Delhi HC Emphasizes the Vital Role of Ombudsman Scheme

Expressing dismay at the “high-handed approach” of the RBI ombudsman in a complaint against a bank, the Delhi High Court has emphasized that the Ombudsman Scheme plays a pivotal role in providing an avenue for consumers seeking justice against regulated entities, like banks or NBFCs.

It stressed that the scheme aims to ensure a cost-effective and expeditious resolution of consumer complaints against regulated entities. It pointed out that the ombudsman is obligated to issue a well-reasoned order to enhance transparency and confidence in the process.

The court was hearing a case in which the petitioner had filed a complaint against a private bank, and the ombudsman rejected the complaint without providing a detailed order.

Under the Reserve Bank-Integrated Ombudsman Scheme, 2021, the ombudsman is required to consider customer complaints related to service deficiencies exhibited by regulated entities while adhering to the principles of natural justice. In this particular case, the ombudsman failed to address the submissions made on behalf of the petitioner when dismissing the complaint.

The court emphasized the importance of having an ombudsman within the RBI who possesses a deep understanding of the banking business and is entrusted to carry out quasi-judicial functions diligently, following existing regulations.

It expressed disappointment in the high-handed approach of the ombudsman in handling complaints concerning banking services in this instance. Such an approach, issuing orders without providing reasons, contradicts statutory mandates and natural justice principles, eroding public trust and undermining democratic values.

The court reaffirmed the significance of the Ombudsman Scheme as a means to achieve earnest, cost-effective, and swift conflict resolution for consumers seeking justice against regulated entities.

It further stated that the ombudsman must issue detailed orders after considering the complainant’s submissions and providing adequate hearing opportunities for both parties. It stressed the need to eliminate empty formalities.

Given the lack of explanation or grounds for the rejection in this case, the court viewed it as a mechanical acceptance of the bank’s position. Consequently, the rejection order was set aside, and the matter was remitted back to the ombudsman for a fresh evaluation in compliance with the law.