The Kerala High Court (Ernakulam Bench) has held that the Banking Ombudsman, upon disposing of a complaint under the RBI Integrated Ombudsman Scheme, 2021, becomes functus officio and cannot suo motu pass a revised order on the same complaint; any such revised order is a nullity. A rejection order under Paragraph 16 of the Scheme must be a reasoned order passed by the Banking Ombudsman personally, not a nameless letter issued by the Ombudsman’s office with the Ombudsman’s approval, and must reflect consideration of the complainant’s reply if received before the order.
While the opportunity of being heard is mandatory even under Paragraph 16 of the Scheme, the right to a personal/oral hearing is not an automatic incident of natural justice; it depends on the facts of each case and must be specifically requested and justified by the complainant, with the final discretion resting with the Ombudsman.
A Single Judge Bench of Justice M.A. Abdul Hakhim first addressed the jurisdictional validity of Ombudsman Order and held that once the Banking Ombudsman had disposed of the complaint under the RBI Integrated Ombudsman Scheme, 2021, the Ombudsman became functus officio and had no right or authority to revisit the matter by passing a fresh revised order, especially when the legality of the original order was already under consideration before the High Court in the pending Writ Petition. The Court noted that the Ombudsman had no power to review or recall the original order. Accordingly, the Court declared the said order to be totally without jurisdiction, null and void.
The Court found that the Ombudsman order was in the form of a letter addressed to the Petitioner and did not have the trappings of an order passed by a quasi-judicial authority. The name of the officer who passed the order was not even mentioned. The Court further observed that said order stated it was issued by the “Office of the RBI Ombudsman” and was issued “with the approval of the RBI Ombudsman,” which meant the order was not passed by the Banking Ombudsman himself but by his office. The Scheme confers authority only on the Banking Ombudsman to dispose of complaints, not on his office to pass orders with the Ombudsman’s approval.
On the question of personal hearing, the Court noted that the RBI Integrated Ombudsman Scheme, 2021 provides for an opportunity of being heard only when the Ombudsman disposes of a complaint under Paragraph 15 (passing an award), and no such opportunity is stipulated under Paragraph 16 (rejection of complaints). However, the Court noted that even when a complaint is rejected under Paragraph 16, reasons must be given since the aggrieved party has a right of appeal, and the Ombudsman cannot avoid giving reasons or opportunity of hearing merely because Paragraph 16 does not expressly stipulate the same.
The Court then examined whether the Petitioner was entitled to a personal hearing specifically. Referring to the Supreme Court’s decision in State Bank of India v. Amit Iron Private Limited [2026 KHC 6245], which clarified the earlier decision in SBI v. Rajesh Agarwal [(2023) 6 SCC 1], the Court held that the opportunity of being heard does not necessarily include an opportunity of personal hearing in all cases. The Court held that if a complainant requires a personal hearing, it is for the complainant to request the same before the Banking Ombudsman and substantiate the need, and it is for the Ombudsman to decide whether to grant it.
Briefly, the Petitioner, Mary Peter, a 60-year-old resident of Kottayam, Kerala, was sanctioned a cash credit loan of Rs. 10 lakhs and a term loan of Rs. 50,000/- by the Central Bank of India, Kottayam Branch. However, the Bank released only Rs. 4.05 lakhs (as per the Petitioner’s version) or Rs. 4.70 lakhs (as per the Bank’s version) and refused to disburse the remaining sanctioned amount. The Bank also took the position that the Petitioner was not entitled to a moratorium. Aggrieved by this, the Petitioner filed a complaint before the Banking Ombudsman (Respondent No.3), who issued a notice communicating the Bank’s response to the Petitioner. Later, the Banking Ombudsman rejected the complaint invoking Clause 16(2)(a) of the Reserve Bank – Integrated Ombudsman Scheme, 2021, holding that there was no deficiency of service on the part of the Bank, without considering the Petitioner’s reply.
When the Petitioner challenged the same before the High Court, the Respondent Bank opposed the petition, contending that the sanctioned amounts were Rs. 10.12 lakhs (cash credit) and Rs. 50,000/- (term loan), and that Rs. 4.70 lakhs had been disbursed. The Bank justified withholding the remaining amount on the ground that the Petitioner had not produced documents to prove utilization of the disbursed portion. The Bank also relied on a declaration issued by the Petitioner herself in vernacular language, stating that she did not want moratorium. Meanwhile, after the filing of the petition, the Banking Ombudsman suo motu reconsidered the matter and passed a fresh revised order, again rejecting the complaint.
