Anand, J. - (1.)Leave granted.
(2.)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 circumstances: 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 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. 20,0000/- 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, respondent No. 3 executed a Demand Promissory Note undertaking to pay interest 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 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 respectively. 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 No. 90/91.
(3.)Respondents Nos. 2 to 5 filed a complaint before the Banking Ombudsman 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 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 basis of various 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.