M/S Chaudhary Trading Company Pvt Ltd v. Reserve Bank of India and Anr

1. This is Application filed by the Appellant under Section 5 of the Limitation Act, 1963 read with section 151 of the Code of Civil Procedure, 1908 seeking condonation of delay of 20 days in filing the present Appeal.

2. Having heard learned Counsel representing the Parties and perused the averments made in the instant Application, the Application is allowed and delay of 20 days in filing the Appeal is condoned.

3. The Application stands disposed of.

4. The present Letters Patent Appeal assails the Order dated 09.04.2026 (“Impugned Order”) passed by the learned Single Judge in W.P.(C) 16133/2024 (“Writ Petition”) filed by the Appellant being aggrieved by the order dated 23.09.2022 (“Rejection Order”) passed by Respondent No. 1 rejecting the Appellant’s complaint against Respondent No. 2 alleging, inter alia, wrongful charging of interest. In the Writ Petition, the Appellant, inter alia, prayed for the following reliefs: “a. Issue a writ in the nature of mandamus thereby directing the Respondent No. 01 to initiate proceedings for cancellation of the license for violation of the guidelines and terms & conditions imposed, by which the Respondent No. 02 Bank has been clearly acting against norms and guidelines issued by Respondent No. 01 time to time. b. Direct the Respondent No. 01 to take legal action against the officials of the Respondent No. 2 bank, who are arbitrarily mala fidely, and contrary to the RBI guidelines have been charging arbitrary interest, even during the Covid-19 pandemic.”

5. The learned Single Judge vide the Impugned Order dismissed the Writ Petition observing as under:

6. It is the case of the Appellant that it is engaged in the business of timber import and trading and had initially availed credit facilities from Oriental Bank of Commerce. The Appellant, thereafter, transferred its banking and credit facilities to Respondent No. 2 on the assurance of better loan terms and further mortgaged properties valued at approximately ₹13,00,00,000/-. The Appellant alleges that, after creation of the mortgage securities and availing of credit facilities from Respondent No. 2, Respondent No. 2 repeatedly and arbitrarily revised the rate of interest, imposed excessive charges, threatened classification of the account as a Non-Performing Asset (“NPA”), and compelled the execution of revised sanction letters under commercial duress.

7. Aggrieved thereby, the Appellant lodged complaints before the Reserve Bank of India (“RBI”) Ombudsman in 2020 and 2022 (“Complaints”), alleging wrongful charging of interest and threats by Respondent No. 2 to auction the mortgaged property unless the Appellant repaid the outstanding dues within the time stipulated by Respondent No. 2 and at the rate of interest demanded by it. It is the Appellant’s case that the RBI Ombudsman, vide the Rejection Order, disposed of the Complaints mechanically, without due consideration of the documents placed before it, and merely observed that the continuation of a banking relationship is a commercial decision between the bank and the customer, in which the RBI Ombudsman has no role to play.

8. Learned Counsel for the Appellant submitted that the Writ Petition did not merely concern a private contractual dispute but raised issues of regulatory failure and arbitrary exercise of statutory powers by the RBI and, therefore, ought not to have been dismissed by the learned Single Judge.

9. Per contra, Respondent No. 2 submitted that the Appellant had voluntarily executed and accepted the sanction letters from time to time; that the rate of interest charged by Respondent No. 2 was in accordance with the terms thereof; that the relationship between the Appellant and Respondent No. 2 is purely contractual and commercial in nature; and that any grievance relating to the charging of interest or execution of sanction letters cannot be adjudicated in writ proceedings.

10. Learned Counsel for RBI submitted that the RBI Ombudsman has no role in interfering with commercial decisions between a bank and its customer, and that the Appellant’s individual dispute with Respondent No. 2 cannot form the basis for seeking directions against RBI, particularly when other remedies for redressal of a contractual dispute are available in law.

11. Learned Counsel for RBI further submitted that the Appellant has already availed alternative remedies in respect of the same grievance by approaching the National Consumer Disputes Redressal Commission, but withdrew the said proceedings on the ground of pecuniary jurisdiction and, thereafter, approached the State Consumer Disputes Redressal Commission, where proceedings concerning the same grievance are presently pending.

12. We have considered the submissions advanced on behalf of the Parties and perused the material placed on record.

13. The principal relief sought by the Appellant in the Writ Petition is cancellation of the banking license granted to Respondent No. 2 by RBI. While grant and cancellation of a banking license are governed by the statutory framework under the Banking Regulation Act, 1949, which regulates the relationship between the RBI and banking companies, the grievance raised by the Appellant is that Respondent No. 2 wrongfully charged interest under sanction letters which, according to the Appellant, were executed under commercial duress.

14. The grievance raised by the Appellant pertains to the rate of interest charged by Respondent No. 2 under sanction letters admittedly signed and accepted by the Appellant. The said grievance, therefore, arises from the contractual relationship between the Parties, and the continuation of such relationship is a commercial decision between the Appellant and Respondent No. 2. Accordingly, no relief as sought by the Appellant can be granted in exercise of writ jurisdiction by this Court.