Delhi High Court Rebukes RBI Ombudsman For Passing Unreasoned Order, Says Ombudsman Scheme Can’t Be Reduced To A ‘Tantalizing Promise’

The Delhi High Court has rebuked the RBI Ombudsman for passing an unreasoned order, observing that the Reserve Bank- Integrated Ombudsman Scheme, 2021, under which the official is appointed, cannot be reduced to a “tantalizing promise.”

“The RBI Ombudsman, appointed by the RBI, is a person who understands the business of banking, the practices involved therein, the duties of the bank and the possible infirmities in the system. It is, therefore, observed that the Ombudsman is entrusted to carry out quasi-judicial functions with utmost diligence in accordance with the extant regulations,” Justice Purushaindra Kumar Kaurav said.

An RBI Ombudsman is a senior official of RBI appointed to redress the complaints from customers against “deficiency in service”, as defined under Clause 3(1)(g) of the 2021 Scheme.

The court observed that the Ombudsman is reasonably expected to pass a well-reasoned order and any empty formality deserves to be weeded out.

“The adherence to the principles of natural justice is the cornerstone of a just and fair legal system as it also proves to be a quintessential safeguard against any adjudicatory arbitrariness in judicial or administrative proceedings. Therefore, undeniably, the Ombudsman is duty bound to pass a reasoned order which would eventually foster a greater transparency in the decision-making process and also inspire the confidence of the common man in efficient dispute resolution through such bodies,” the court said.

It added that the Ombudsman Scheme seeks to achieve an earnest, cost- effective and speedy resolution of the complaints of consumers against the regulated entities and also bridges the gap between the regulated entities and countless individuals meandering for justice.

“While deciding upon the complaint, the Ombudsman must fathom out appropriate reasons of rejection to uphold the integrity of its office and prevent it from becoming a mare’s nest,” the court said.

Justice Kaurav was dealing with a plea moved by an entity namely MB Power Limited challenging the rejection of its complaint made to the principle nodal officer of ICICI Bank with a copy to RBI Ombudsman.

The Ombudsman, while taking cognizance of the representation, sent a pre-emptive rejection to the company in December last year. Thereafter, on April 15, a formal complaint before the Ombudsman.

It was the petitioner entity’s case that an unreasoned order of rejection of the complaint was passed by the Ombudsman reiterating the earlier rejection. Another rejection order was passed in May.

Setting aside the impugned orders, the court observed that the Ombudsman did not deal with any of the submissions made on behalf of the complainant company in its complaint and thus, the order passed in December last year was “an empty formality bereft of any reasoning.”

“…when the detailed complaint was filed by the petitioner before the Ombudsman, the Ombudsman was required to decide the same, giving a fair consideration to the principles of natural justice. It is also seen that without seeking any response from the respondent no.2-ICICI Bank, the formal complaint of the petitioner was also unilaterally rejected by an unreasoned order,” the court said.

Furthermore, Justice Kaurav said that it is appalling to see a “high-handed approach” of the Ombudsman in facilitating resolution of complaints pertaining to services rendered by the bank in the matter.

“If such an authority passes an order without assigning any reasons, defying the statutory mandate and principles of natural justice, it would only erode public trust in its functioning and consequently, undermine the democratic values. Therefore, any attempt of the Ombudsman to wield power in an arbitrary manner is an inexpedient exercise of powers, which deserves to be rebuked,” the court said.

It thus remitted the matter back to the Ombudsman for fresh consideration in accordance with law. After hearing the parties, the Ombudsman is directed to pass a reasoned order, the court said.

Counsel for Petitioner: Mr.Saurabh Kirpal, Sr. Advocate with Mr. Dushyant Manocha, Ms. Darika Sikka and Ms. Chitra Vats, Advocates.

Title: MB POWER (MADHYA PRADESH) LTD. v. OMBUDSMAN, RESERVE BANK OF INDIA & ANR.

Citation: 2023 LiveLaw (Del) 1014

Click Here To Read Order