The 12th International Consumer Law Conference Blog

Organised by NALSAR and the International Association for Consumer Law

Banking System and Growth in India: Forum Constituted for Dispute Resolution of Consumers

Speaker- Mr. D.V. Seetharama Murthy, Advocate, AP High Court.

The growth of the banking sector in India, right from 1969 till the present day, was traced by the speaker.According to the speaker,the adjudication systems  in place for disputes in the banking system are not enough.In bank related disputes, there was no system of compulsory participation of people who had some knowledge of the banking procedures.Lack of people having a banking background in the adjudication of such disputes led to a lot confusion.An instance of this provided by the speaker was that of a hearing of a bank related case where the judge kept getting confused on the difference between the words credit and debit. Such instances hamper the proceedings of the case.Keeping such problems in mind, the Reserve Bank of India came up with the concept of ombudsman.The Chairman of the ombudsman committee was to be of the rank of a manager or a deputy manager of a bank. This provision took care of the problem of having people with no banking knowledge as adjudicators. The main problem was that according to the Superme Court, the ombudsman was to be a tribunal of limited jurisdiction and also that the scheme regarding the ombudsman was just an administrative step taken by the Reserve Bank and had no statutory authority. In case of any dispute regarding the jurisdiction,between a court and an ombudsman,the jurisdiction of the ombudsman would seize to exist.In effect, the position of the ombudsman was reduced. Also, an ombudsman could not award compensation of an amount which was more than the amount lost.Thus, the ombudsman could not take into award any compensation for the cost of litigation or the mental agony suffered by the litigant.  A copy of the award of the ombudsman was to be provided to the bank within 15 days by the consumer or else the award would lapse. In India, where lapses in the time period are very common,the viability of such clauses need to be looked into.Further,no lawyers are allowed to argue in front of the ombudsman.Thus,lay persons,who have absolutely no knowledge of law,end up arguing in a very ineffective and digressing manner and thus hamper the proceedings.

The speaker also spoke about a case, Durga Hotel Complex v. Union of India, 2007 (5) SCC 120,which has sounded the death knell for the authority of the ombudsman.The Supreme Court held that an ombudsman would have jurisdiction is any case only if the case was not pending before any court or tribunal.The provision regarding the ombudsman had no statutory force. According to the speaker,the ombudsman needs to be provided with the necessary teeth and claws to make the adjudication effective.The provision regarding the ombudsman should have statutory authority.For matters involving complex points of law,the litigants need to be given the option of engaging lawyers.The clause regarding the time limitation of 15 days needs to be looked into and the execution of the awards needs to be made simpler.Further, a proper procedure code,to be followed by the ombudsman should be laid down.A legislation addressing all these issues needs to be enected to provide a much needed effective redressal forum.

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