S.J.MUKHOPADHAYA, J.
The 1st respondent filed a complaint under clause 16 (3) of the Banking Ombudsman Scheme, 1995 (hereinafter referred to as the 'Scheme') against the Bank claiming damages for business loss amounting to Rupees One Crore; compensation for mental agony amounting to Rs.5 lakhs; loss on account of credit by the bank in the accounts and excess interest to the extent of Rs.12 lakhs; LIC loss at Rs.4 lakhs and cost of the petition of Rs.5,000/=. The 2nd respondent, Banking Ombudsman, by order dated 17th Nov., 1997, held that it could not proceed in the matter as the Bank had already moved the Debts Recovery Tribunal (hereinafter referred to as the 'Tribunal') for recovery of its debts. The said order was challenged by the 1st respondent in W.P. No.3645/98, which was allowed by learned single Judge vide impugned judgment dated 18th April, 2002, and directed the Banking Ombudsman to expedite the complaint filed by the 1st respondent-writ petitioner by giving sufficient opportunity to submit supporting materials and personal hearing.
The main plea taken by the appellant-Bank is that the 1st respondent borrower cannot be allowed to take advantage of his own wrong having failed to utilise the opportunity to make counter claim u/s 19 (8) of the Recovery of Debts due to Banks and financial Institutions Act, 1993 (hereinafter referred to as the 'DRT Act'). The claim as was made by the Bank before the DRT and the damages as claimed by the 1st respondent, the two claims being interlinked, after decision of DRT the Banking Ombudsman cannot give an independent finding.
2. For disposal of the case it is necessary to notice relevant facts as mentioned hereunder :-
In Feb., 1997, the Bank filed O.A. No.156/97 against the 1st respondent u/s 19 of the DRT Act before the Tribunal for recovery of dues from the 1st respondent. The 1st respondent had no knowledge of the same, who filed a complaint u/s 16 of the Scheme claiming damages as mentioned above. After getting reply from the Bank to the effect that the Bank has already filed an original application before the Tribunal, the Banking Ombudsman, on 17th Nov., 1997, observed that it was not proceeding further in the matter as the Bank has moved before the Tribunal. The said order was challenged by the 1st respondent and allowed by learned single Judge.
3. Learned counsel appearing on behalf of the Bank submitted that the observation of learned single Judge that the Tribunal could not entertain the claim filed by the borrower and that no aspect of defence can be gone into or examined by the Tribunal is erroneous; the Tribunal has jurisdiction to decide the counter claim, including damage, if necessary, after taking into consideration the relevant evidence, if any counter claim is filed u/s 19 (8) of the DRT Act.
Learned counsel placed reliance on Supreme Court decision in Durga Hotel Complex Vs Reserve Bank of India (2007 (5) SCC 120). It was submitted that the Supreme Court held that the Banking Ombudsman serves as an alternative to the adversary system for resolving disputes, that it will be logical to postulate on an interpretation of clause 16 of the Scheme that the Ombudsman loses his jurisdiction over the subject matter on an adversary adjudication forum seizen of the subject matter of the complaint. It is also held that the intention behind incorporating clause 16 (3) (d) is to ensure that the relief the Ombudsman may give may not conflict with a more comprehensive adjudication by Court, Arbitrator, Tribunal or Forum with wider powers. The Supreme Court further held that the expression 'counter claim' in sub-section (8) to (11) of
Section 19 of the DRT Act will take even a claim for damages based on the same transaction and could also include even an independent claim that the respondent before the Tribunal may have against the claimant-financial institution. The decision in Union Bank of India, Calcutta Vs Abhijit Tea Company P. Ltd. & Ors. (2000 (7) SCC 357) and State Bank of India Vs Ranjan Chemicals Ltd. (2007 (1) SCC 97) are also relied on.
Thus, according to the appellant, the Banking Ombudsman has no jurisdiction to adjudicate the complaint of the 1st respondent-borrower.
4. It was argued on behalf of the 1st respondent that the complaint before the Banking Ombudsman was filed in the year 1997 when there was no provision for counter claim.
Section 19 of the DRT Act was amended in the year 2000, but much before the same the Banking Ombudsman had refused to interfere in the matter on the ground of pendency of case before the Tribunal.
In reply, learned counsel for the Bank requested to reject the aforesaid argument for the following reasons :-
a) It is only on 1st Feb., 2001, the original application filed by the Bank was finally closed by the Tribunal as the borrower failed to comply with the conditional order to set aside the ex-parte order.
The 1st respondent has also not filed a written statement even after the year 2000 raising a counter claim and allowed the matter to be decreed ex-parte on account of his default.
The 1st respondent cannot be allowed to take advantage of his own wrong having failed to utilise the opportunity even after the year 2000 by not filing counter claim.
b) It will not be open to the 1st respondent to press his objection and agitate his complaint any longer as the original application has already been closed in the year 2001.
The counter claim of the 1st respondent is by way of damage and reversal interest. It has been held by Supreme Court in State Bank of India Vs Ranjan Chemicals Ltd. (2007 (1) SCC 97) that in such cases, the cause of action for recovery suit of the Bank and the counter claim of the borrower are referrable to cause of action arising out of the same transaction between the Bank and the borrower; that the decree of one or the other would depend upon ascertainment of the rights and obligations arising out of the loan transaction and the state of the loan account. It is held that two claims are inextricably interlinked. In the said case, decision in Union Bank of India, Calcutta Vs Abhijit Tea Company P. Ltd. & Ors. (2000 (7) SCC 357) has been followed.
5. We have heard the learned counsel for the parties and perused the records.
6. The point that arose for consideration before learned single Judge are :-
i) Whether the impugned proceedings of the 1st respondent declining to entertain the complaint is sustainable in law.
ii)Whether the proceedings for recovery of debts initiated by the 2nd respondent-Bank on the file of the Debt Recovery Tribunal, excludes the jurisdiction of the 1st respondent-Ombudsman.
iii)To what relief, if any, the petitioner is entitled to.
7. For taking a decision on the issue, learned single Judge rightly noticed the broad outline of the complaint submitted by the petitioner, relevant of which reads as follows :-
The Bank authorities failed to adjust the amounts to the proper head of account viz., packing credit account and adjusted towards TOD/CC accounts which bear higher interest and thereby allowed the interest to increase and also stopped further release of funds under P.C. Account as a result, we incurred heavy loss in the business and lost reputation. Though the error was brought to the notice of the bank officials several times, they have not cared to adjust the amount to the relevant head of account.
Because of wrong credit by the Bank heavy interest was charged under all accounts.
Due to non co-operation by the Bank the company incurred direct loss of Rs.1.00 Crore in our business.
On account of the mistake done by the Bank, I lost LIC policy for Rs.4,00,000/=.
On account of the lethargic attitude of the bank, lost reputation in foreign countries and in local market.
10. The relief prayed for in the complaint is as follows :-
(i)Business loss of Rs.1,00,00,000/=.
(ii)Compensation for mental agony Rs.5,00,000/=.
(iii)Because of wrong credit by the bank in all accounts, excess interest paid approximately Rs.12,00,000/=.
(iv)LIC loss Rs.4,00,000/=.
(v)Cost of petition Rs.5,000/=.
8. As against the detail set out in the complaint, the Bank instituted proceeding before the Tribunal, Chennai, with respect to the alleged outstanding dues against the 1st respondent u/s 17 of the DRT Act. When such claim was filed in 1997, the only claim that could be agitated or sought to be enforced is for recovery of the debts due to the Banks and financial institutions and not any damage or compensation for omission or commission on the part of the Bank by the customer of the Bank. It is only the bank that could initiate action for recovery of the debts, besides ancillary reliefs in order to see that the Banks relief for recovery of debt becomes an executable decree.
9.
Section 2 (g) defines the expression debt. The claim for damages or compensation or set off for alleged commission and omission on the part of the Bank could not have been the subject matter of the proceeding u/s 17 nor the 1st respondent could resist the claim of the Bank on the basis of any commission or omission on the part of the bank in the year 1997 when the OA was filed. At that time, if at all, what the Tribunal could adjudicate is the total quantum of money advanced, the total liability, less the amount, if any, already paid and not any other aspect or defence could be gone into or examined by the Tribunal. It is not as if the complaint relates to or raised as a counter claim and set off. Therefore, in the year 1997, when the Banking Ombudsman refused to entertain the application, the pendency of the proceeding initiated u/s 17 could not have been relied upon to refuse the complaint, claim made by Bank u/s 17 being totally distinct and separate from the contents of the complaint. At that relevant point of time in the year 1997, the scope of the two proceedings were distinct and separate.
10. In terms of Section 35-A read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India framed the scheme, The Banking Ombudsman Scheme, 1995, which came into effect from 15th June, 1995.
Section 16 of the Scheme provides for redressal of grievance against a Bank before the Banking Ombudsman. Clause 17 enables the Banking Ombudsman to call for information. Clauses 12 and 13 provides as to the powers of the Banking Ombudsman as well as its duties, which include the statutory obligation/duty to receive complaints relating to the provisions of the banking service as well as to consider such complaint and facilitate their satisfaction, on settlement by agreement, by making recommendation or award in accordance with the Scheme. Clause 13 in Chapter III of the Scheme prescribes the specific ambit of the authority, which reads as follows :-
13. SPECIFIC AMBIT OF AUTHORITY :
As regards banking services, the Banking Ombudsman's authority will include :-
(a) All complaints concerning deficiency in service such as :-
(i)Non-payment/inordinate delay in the payment of collection of cheques, drafts/bills etc.
(ii)Non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof.
(iii)Non-issue of drafts to customers and others.
(iv)Non-adherence to prescribed working hours by branches.
(v)Failure to honour guarantee/letter of credit commitments by banks.
(vi)Claims in respect of unauthorised or fraudulent withdrawals from deposit accounts, etc.
(vii) Complaints pertaining to the operations in any savings, current or any other account maintained with a bank, such as 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.
(viii) Complaints from exporters in India such as delays in receipt of export proceeds, handling of export bills, collection of bills, etc., provided the said complaints pertain to the bank's operations in India; and
(ix) Complaints from non-resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank related matters.
b) Complaints concerning Loans and Advances only insofar as they relate to :-
i)Non-observance of Reserve Bank Directives on interest rates.
ii)Delays in sanction/non-observance of prescribed time schedule for disposal of loan applications; and
iii)Non-observance of any other directions or instructions of the Reserve Bank, as may be specified for this purpose from time to time.
11. Clause 18 provides for settlement of complaints by agreement and Clause 19 provides for recommendation by settlement. The Bank relied on clause 16 (3) (d), which provision provides that no complaint to the Banking Ombudsman shall lie unless the complaint is in the same subject matter, for which no proceeding before any Court, Tribunal, Arbitrator or any other Forum is pending or a decree or award or order of dismissal has already been passed by any such Court, Tribunal, Arbitrator or Forum. But by all standards or reasons, the proceeding initiated by the Bank for recovery of the debts due to it cannot be held to be the subject matter of the complaint made by the 1st respondent before the Banking Ombudsman, nor such a complaint could be maintained by either side before the Tribunal. There could be neither a claim for damage or deficiency or omission of the bank in terms with
Sections 17 and 19 of the DRT Act as in 1997. Though sub-section (6) to
Section 19 provides for the defendant to claim set off against the balance due of any ascertained sum of the money legally recoverable by him from such applicant, the defendant may present written statement containing particulars of debts to be set off. The set off being different from making an independent claim towards compensation or damages for loss caused by deficiency or omission or arbitrary refusal to follow RBI guidelines or alike, learned single Judge rightly allowed the claim made by the 1st respondent.
12. By way of repetition we may remind that the complaint of the 1st respondent made under clause 16 of the Scheme was not entertained by the Banking Ombudsman by order dated 17th Nov., 1997. We are supposed to answer the issue on the basis of the law as was existing in the year 1997 when such rejection was made and, therefore, the Bank cannot take advantage of sub-section (8) to
Section 19, which was introduced subsequently by Amending Act, 2000.
13. In view of the law as was in vogue at the time when the order of rejection was passed (in 1997), we hold that the proceeding dated 17th Nov., 1997, of the Banking Ombudsman, declining to entertain the complaint, as unsustainable in law and that the proceeding for recovery of debts initiated by the Bank on the file of the Tribunal did not exclude the jurisdiction of the Banking Ombudsman in 1997.
We, having concurred with the findings of learned single Judge and there being no merit, the writ appeal is dismissed. But there shall be no order as to costs.
GLN To
1. Banking Ombudsman Office of the Banking Ombudsman Chellammal (VIII floor) 11/11-A, Sri Thiagaraya Road T.Nagar, Chennai 600 017.
2. Export Credit Guarantee Corporation of India Spencer Tower, 7th Floor 770-A, Anna Salai Chennai 2