2007 (3) TMI 379 - SC - Companies Law

Whether the subsequent filing of the claim by the Bank before the Debts Recovery Tribunal would oust the jurisdiction of the Banking Ombudsman in a complaint earlier instituted before him? Whether the claims put forward before the Banking Ombudsman in its complaint by the appellant fell within the jurisdiction of the Ombudsman under the Scheme and consequently whether the directions issued by him were within his province under the Scheme? Held that - Appeal dismissed. The High Court was justified in interfering with the award of the Banking Ombudsman. We therefore answer both the questions raised on behalf of the appellant against the appellant and in favour of the respondent-Bank.

Summary

Issues Involved:
1. Jurisdiction of the Banking Ombudsman in light of subsequent proceedings before the Debts Recovery Tribunal.
2. Scope of the Banking Ombudsman's authority under the Banking Ombudsman Scheme, 1995.

Detailed Analysis:

Jurisdiction of the Banking Ombudsman:
- The appellant, a partnership firm, sought a loan from the respondent-Bank, which was partially disbursed. The appellant later filed a complaint with the Banking Ombudsman alleging unauthorized withdrawals and delay in loan disbursement.
- The respondent-Bank contested the jurisdiction of the Banking Ombudsman, arguing that the matter was pending before the Debts Recovery Tribunal.
- The Banking Ombudsman proceeded with the complaint and passed an award in favor of the appellant.
- The respondent-Bank challenged this award in the High Court, which quashed the award on the ground that the Banking Ombudsman lost jurisdiction once the Bank approached the Debts Recovery Tribunal.
- The Supreme Court upheld the High Court's decision, clarifying that the Banking Ombudsman loses jurisdiction when the subject-matter of the complaint is taken to a Court, Tribunal, or other competent forum. The Court emphasized that the Ombudsman must retain jurisdiction throughout the proceedings to render a valid award.

Scope of the Banking Ombudsman's Authority:
- The appellant's complaint included claims related to unauthorized withdrawals and delays in loan disbursement, seeking further credit and compensation for losses.
- The Supreme Court examined the relevant provisions of the Banking Ombudsman Scheme, 1995, particularly Clause 13(b), which limits the Ombudsman's authority to specific issues related to loans and advances, such as non-observance of Reserve Bank directives on interest rates and delays in sanctioning loans.
- The Court found that the Banking Ombudsman exceeded his jurisdiction by directing the Bank to disburse additional funds, set repayment schedules, and alter financing ratios. These directions were beyond the scope of Clause 13(b) and not supported by any Reserve Bank directives.
- The High Court's conclusion that the Banking Ombudsman had exceeded his jurisdiction was affirmed by the Supreme Court, which noted that the Ombudsman's role is non-adversarial and limited to facilitating the resolution of complaints within the specified ambit of authority.

Conclusion:
- The Supreme Court dismissed the appeal, confirming that the Banking Ombudsman lost jurisdiction once the matter was taken to the Debts Recovery Tribunal and that the directions issued by the Ombudsman were beyond his authority under the Banking Ombudsman Scheme, 1995. The questions of law were answered against the appellant and in favor of the respondent-Bank.