Holding

Circulars issued by the Reserve Bank of India under Sections 21 or 35 of the Banking Regulation Act are statutory in nature and must be complied with by banks and the Banking Ombudsman.

Summary

Canara Bank had advanced three loans to a landlord for constructing strong rooms that the bank later leased. The loans were subject to demand promissory notes stipulating interest rates above the RBI rate, compounded quarterly, and the bank debited interest at the contractual rates with quarterly rests. The landlord and co‑respondents complained before the Banking Ombudsman, arguing that such loans were not "term loans" and that interest could only be charged at simple rate not exceeding 15% per annum. The Ombudsman, relying on State Bank of Patiala v. Harbans Singh, ordered the bank to recast the interest and set the interest at simple rate, ignoring several RBI circulars. On appeal, the Supreme Court held that RBI circulars issued under Sections 21 and 35 of the Banking Regulation Act are statutory and binding on banks and the Ombudsman, and that the Ombudsman must apply them. Consequently, the Court set aside the Ombudsman’s award and remanded the matter for fresh disposal in light of the RBI directions. The appeal was allowed.

Issues considered

Whether RBI circulars issued under Sections 21 and 35 of the Banking Regulation Act are statutory and binding on banks and the Banking Ombudsman
Whether loans advanced to landlords for construction/renovation of premises taken on lease constitute "term loans" for the purpose of interest calculation
Whether a bank may charge interest at the contractual rate with quarterly rests on such loans

Legislation cited

Banking Regulation Act, 1949s. 21, s. 35, s. 35A

Subjects

Banking OmbudsmanRBI circularsTerm loanInterest calculationQuarterly restsStatutory complianceBanking Regulation Act

Judgment

CANARA BANK A
v.
P.R.N. UPADHYAYA AND ORS.

AUGUST 25, 1998

B
(DR. AS. ANAND, M. SRINIVASAN AND
S. RATENDRA BABU, JJ.]

Banking Regulation Act, 1949-Section 21, 35--Circulars issued by
Rese1ve Bank of India-Held, Statuto1y i11 nature and required to be complied
with by the ba11ks. c
S.35A-Banking Ombudsman-Appointed by virtue of the scheme
framed u11der the sectio11:-Dutie;~Held, to regulate tlze working of the banks
and to issue directions to cany out the circulw:> and directions issued by the
Rese1ve Ba11k of India. D
Words & Phrases-Temz Loan-Mea11ing of in the context of banking
law and practice.

The appellant-bank sanctioned loans of Rs. 811,000 on 12.1.1980, Rs.
25,11110 on 21.2.1986 and Rs. 2,00,11011 on 22.2.1991 in favour of respondent E
no. 3 for construction of strong rooms which were to be taken on lease by
the appellant after construction/renovation. In respect of loans granted on
12.1.19811, 21.2.1986 and 22.2.1991, respondent no. 3 executed Demand
Promissory Notes undertaking to pay interest at the rate of 5% above the
Reserve Bank of India rate of interest with minimum rate of interest @ F
14% per annum compounded lJUarterly, 7.5% above the R.B.I. rate of
interest with minimum rate of interest @ 17.5% per annum compounded
11uarterly and 7.5% above the R.B.I. rate of interest with minimum rate of
intel'est @ 17.5% per ';mourn compounded quarterly, respectively. The two
loans granted in the.year 19811and1986 were, after payment, closed in 1988
and 1989 respectively. Interest in respect of those loans was debited at the G
contractual rate with quarterly rests. The appellant - bank also debited
interest with quarterly rests in respect of the loan of Rs. two lacs and
irrespective of the higher contractual rate of interest, the bank debited
interest only at the rate of 15% per annum in view of its Head Oftice
Circular no. 379/~0 and no. 911/91. H
93
94 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

A Respondent nos. 2 to 5 filed a complaint before the Banking Om-
budsman in August, 1996 assailing the action of the appellant - bank in
charging interest at the contractual - rate with quarterly rests in respect
of the loans granted in the year 1980 and 1986 and also for debiting interest
with quarterly rests in respect of the loans granted in 1991. The respon-
B dents sought a direction from the Banking Ombudsman to the appellant
- bank to recast the interest debited in all the loan accounts by debiting
interest at simple rate and to adjust the excess amount charged by way of
higher interest to the loan account granted in 1991 and to pay the balance
amount, if any, to the respondents. The contention of the appellant - bank
before the Banking Ombudsman was that its action was based on various
C circulars issued by the Reserve Bank of India from time to time including
the circulars dated 1.4.1981, 7.3.1986 and 17.5.1994. The Banking Om-
budsman relying upon the judgment in State Bank of Patiala v. Harbal!S
Singh, [1994] 3 SCC 495 allowed the complaint of respondent nos. 2 to 5
and directed the appellant - bank to recast the two loan accounts for the
D year 1980 and 1986 which stood closed in 1988 and 1989 respectively. The
Banking Ombudsman held that (i) the loans granted by banks to their
landlords for construction/renovation of premises which the banks take on
lease or rent later on, cannot be termed as "Term Loans", and (ii) interest
could not be charged by the banks in respect of such loans at quarterly
rests and that the appellant bank could only charge simple interest at the
E rate of not more than 15% in respect of the loan granted to a landlord ..
Against the aforesaid award dated 26.2.1997 made by the Bank Om-
budsman the appellant - bank has filed this appeal.

The contention of the appellant - bank was that communications
F dated March 13, 1976, April 1, 1991, April 18, 1991 and March 7, 1986
issued by Reserve Bank of India clearly indicate that the loans advanced
by banks to landlords for construction/renovation of premises to be taken
by the banks for its use on lease/rent were required to be treated as "Term
Loans" and the banks were entitled to charge interest at the minimum rate
of 15% per annum compounded with quarterly rests.
G
Allowing the appeal, the court

HELD : 1.1. Circulars issued by the Reserve Bank of India under
Section 21 or 35 of the Banking Regulation Act, 1949 are statutory in
H nature and are required to be complied with by the banks. [100-D]
CANARABANKv. P.R.N. UPADHYAYA 95

1.2. Since, an Ombudsman is appointed by virtue of the scheme A
framed under Section 35A of the Banking Regulation Act, 1949, the Om·
budsman is obliged to comply with the directions/circulars and notifica·
tions issued by the Reserve Bank of India under Section 21 or 35 of the Act.
He is also obliged to regulate the working of the banks and issue directions
to them to carry out the directions and circulars issued by the R.B.I. under
Sections 21 and 35 of the Act and ensure their compliance. [103-E] B

2. The expression "term loan" is well understood in banking parlance.
- ..
The expression implies the grant of loan for a fixed term. It has no
relevance with the purpose for which loan is granted. [100-F]

Ta11na11 's Banking Law & Practice in India, 18th Edition referred to.
c
3. There have been more than a dozen circulars/notifications/direc·
tfons issued by the Reserve Bank of India, which deal with the subject of
rate of interest to be charged from the landlords loanees and the manner
of its calculation. A critical examination and application of those circulars D
by the Ombudsman was necessary to decide the complaint filed by the
respondents against the appellant • bank. The impugned award having
been made ignoring various circulars/directions issued by the Reserve
Bank of India, the same cannot be sustained. The impugned award dated
26.2.197" is therefore set aside and the complaint is remitted to the E
Ombudsman for its fresh disposal in the light of the circulars/directions
issued by the Reserve Bank of India. [103-D-F]

State Bank of Patiala v. Harbans Singh, [1994] 3 SCC 495, distin·
guished.
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4286 of
1998 Etc.
:
From the Judgment and Order dated 26.2.97 of the Banking Om-
budsman, at Hyderabad in Andhra Pradesh in C.A. No. 124 of 1996.
G
V.R. Reddy, Pradcep Dewan, Ms. Praveena Gautam, Pramod B.
Aggarwala for the Appellant.

Harish N. Salve, Pradecp S. Parihar, Kuldeep S. Parihar and H.S.
Parihar for the Respondent for R.B.I. H
96 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R.

A A.S. Nambiar and G. Prabhakar for the Respondent Nos. 1-4 in C.A. .
No. 4286/98 and l-2 in C.A. No. 4287/98.

The Judgment of the Court was delivered by

DR. ANAND, J. Leave granted.
B
This appeal is directed against an award made by the Banking
Ombudsman, Hyderabad, (appointed under the Banking Ombudsman
Scheme, 1995) dated 26.2.1997, in a complaint filed by the respondents
against the appellant bank. The appeal arises in the following circumstan-
C ces:

On 12.1.1980, the appellant bank sanctioned a loan of Rs. 80,000 in
favour of respondent no.3 for construction of a strong room. A further loan
of Rs. 25,000 was granted to respondent no. 3 on 21.2.1986 to meet part of
D the construction cost of the premises which were to be taken on lease by
the appellant. On 22.2.1991, an additional loan of Rs. 2,00,000 was granted
by the appellant bank to respondent no.3 to construct a bigger strong room.
The entire premises, after the construction/renovation, were taken on lease
by the appellant bank. In respect of the loan granted on 12.1.1980, respon-
dent no.3 executed a Demand Promissory Note undertaking to pay interest
E at the rate of 5% above the Reserve Bank of India rate of interest with
minimum rate of interest @ 14% per annum compounded quarterly. So far
as the loan granted on 21.2.1986 is concerned, respondent no.3 executed a
Demand Promissory Note, undertaking to pay interest at the rate of 7.5%
above the Reserve Bank of India rate of interest with minimum rate of
p interest @ 17.5% per annum compounded quarterly. A similar Demand
Promissory Note was also executed by respondent no.3 in respect of the
loan dated 22.2.1991 undertaking to pay interest at the rate of 7.5% above
the Reserve Bank of India rate of interest with minimum rate of interest
@ 17.5% per annum compounded quarterly. The two loans granted in the
year 1980 and 1986 were, after repayment, closed in 1988 and 1989 respec-
G tively. Interest in respect of those loans had been debited at the contractual
rate with quarterly rests. The appellant bank also debited interest with
quarterly rests in respect of the loan of Rs. Two lacs and irrespective of
the higher contractual rate of interest, the bank debited interest only at the
rate of 15% per annum in view of its Head Office Circular No. 379/90 and
H No. 90/91.
L
r
CANARABANKv. P.R.N. UPADHYAYA(DR. ANAND,J.] 97

Respondent Nos. 2 to 5 filed a complaint before the Banking Om- A
budsman in August, 1996 assailing the action of the appellant bank in
charging interest at the contractual rate with quarterly rests in respect of
the loans granted in the year 1980 and 1986 and also for debiting interest
with quarterly rests in respect of the loan granted in 1991. The respondents
requested the Banking Ombudsman for a direction to the appellant bank
B
to recast the interest debited in all the loan accounts by debiting interest
at Simple Rate and to adjust the excess amount charged by way of higher
interest to the loan account granted in 1991 and to pay the balance amount,
if any, to the respondents. The complaint was entertained by the learned
Ombudsman and notice was issued to the appellant who resisted the
application on various grounds. The appellant justified its action on the
c
basis of various circulars issued by the Reserve Bank of India from time to
time including the circulars dated 01.04.1981, 07.03.1986 and 17.5.1994.

Relying upon the judgment of this Court in State Bank of Patiala v.
Harbans Singh, (1994] 3 SCC 495, the learned Ombudsman allowed the D
complaint of respondent nos. 2 to 5 and directed the appellant bank to
recast the two loan accounts of the year 1980 and 1986 which stood closed
in 1988 and 1989 respectively. The learned Ombudsman, after referring to
the circular dated April 18, 1991 (Circular seems to be of April 1, 1991)
and certain other circulars opined that the loans granted by banks to their E
landlords for construction/renovation of premises which the banks take on
lease or rent later on, cannot be termed as "term loans". The learned
Ombudsman also opined, on the basis of the judgment in Harbans Singh's
case (supra), that interest could not be charged by the banks in respect of
such loans at quarterly rests and that the appellant bank could only charge
F
simple interest at the rate of not more than 15% iit respect of the loan
granted to a landlord.

The learned Ombudsman with a view to give his Award had framed
the following five issues:
G
1. Whether the grievance of the complainant regarding mode of
calculation of simple interest and appropriation of credits received can be
considered:

2. Whether Limitation Act is applicable; H
98 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

3. Whether the reopening of the charging of interest can be enter-
tained keeping in view Section 21 A of the Banking Regulation Act;

4. Whether the bank is justified to charge interest over and above the
contractual rate; AND

5. Charging of interest on quarterly compounding basis.

Since, there is no controversy raised before us as regards the first
three issues, we are relieved of the necessity to deal with those three issues.

Dealing with issue No. 4, the learned Ombudsman opined:

"As regards the fourth point that the bank had charged interest
to the loan accounts in excess of the contracted rate and that too
at quarterly rests. It has failed to substantiate and establish that
the interest charged in the accounts was in conformity with the
Reserve Bank of India directions more specifically the R.B.I.
Circular No. DBOD.NO.BL.B.C.60/22.01.0003/94 dated 17.5.1994.
As per this circular it is clear that the bank can charge interest
only at a rate contracted at the time of sanction of the loan and
the bank is not entitled to vary the rate of interest when ever there
is a change in the interest rate for term loans. I therefore, hold
this point in favour of the complainant."

While dealing with issue no. 5, the learned Ombudsman observed :

"As regards the fifth issue it is observed that charging of interest
at quarterly rests was also in violation of the principles laid down
by the Supreme Court in the case of State Bank of Patiala v.
Harbans Singh Civil Appeal No. 1690 of (1994) arising out of SLP
(C) No. 14276 of (1993). The Honourable Supreme Court while
dealing with the question of bank's right to charge interest on
quarterly rest held that:
.
"In the light of directions given by the Reserve Bank of India
which the commercial banks are bound to follow and the bank
itself adopted that policy and reduced the rate of interest, the
liability to pay quarterly rests is obviously illegal. The trial court
and the District Court, therefore, are quite right in limiting the
CANARABANKv. P.R.N. UPADHYAYA[DR. ANAND,J.] 99

liability of the respondent only to pay simple interest on the loan A
advanced by the Bank at 15% per annum without quarterly rests."

The above decision is equally applicable to the facts of the
present case and the point under consideration. In view of the
above decision of the Honourable Supreme Court I have no
hesitation to hold that the bank is not entitled to charge compound B
rate of interest on quarterly rests and as such the action of the
bank is held to be in violation of the law laid down by the Supreme
Court. Consequently I hold this point also in favour of the com-
plainant."
c
Mr. V.R. Reddy, learned Senior counsel, appearing for the appellant
bank and Mr. Harish Salve, learned Senior counsel, appearing for the
Reserve Bank of India assailed the aforesaid findings of the learned
Ombudsman. Learned counsel submitted that the Reserve Bank of India
had in its letter dated 13.3.1976 clearly provided that scheduled banks
could charge interest with quarterly rests. Emphasis in this behalf was D
particularly laid on the following excerpt from the communication of the
Reserve Bank of India dated March 13, 1976:

"1 (ii) no scheduled commercial bank incorporated in India and
having aggregate demand and time liabilities of Rs. 25 crores or E
about but less than Rs .. 50 crores as on the 12th March, 1976 or
at any time thereafter, shall charge interest on loans/advances/cash.
credits/overdrafts or any other financial accommodation made or
provided by it or renewed by it, or discount usance bills at a rate,
in either case, higher than 17.5% p.a. :interest shall be charged
with quarterly rests."
F

Learned counsel. also referred to the direction issued by the Reserve
Bank of India dated March 7, 1976 and submitted that according to that
communication, advaµces granted by banks to landlords for purpose of
construction/renovation of premises for its use were required to be treated G
as "Term Loans" and charged interest accordingly and that this position
had been further clarified by the Reserve Bank of India through its circular
dated April 18, 1991, wherein it was stated that the minimum rate of
interest on loans advanced to landlords for the premises leased out to the
banks should be at the rate of 15% per annum. It was submitted that H
100 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R. _

- A ·communication dated April 18, 1991 read with the earlier communication
of March 13, 1976, April 1, 1991 and March 7, 1986 clearly indicated that
in the case of loan advanced to the landlord for construction/renovation of
premises_ to be taken by the banks on lease/rent, the banks were entitled
to charge interest at the minimum rate of 15% per annum compounded
B with quarterly rests. Learned counsel also submitted that insofar as the
judgment in State Bank of Patiala v. Harbans Singh, [1994] 3 SCC 495, is
concerned, that did not refer to, much less consider and discuss, various
circulars issued by the Reserve Bank of India under Section 21 or Section
35 of the Banking Regulation Act, 1949 and as such that judgment could
C not be treated to have laid down the law after considering various circulars
issued by the Reserve Bank of India, which have a statutory flavour.

That the circulars issued by the Reserve Bank of India under Section
21 or 35 of the Banking Regulation Act, 1949 are statutory in nature and
are required to be complied with by the banks is not in any doubt. An
D Ombudsman appointed under the Scheme is obliged to regulate the work-
ing of the banks and issue directions to them to carry out the directions
and circulars issued by the Reserve Bank of India under Section 21 or 35
of the Act. The view taken by the learned Ombudsman to the effect that
the loans granted by the banks to their landlords for construction/renova-
E tion of premises which are taken on lease or rent by the banks cannot be
termed as "term loans", as in the words of the learned Ombudsman "only
those loans which are taken for commercial purposes can be construed to
be term loans", is clearly erroneous and does not appeal to us.

F The expression "term loan" is well understood in banking parlance.
The expression implies the grant of loan for a fixed temz. It has no relevance
with the purpose for which loan is granted. Where the term for repayment
is long, the loan is called "long term loan" and where the term exceeds one
year but not five to seven years, it is commonly known as "medium term
loan". According to Tannan 's Banking Law & Practice in India, 18th Edition
G the expression loan is defined as follows:-

"Loans - When a banker makes an advance in a lump sum the
whole of which is withdrawn and is supposed to be repaid generally
wholly at one time is called a loan. If the customer repays the same
H either wholly or partially and wishes to have accommodation sub-
CANARABANKv. P.R.N. UPADHYAYA[DR. ANAND,J.] 101

sequently, the latter will be treated as a separate transaction to be A
entered into if the bank agrees to do so and subject to such terms
as the bank may like to impose. Thus the bank does not suffer any
loss of interest as a result of carrying excessive cash which is
necessary in the case of cash credits and overdrafts. Loan accounts
are said to have a lower operating cost than cash credits and
overdrafts because of the larger number of operations in the case
B
of the latter as compared to the former and consequently a lower
rate of interest on loans appears to be justifiable than in the case
of overdrafts and cash credits.

The expression Lenn loan has been defined in the same book C
as follows:-

"Tem1 Loan - Where a loan is granted for a fixed period
exceeding one year and is repayable according to a schedule of
repayment, as against on demand and at a time, it is known as a
'term loan'. Where the period· exceeds one year but not, say 5 to D
7 years, it 'is commonly known as a medium-term loan; a loan with
longer repayment schedule is known as long-term loan. A term
loan is generally granted for fixed capital requirements, although
such loans for working capital are not unknown, and are supposed
to be repaid out of future earnings of the fixed assets in particular E
and of the borrower in general. It therefore requires a proper and
more sustained appraisal of various factors connected with the
proposition than an ordinary commercial demand loan."

Thus, the opinion of the. learned Ombudsman to the effect that
circulars of the Reserve Bank of India which permitted charge of interest
F
at quarterly rests applies only to "term loans" for "Commercial purposes"
and not to the loans given to the landlords for construction/renovation of
the premises, does not bear scrutiny. The view expressed by the learned
Ombudsman was apparently influenced by the judgment of this Court in
Harbans Singh's case (supra), which had negatived the plea raised on G
behalf of the appellant bank in that case that the word Lenn loan would
include not only the loan advanced for commercial purposes but also such
loans as one advanced to the landlords for construction/renovation of the
buildings given on lease to the lending bank for their commercial purposes.
A careful persual of the judgment in Harbans Singh's case (supra), how-· H
102 SUPREME COURT REPORTS [1998] SUPP. l S.C.R.

A ever, shows that the Bench was handicapped because various cir-
culars/notifications/directions issued by the Reserve Bank of India under
Sections 21 and 35 of the Act dealing with the subject were not brought to
the notice of the Bench. This is explicit from the following observation of

B
the Bench:

"Though we have given sufficient time and adjourned the case
-
from time to time to produce all the records, the bank has not
chosen to produce the records; in particular, circular letter of
Reserve Bank of India bearing DBOD NO.DCDC 106/c 168(61-
80) dated 15.09.80 on the subject of minimum lending rates of
c interest in respect of advances to the landlords. Therefore, we are
constrained to proceed on the basis of the material placed by the
appellants and 'the respondent."

It was, thus, on account of lack of relevant material before it, that
D the Bench opined:

"In the light of these intrinsic factual material, directions by the
Reserve Bank and circumstances, it is clear that there is no liability
of the landlord, who had taken loan for constructing the premises
and leasing back to the bank for commercial purpose, to pay
E interest at more than 15% and he need not pay interest at quarterly
rest. The letter of RBI dated 13.3.1976 also indicates that the obliga-
tion to pay quarterly rest was not with reference to the loans taken
by the landlords for construction of the premises but for commercial
purpose. The word tenn loan was used for the commercial purpose
F and it did not include the loan advanced to the landlords for
construction of the buildings. Tenn loan would mean the loan
advanced for commercial purposes and not the loans given to the
landlords for construction of the buildings to lease back for the use
by the bank itself. It was not so intended would be clear from clause
l(ii) of the letter relied on by the bank (Ex. P-7) as extracted
G earlier. It would indicate that in respect of commercial loans, they
appear to have intended to charge quarterly rest. The Reserve
Bank at nowhere indicated that the term loans given to the
landlords for construction of the buildings to lease back to the
commercial banks should be intended to be charged with interest
H with quarterly rest. On the other hand, they have reduced suffi-
CANARABANKv. P.R.N. UPADHYAYA[DR.ANAND,J.] 103

ciently from time to time even the lending rate of interest in favour A
of landlords/lessors." (Emphasis supplied)

The judgement in Harbans Singh's case therefore, proceeded on the
facts as pleaded by the parties, in the absence of relevant material, which
apparently were not brought to the notice of the court. That judgment B
must, therefore, be considered as confined to the facts of that particular
case and not to be an exposition of law based on various circular/directions
and notifications issued by the Reserve Bank of India which have statutory
force with regard to the meaning of "term loan" or charge of interest from
the landlords with quarterly rests.
c
Learned counsel for the parties before us, did not dispute that there
have been more than a dozen circulars/notifications/directions issued by
the Reserve Bank of India, which deal with the subject of rate of interest
to be charged from the landlords loanees and the manner of its calculation. D
A critical examination and application of those circulars was necessary to
decide the complaint filed by the respondents against the appellant bank,
which unfortunately the learned Ombudsman did not do. Since, an Om-
budsman is appointed by virtue of the Scheme framed under Section 35 A
of the Banking Regulation Act, 1949, he is obliged to comply with the
E
directions/circulars and notifications issued by the Reserve Bank of India
under Section 35 or 21 of the Act. He is also required to issue directions
to Banks, based on those directions/circulars and ensure their compliance.
The learned Ombudsman could not have ignored the circulars and direc-
tions while dealing with the complaint filed by the respondent. The im-
pugned award having been made ignoring various circulars/directions
F
issued by the Reserve Bank of India, the same cannot be sustained. It is
therefore, appropriate that we set aside the impugned award dated
26.2.1997 and remit the complaint to the learned Ombudsman
(Hyderabad) for its fresh disposal in the light of the circulars/directions
issued by the Reserve Bank of India with regard to charging of rate of G
interest from the landlord loanees, whose buildings are taken on lease/rent
by the concerned bank and calculating the interest at quarterly rests.
Accordingly, this appeal succeeds and is allowed. The complaint is
remanded to the learned Banking Ombudsman, Hyderabad, for its fresh
disposal in the light of the observations made hereinabove. H
104 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R.

A Since, we are remanding the complaint for its fre ;h disposal on
merits, we have refrained from expressing any opinion on the effect of
various circulars/directions and notifications issued by the Reserve Bank
of India on the subject under consideration. In case the circulars/direc-
tions/notifications were not placed before the learned Ombudsman earlier,
B the same shall be permitted to be brought on the record by the learned
Ombudsman and the parties given an opportunity to have their say in
regard thereto.

The appeal is disposed of in above terms. No costs.

C Dr. ANAND, J, Delay condoned.

The application of the petitioner to implcad Reserve Bank of India
as a party respondent is allowed. Mr. Salve, Senior Advocate is present on
behalf of the Reserve Bank of India and waives formal notice.

D Leave granted.

On identical questions of fact and law, we have disposed of an appeal
arising out of special leave petition (c) No.11807 of 1997, titled Canara
Bank v. P.R.N. Upadhyaya & Ors. Thus, for the reasons recorded therein,
this appeal succeeds and is allowed. The award of the learned Ombudsman
E (Maharashtra & Goa) dated 10.03.1997 is hereby set aside and the matter
remanded to the learned Ombudsman for its fresh disposal, on merits, in
light of the observations made by us in the case of Canara Bank (supra).
No costs.

A.KT. Appeal allowed.