Case Note & Summary
The petitioner, Doddaballapur Spinning Mills, a company registered under the Companies Act, 1956, held a current account with ICICI Bank Ltd. (respondent 2). On 31.03.2010, the petitioner obtained a demand draft (DD) bearing No.005209 for Rs.50 lakhs from the bank, payable to a third party. The DD was not presented for payment. On 19.07.2018, the petitioner requested the bank to cancel the DD and credit the amount to its account. The bank refused, stating that the DD was time-barred. The petitioner then filed a complaint with the Banking Ombudsman (respondent 1), who rejected the complaint on 19.06.2019 on the ground that it was filed beyond the limitation period of one year from the date of the bank's refusal, as per Clause 16(3) of the Banking Ombudsman Scheme, 2006. Aggrieved, the petitioner filed a writ petition under Articles 226 and 227 of the Constitution of India seeking quashing of the Ombudsman's order and directions to the bank to cancel the DD and credit the amount with interest. The High Court examined the issue and found that the Ombudsman had not considered the petitioner's explanation for the delay or the RBI circulars that permit cancellation of demand drafts even after one year. The court held that the Ombudsman's order was unsustainable and set it aside. The court further directed the bank to cancel the DD and credit the amount of Rs.50 lakhs to the petitioner's account with interest at 6% per annum from 19.07.2018 (the date of request) until the date of payment. The writ petition was allowed.
Headnote
A) Banking Law - Banking Ombudsman - Limitation - The Banking Ombudsman rejected the complaint as barred by limitation under Clause 16(3) of the Banking Ombudsman Scheme, 2006, without considering the petitioner's explanation and the RBI circulars that allowed cancellation of demand drafts even after one year. The High Court held that the Ombudsman ought to have considered the merits and the circulars, and set aside the order. (Paras 1-10) B) Banking Law - Demand Draft - Cancellation - RBI Circulars - The petitioner sought cancellation of a demand draft issued in 2010, which was not presented for payment. The bank refused citing time bar. The High Court relied on RBI circulars that permit cancellation of demand drafts even after one year, subject to indemnity. The court directed the bank to cancel the DD and credit the amount with interest at 6% p.a. from the date of request. (Paras 2-12)
Issue of Consideration
Whether the Banking Ombudsman was justified in rejecting the petitioner's complaint on the ground of limitation without considering the merits and the applicable RBI circulars regarding cancellation of demand drafts.
Final Decision
The writ petition is allowed. The impugned order of the Banking Ombudsman dated 19.06.2019 is quashed. ICICI Bank is directed to cancel the demand draft bearing No.005209 dated 31.03.2010 and credit the amount of Rs.50 lakhs to the petitioner's account with interest at 6% per annum from 19.07.2018 until the date of payment.
Law Points
- Banking Ombudsman Scheme
- 2006
- Limitation for filing complaint
- RBI Circulars on demand draft cancellation
- Writ of Certiorari
- Jurisdiction of Banking Ombudsman
