relied upon required transparency, prior communication, and avoidance of usurious charges.

Conclusion: The bank's enhancement of interest and levy of annual maintenance charges were held to be arbitrary and not justified.

Issue (iii): Whether the Banking Ombudsman's closure of the complaint complied with the requirements of notice, opportunity of objection, and a reasoned decision.

Analysis: The complaint was closed without the petitioner being given an effective opportunity to file objections to the bank's reply, and the closure communication did not disclose any reasoned adjudication. The order was treated as a mechanical closure rather than a speaking determination under the Scheme, 2006.

Conclusion: The Ombudsman's closure order was set aside for breach of procedural fairness and non-application of mind.

Final Conclusion: The complaint was remitted for fresh consideration by the Banking Ombudsman after affording both sides an opportunity of hearing and passing a speaking order within the time directed by the Court.

Ratio Decidendi: A statutory complaint under the Banking Ombudsman framework cannot be closed without affording an effective opportunity to contest the bank's reply, and any substantial revision in interest or ancillary charges must rest on a transparent, objective, and consensual basis consistent with RBI norms.

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