Bank’s Rs 6 Lakh Advisory Payment Didn’t Settle Customer’s Premium Complaint Without Acceptance, Kerala HC Orders Ombudsman to Issue Award

The petitioner challenged the Banking Ombudsman’s order closing his complaint against Standard Chartered Bank as “resolved” under Clause 14(9)(a) of the Reserve Bank – Integrated Ombudsman Scheme, 2021.

The complaint concerned the petitioner’s allegation that the Bank had undertaken to service premiums on eight insurance policies.

During the complaint, the Ombudsman issued an advisory for payment of ₹6 lakh, which the Bank credited to the petitioner’s account before the complaint was closed.

The petitioner had not accepted the advisory.

The Bank disputed the alleged undertaking and raised objections to the writ petition, including that the dispute involved contested facts and had alternative remedies.

The petitioner sought restoration and determination of his complaint under the Scheme.

The Reserve Bank – Integrated Ombudsman Scheme, 2021, framed under Section 35A of the Banking Regulation Act, 1949, Section 45L of the Reserve Bank of India Act, 1934, and Section 18 of the Payment and Settlement Systems Act, 2007, governs the Ombudsman’s resolution and adjudication of complaints.

Under Clause 3(1)(k), “settlement” means an agreement reached by the parties through facilitation, conciliation, or mediation; Clause 14(9)(a) permits a complaint to be treated as resolved when it has been settled by the regulated entity with the complainant upon the Ombudsman’s intervention.

If a complaint is neither resolved under Clause 14 nor rejected under Clause 16, Clause 15 requires the Ombudsman to pass an award based on the record and after giving both parties a reasonable opportunity to be heard.

Clauses 15(7) and 15(8) provide for the complainant’s acceptance of an award and the regulated entity’s subsequent compliance, showing that acceptance is material to final settlement under the Scheme.

The High Court may exercise Article 226 review to determine whether the Ombudsman complied with the Scheme, even where the underlying merits involve disputed facts.

The Court declined to determine the parties’ competing factual claims about the Bank’s alleged undertaking, as those were disputed questions of fact.

It nevertheless held that review of the Ombudsman’s procedural compliance was maintainable because the order was not appealable under the Scheme.

The Bank’s payment of ₹6 lakh pursuant to the Ombudsman’s advisory did not establish a settlement: the payment was made without the petitioner’s consent, and he had not been given an opportunity to accept or reject the advisory before the complaint was closed.

Because Clause 14(9)(a) requires a settlement—an agreement between the parties—the unilateral payment could not support treating the complaint as resolved.

The Ombudsman was therefore required to proceed under Clause 15.

The ₹6 lakh already paid was made subject to the final award.