Back
2009 Supreme(Online)(KER) 40988
HIGH COURT OF KERALA
S. SIRI JAGAN, J
ABRAHAM REJI MATHEW – Appellant
Versus
THE SOUTH INDIAN BANK LTD – Respondent
WP(C)/8606/2005
SRI.V.VENUGOPALAN NAIR, SRI.S.HARIKRISHNAN, SRI.GEORGE VARGHESE (MANACHIRACKEL), SRI.C.M.ANDREWS
The court reaffirmed that disputes over the legitimacy of charges created under a power of attorney must be resolved in civil court, not through the writ jurisdiction.
Headnote:
Banking - Power of Attorney - Banking Ombudsman Scheme 2002 - The court upheld the Ombudsman’s decision, indicating the legality of the bank's actions under the power of attorney, and that the dispute requires adjudication in civil court.
Fact of the Case:
The petitioners challenged the Banking Ombudsman's decision rejecting their complaint regarding the appropriation of their Fixed Deposits by the bank due to a default in a loan obtained by their father, who misused a power of attorney granted by the petitioners.
Finding of the Court:
The court found that the Ombudsman acted lawfully based on a report from the RBI which confirmed the bank's actions were not in violation of banking practices, and the petitioners had not raised objections during the loan sanction process.
Issues: Whether the Banking Ombudsman’s decision to decline relief to the petitioners regarding their Fixed Deposits was justified.
Ratio Decidendi: The creation of a charge over the Fixed Deposits by the power of attorney holder was legally valid, and the decision to uphold the Ombudsman's conclusions was justified based on the absence of errors or legal faults in its assessment.
Final Decision: Writ petition dismissed for lack of merit.
J U D G M E N T
NONE APPEARS FOR THE PETITIONERS. THE PETITIONERS ARE ALSO ABSENT.
DISMISSED FOR DEFAULT.
1-9-2008. SD/- S. SIRI JAGAN, JUDGE.
[TRUE COPY] P.S TO JUDGE.
C.K.ABDUL REHIM, J.
---------------------------------- W.P.(C).No.8606 OF 2005 ----------------------------------
Dated this the day of November, 2009
J U D G M E N T
----------------------
1. The petitioners are brothers employed in Qatar since the last several years. The challenge in this writ petition is against Ext.P7 order of the 4th respondent, Banking Ombudsman, rejecting a complaint submitted by the petitioners against respondents 1 to 3. The petitioners were holding various Fixed Deposits with respondent Nos.2 and 3 Banks, in their individual name as well as in the joint name of the petitioners along with their father and mother. Ext.P1 is a power of attorney executed by the petitioners in favour of their father Sri.K.M.Abraham, inter alia authorizing to take loan or advances on behalf of the petitioners from the South Indian Bank Limited and to create charge on the deposits held with the Bank for availing advance from the Bank in the name of the petitioners or in other names. According to the petitioners the intention in creating such a power of attorney was only to enable their father to avail loan in case of emergency. The complaint of the petitioners is that their father who was one of the Directors of a company incorporated had availed loan from the said Bank by pledging Fixed Deposits W.P.(C).8606/05-Y 2 misutilising Ext.P1 Power of Attorney and the Bank had appropriated Fixed Deposits held by the petitioners, on default committed by the company in repaying the loan amounts, without knowledge or consent of the petitioners. The petitioners submitted Ext.P2 complaint in this regard to the 4th respondent. Thereafter the Bank had intimated the petitioners that the Fixed Deposits can be reinstated only if the petitioners make payment of the entire arrears due in the loan account. Followed by this the 4th respondent had issued Ext.P4 proceedings to the petitioners informing that since the Bank had already replied on the issue there is no need for further intervention by the 4th respondent.
2. The petitioners have approached this Court challenging Ext.P4, and this Court was pleased to dispose of the writ petition directing the 4th respondent to adjudicate on Ext.P2 complaint on merits. Thereafter the 4th respondent afforded a personal hearing and the Power of Attorney holder of the petitioners was heard. Ext.P7 is the proceedings issued by the 4th respondent after hearing all the parties. It is revealed that the 4th respondent had referred the matter to the Legal Department of the RBI Central Office and the report received from the Legal Department of the RBI confirmed that the Bank’s action is not in violation of any law or banking practice, since the W.P.(C).8606/05-Y 3 Bank had obtained loan documents executed by the father of the petitioners on the basis of the Power of Attorney as collateral security after obtaining signature from the Power of Attorney on all relevant documents. On the basis of the legal opinion of the RBI the Ombudsman declined further interference.
3. According to the petitioners Ext.P7 decision of the 4th respondent is highly illegal, improper and erroneous. The Ombudsman ought to have interfered in the matter and directed reinstatement of the Fixed Deposits because the same was appropriated without knowledge and consent of the petitioners. The petitioners further contented that Ext.P1 Power of Attorney have not created any valid authorisation for pledging of the Fixed Deposits which stands in the name of the petitioners. It is also contended that the Bank have appropriated even Fixed Deposits made in the joint name of the petitioners and their mother, who had not even issued any Power of Attorney.
4. In the counter affidavit filed by the 3rd respondent it is stated that the loan sanctioned to the company has been collaterally secured with
