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 No.2). On 31.03.2010, the petitioner obtained a demand draft (DD) bearing No.005209 for Rs.50 lakhs from the bank, payable to the Deputy Commissioner, Commercial Taxes (Audit), Bangalore. The DD was issued for payment of tax dues, but the petitioner later decided not to use it. On 19.07.2018, the petitioner requested the bank to cancel the DD and credit the amount back to its account. The bank refused, citing a policy that DDs older than three months cannot be cancelled. The petitioner then filed a complaint with the Banking Ombudsman (respondent No.1) on 19.07.2018. The Ombudsman, by order dated 19.06.2019 (Annexure-H), rejected the complaint on two grounds: (i) the complaint was time-barred under Clause 16(3)(b) of the Banking Ombudsman Scheme, 2006, as it was filed more than one year after the cause of action; and (ii) the bank's policy of not cancelling DDs after three months was justified. 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 court examined the RBI Circulars dated 16.12.2009 and 30.06.2010, which permit cancellation of DDs after three months if the payee does not present the same. The court found that the Ombudsman had not considered these circulars. On limitation, the court held that the cause of action arose on 19.07.2018 when the bank refused cancellation, and the complaint was filed on the same day, thus within one year. The court also noted that under Article 31 of the Limitation Act, 1963, the limitation for claiming refund of a bill of exchange is three years from the date of the draft, and the petitioner's claim was within time. The court concluded that the Ombudsman's order was perverse and unsustainable. The court allowed the writ petition, quashed the Ombudsman's order, and directed the bank to cancel the DD and credit Rs.50 lakhs to the petitioner's account with interest at 6% per annum from 19.07.2018 until payment.
Headnote
A) Banking Law - Demand Draft Cancellation - RBI Circulars - The Banking Ombudsman failed to consider RBI Circulars dated 16.12.2009 and 30.06.2010 which permit cancellation of demand drafts after three months if the payee does not present the same, and the petitioner's request was made after the prescribed period - Held that the Ombudsman's order is unsustainable and set aside (Paras 7-10). B) Limitation - Banking Ombudsman Scheme, 2006 - Clause 16(3)(b) - The Ombudsman rejected the complaint as time-barred under Clause 16(3)(b) of the Scheme, but the court found that the complaint was filed within one year from the date of the petitioner's request for cancellation on 19.07.2018, and thus within limitation - Held that the Ombudsman erred in dismissing the complaint on limitation (Paras 11-13). C) Banking Law - Demand Draft - Limitation Act, 1963 - Article 31 - The court noted that a demand draft is a bill of exchange and the limitation period for claiming refund is three years from the date of the draft, and the petitioner's claim was within time - Held that the Ombudsman's order is perverse (Paras 14-15).
Issue of Consideration
Whether the Banking Ombudsman was justified in rejecting the petitioner's complaint seeking cancellation of a demand draft and credit of the amount, and whether the Ombudsman's order is sustainable in law.
Final Decision
The writ petition is allowed. The impugned order dated 19.06.2019 passed by the Banking Ombudsman (Annexure-H) is quashed. The respondent No.2 (ICICI Bank Ltd) is directed to cancel the demand draft bearing No.005209 dated 31.03.2010 for Rs.50 lakhs and credit the said amount to the petitioner's account along with interest at 6% per annum from 19.07.2018 till the date of payment.
Law Points
- Banking Ombudsman Scheme
- 2006
- RBI Circulars on DD cancellation
- Limitation for filing complaint
- Writ jurisdiction under Articles 226 and 227
- Natural justice
