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2004 Supreme(Pat) 1153
PATNA HIGH COURT
Nagendra Rai and S.N.Hussain JJ.
Durga Hotel Complex
Versus
Reserve Bank Of India
Letters Patent Appeal No. 309 of 2004 ; 313 of 2004 ;
Decided On : NOVEMBER 23, 2004
The court emphasized the limited jurisdiction of the Banking Ombudsman in addressing loan disputes and the need to transfer matters to the Debt Recovery Tribunal if the subject-matter is the same.
Headnote:
Banking Ombudsman Scheme - Loan Dispute - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - sec. 35A of the Banking Regulation Act - Clause 16 of the Banking Ombudsman Scheme, 1995
Fact of the Case:
The appellant, a partnership firm, sought a loan from the State Bank of India for a construction project. The bank initially sanctioned a loan but later decided to call it back, leading to a dispute. The appellant filed a complaint under the Banking Ombudsman Scheme, seeking various reliefs.
Finding of the Court:
The court found that the directions issued by the Banking Ombudsman were beyond the power vested in him under the Scheme. It also held that the proceeding before the Banking Ombudsman was not maintainable due to the pending proceeding under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Issues: The issues involved the authority of the Banking Ombudsman, the maintainability of the proceeding, and the scope of the Scheme in addressing loan disputes.
Ratio Decidendi: The court held that if the subject-matter of the proceeding before the Tribunal under the Act and the subject-matter in the complaint is the same, then the proceeding has to be transferred to the Debt Recovery Tribunal. It also emphasized the limited jurisdiction of the Banking Ombudsman in addressing loan disputes.
Final Decision: Both the appeals were dismissed.
1. Both the appeals have been heard together and are being disposedby this common order.
2. Both the appeals arise out of common order dated 23-1-2004 passed by the learned single Judge, whereby he has set aside the award dated 30-3-2002 passed by the Banking Ombudsman on the ground that the relief granted by him is beyond the power vested In him. Two writ applications were filed before the learned single Judge. C.W.J.C. No. 10756 of 2002 was filed by the appellant M/s. Durga Hotel Complex against the respondent State Bank of India to carry out the directions given by the Banking Ombudsman by his order dated 30th March. 2002. C.W.J.C. No. 1882 of 2003 was filed by the Respondent State Bank of India challenging the aforesaid award.
3. Learned single Judge heard both the matters together and dismissed the writ application filed by the appellant and allowed the writ application filed by the Bank. L.P.A. No. 313 of 2004 arises out of an order passed In C.W.J.C. No. 1882 of 2003 and L.P.A. No. 309 of 2004 arises out of an order passed In C.W.J.C. No. 10756 of 2002. 4. Admitted fact Is that the appellant; a partnership firm, approached the State Bank of India for grant of loan In the year 1995 for construction of hotel-cum-shopping complex with the total project cost of Rs. 33.13 lacs. The Zonal Office of the Bank rejected the said proposal. The appellant there-after resubmitted the proposal with necessary amendments and the Zonal Office of the Bank sanctioned Rs. 15 lacs on.24.4-1997. After the appellant complied with requisite formalities, a sum of Rs. 11,58,750/ was advanced to him till December, 1998 when the Bank decided to call back the loan and stopped further advancement of loan. These decisions were taken by the Bank on the grounds that there was diversion of fund and unilateral enlargement of project size with material deviations in the parameter of construction. The appellant thereafter submitted another revised project of Rs. 75 lacs. The Advisory Committee of the Bank recommended the case of the appellant favourably. However, the Respondent Bank having considered the entire matter including its past conduct and other defects decided not to advance loan to the appellant and call back the loan and it further decided to Initiate a proceeding for recovery 61 the loan and the said order was communicated to the appellant on 28-6-1999. The Bank later on served legal notice recalling the loan with interest of Rs. 14.30.876.00 . The Bank also filed Case No. 157 of 2000 before the Debt Recovery Tribunal under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, hereinafter referred to as the Act, which is pending. The appellant also filed Complaint Case No. 88 of 2000 before the Banking Ombuds- man created u/s. 35A of the Banking Regulation Act, who by the impugned order allowed the claim of the appellant and issued directions as follows :-
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(1) Balance amount of Rs. 3,41,250.00 as sanctioned earlier as a loan be disbursed.
(2) The recommendation of the Committee regarding revised project proposal of Rs. 75 lacs be honoured,
(3) Financial ratio 75:25 be maintained between the Bank and the complainant.
(4) Repayment is to be made within seven years excluding one year moratorium.
(5) The period of moratorium be enhanced according to the Rules arid interest be charged strictly in accordance with guidelines issued by the Reserve Bank of India.
4. The Bank thereafter referred the matter to the Reserve Bank of I ndia for guidelines regarding implementation of the award of the learned Ombudsman. The Reserve Bank of India permitted the respondent Bank to challenge the award and thereafter the Bank filed the case. In the meantime, the appellant also filed writ application for implementation of the award, as stated above.
5. The appellant filed the complaint under Clause 16 of the Banking Ombudsman Scheme, 1995, hereinafter referred to as the Scheme claiming following reliefs :-
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(1) The Bank
