Ombudsman Cannot Treat Complaint As Settled Without Customer's Acceptance Of His Advisory: Kerala High Court

A bank's payment of an amount directed by the Banking Ombudsman does not, by itself, settle a customer's complaint. The Kerala High Court has ruled that a complaint can be treated as resolved under the Reserve Bank–Integrated Ombudsman Scheme, 2021, only after the complainant accepts the advisory.

A single-judge Bench of Justice M.A. Abdul Hakhim was hearing a petition filed by Mohamed Shafi, a Standard Chartered Bank customer, challenging the Banking Ombudsman's order treating his complaint as resolved.

Shafi alleged that the bank had assured him that premiums for eight ICICI Prudential Life Insurance policies, subscribed between March 2023 and October 2024, would be paid from returns on his mutual fund investments. The bank had also agreed to bear any shortfall, he claimed.

According to Shafi, the arrangement was initially honoured. However, the bank subsequently failed to reimburse ₹5 lakh towards premiums he had paid himself. The bank later credited ₹17 lakh towards subsequent premium payments in October 2025. It allegedly failed to honour the arrangement again in March 2026, forcing Shafi to liquidate his investments. The bank, however, maintained that the earlier ₹17 lakh payment was merely a service gesture and did not amount to an admission of liability.

Shafi approached the Banking Ombudsman, which issued an advisory on March 23, 2026, directing the bank to pay ₹5 lakh towards the disputed premiums and ₹1 lakh as compensation for mental agony. The bank credited ₹6 lakh to his account on March 25. The Ombudsman closed the complaint the following day under Clause 14(9)(a) of the Scheme.

Shafi challenged the closure, arguing that he had neither accepted the advisory nor agreed to settle the complaint.

The bank disputed his allegations. It claimed that Shafi had prepared the draft confirmation letter and instructed former branch manager Gireesh M.G. to print it on the bank's letterhead without authorisation. It also maintained that the eight insurance policies had been independently subscribed by Shafi and that the bank had acted only as an agent. The bank further argued that Shafi could not challenge the Ombudsman's order after receiving ₹6 lakh.

The court observed that the payment was not based on any agreement between the parties. Clause 3(1)(k) of the Scheme defines settlement as an agreement reached through facilitation, conciliation or mediation.

"When there is no agreement reached by the parties upon the intervention of the Ombudsman, the Ombudsman cannot close the Complaint as resolved under Clause 14(9)(a) of the Scheme," it held.

The court noted that the complainant was not given an opportunity to communicate his acceptance or rejection of the advisory before the complaint was closed. It also explained that under Clause 15(7), a complainant must accept an Award in writing within 30 days of receiving it. Clause 15(8) requires the bank to comply with the Award within 30 days of receiving the acceptance letter, in the absence of an appeal by the bank.

"Only if the Advisory is furnished to the Complainant and the Complainant accepts the Advisory, it could be treated as settled upon the intervention of the Ombudsman as provided under Clause 14(9)(a) of the Scheme," the court observed.

It further held that the Ombudsman had acted illegally by treating the complaint as resolved and was bound to dispose of it by passing an Award under Clause 15.

The court also held that the writ petition was maintainable since the Ombudsman's order was not appealable and the High Court could examine whether the Scheme had been followed.

Clarifying that it was not examining the merits of the underlying dispute, the court allowed the petition, set aside the Ombudsman's order and directed it to pass an Award within three months of receiving a copy of the judgment. The ₹6 lakh already paid by the bank will remain subject to the final Award.

For Petitioner: Advocate Harikumar G (Gopinathan Nair)

For Respondents: Advocate Thomas P Kuruvilla