Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Tel) 8734

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Nagesh Bheemapaka, J
Vijayakrishna Spices Private Limited – Appellant
Versus
Canara Bank Limited – Respondent
WRIT PETITION No. 18933 OF 2025

Advocates:
For the Appellants/Petitioners: B. Krishna Reddy
For the Respondents: A. Krishnam Raju, N. Legal

Writ jurisdiction under Article 226 is not maintainable for adjudicating commercial disputes arising from banking contracts involving complex factual determinations such as penalty disclosures and contractual interpretations, particularly when an agreed arbitration mechanism exists and the petitioner has already exhausted the RBI Ombudsman process.

Headnote:(A) Banking Regulation Act, 1949 - Section 35A - Reserve Bank Integrated Ombudsman Scheme, 2021 - Clause 14(9)(a), 16(1)(a) - Writ jurisdiction - Maintainability - Dispute regarding bank prepayment penalty and recovery of concessions - Petitioner challenged deductions post-takeover of credit facilities - Court held that disputes arising from commercial contracts involving interpretation of sanction letters, banking practices, and factual determination of disclosure are not suitable for adjudication under Article 226 of the Constitution - Parties are bound by the arbitration clause in the Common Hypothecation Agreement - Petitioner already invoked the Ombudsman mechanism and failed to challenge the Ombudsman's order - Writ petition dismissed with liberty to move the civil court or arbitral forum. (Paras 12, 14, 15, 16)

(B) Writ Jurisdiction - Commercial contracts - Disputed questions of fact - Exercise of extraordinary jurisdiction under Article 226 is not appropriate where the remedy lies in a civil suit or arbitration particularly when the contract specifically mandates arbitration for resolution of disputes. (Paras 13, 14)

Facts of the case:
The petitioner, a spice powder manufacturing company, held working capital facilities with the respondent bank. Upon finding the sanctioned limits insufficient, the petitioner opted to transfer its credit facility to another bank. The respondent bank consequently deducted a 2% prepayment penalty, withdrew interest concessions on packing credit, and recovered forex rate concessions. The petitioner sought relief through the RBI Ombudsman, who partially granted the claim regarding forex charges but closed the complaint. The petitioner subsequently filed this writ petition challenging these deductions.

Findings of Court:
The court found that the dispute involved complex contractual interpretations and disputed questions of fact, rendering it unsuitable for writ jurisdiction under Article 226, especially as the agreement contained a binding arbitration clause.

Issues: Whether the writ petition is maintainable for a commercial dispute arising from contractual terms, and whether the court should interfere when an alternative dispute resolution mechanism (Ombudsman) has already been exhausted by the party.

Ratio Decidendi: Writ court exercise is not appropriate where the resolution depends on the interpretation of commercial contracts, disputed factual evidence regarding the disclosure of penalty terms, and where valid alternate forums like arbitration have been agreed upon by the parties.

Result: Writ petition dismissed.

O R D E R:

Petitioner company is stated to be engaged in the manufacture and export of spice powders and has been banking with the 1st respondent Canara Bank for more than two decades. It is stated, the 1st respondent enhanced the working capital limit to Rs.225 Crores through sanction letter dated 05.01.2024 against petitioner’s request for Rs.300 Crores. As the sanctioned limit was insufficient for its business expansion, petitioner is stated to have approached State Bank of India for higher working capital limits. According to petitioner, State Bank of India sanctioned the required facility and petitioner pre closed the working capital facility with the 1st respondent on 28.03.2024 by paying the outstanding amount of Rs.166,65,63,557/-.

It is further stated, on 30.03.2024, the 1st respondent deducted pre-payment penalty at 2% on the outstanding amount amounting to Rs.3,33,31,272/- along with GST of Rs.59,99,628.96 totalling Rs.3,93,30,900/-. Petitioner also alleges that the 1st respondent withdrew interest concessions granted under the Packing Credit Facility amounting to Rs.13,55,156/- and Cash Credit Facility amounting to Rs.70,056/- and also recovered Rs.57,82,581/- towards concession on FOREX rate as reflected in the bank statement.

Aggrieved by the deductions, representations dated 10.04.2024 and 06.05.2024 were submitted requesting withdrawal of the decision and refund of the deducted amounts. The 1st respondent replied through letters dated 20.04.2024 and 17.05.2024. As the matter was not resolved, petitioner approached the 3rd respondent Reserve Bank of India Ombudsman by filing a complaint on 28.08.2024. The 3rd respondent disposed of the complaint by directing refund of only the FOREX concession amount while not examining the other issues raised by petitioner. According to petitioner, the order of the Ombudsman violates the principles of natural justice and the Wednesbury principle governing exercise of discretion. Reliance is placed on the decision of the High Court of Delhi in Hare Ram Singh v. RBI (W.P.(C) No.13497 of 2022 dated 18.11.2024) wherein orders of the Ombudsman were set aside for failure to consider the entire controversy.

According to petitioner, deduction without prior notice violates principles of natural justice and the order of the 3rd respondent is legally not sustainable. The guidelines available in the public domain as of January 2024 did not specify 2% penalty for prepayment of working capital loans and that revised guidelines dated 01.04.2024 subsequently introduced clarity regarding such penalty. Petitioner therefore, contends that imposition of penalty based on later guidelines amounts to retrospective application. Petitioner also relies upon Section 29 of the Indian Contract Act, 1872 to contend that vague contractual clauses are void.

Reliance is placed on the judgment of the High Court of Telangana in Anasuya vs. V.M. Sateesh¹2025 (3) ALD 447 (TS) (DB), following the Supreme Court decision in Subodh Kumar Singh Rathour v. Chief Executive Officer ²2024 SCC OnLine SC 1682, wherein it was held that principles of natural justice apply even in contractual matters and writ jurisdiction can be invoked when such principles are violated.

Petitioner contends that bank failed to disclose the true nature of penalty and induced them to enter the agreement under the belief that pre-closure penalty would not apply to a working capital loan. Petitioner relies upon the judgment of the Hon’ble Supreme Court in Hongkong & Shanghai Banking Corporation Limited v Awaz³(2025) 3 SCC 52, wherein it was held that when customers are made aware of the most important terms and conditions including rate of interest they have no cause of action. Petitioner contends that since such important terms were not disclosed in the present case, deduction of amounts from petitioner’s account is arbitrary.

It is further submitted that Reserve Bank of India issued Circular dated 18.08.2023 on Fair Lending Practi

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2026 Supreme(Online)(Tel) 8734

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABADNagesh Bheemapaka, JVijayakrishna Spices Private Limited – AppellantVersusCanara Bank Limited – RespondentWRIT PETITION No. 18933 OF 2025

Cases Referred (4)

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Nagesh Bheemapaka, J
Vijayakrishna Spices Private Limited – Appellant
Versus
Canara Bank Limited – Respondent
WRIT PETITION No. 18933 OF 2025