Summary of this article
Kerala High Court sets aside the Ombudsman's complaint-closure order.
Bank's Rs 6 lakh payment did not establish customer-approved settlement.
Ombudsman must issue a formal award within three months.
The High Court of Kerala has directed the Reserve Bank of India (RBI) Banking Ombudsman to reconsider a customer’s complaint against Standard Chartered Bank after finding that it was wrongly closed without his agreement. Even though the bank transferred Rs 6 lakh following an advisory from the Ombudsman, the court found that the payment alone did not establish that the complaint was settled between the bank and its customer.
The Ombudsman has been asked to pass a formal award within three months of receiving a copy of the judgment.
Eight Insurance Policies At Centre Of Dispute
The complaint was filed by Mohamed Shafi, who had purchased eight life insurance policies between March 2023 and October 2024.
Shafi’s grievance was that Standard Chartered Bank officials had assured him that the premiums would be paid from returns generated by his mutual fund investments held with the bank. He also claimed that the bank had agreed to pay any amount that fell short.
However, he claimed the bank did not follow through the agreement in 2025 and Shafi had to spend his own money to meet the premium payments, ending up with financial losses. In February 2026, he contacted the Banking Ombudsman for reimbursement and compensation.
On March 23, 2026, the Ombudsman issued an advisory to the bank for paying Rs 5 lakh for the disputed premiums and Rs 1 lakh for mental agony. The bank transferred the full Rs 6 lakh on March 25. The complaint was marked as resolved on March 26 under the RBI Integrated Ombudsman Scheme, 2021.
Payment Alone Does Not Mean Settlement
The high court said that the customer had no opportunity to communicate whether he accepted the advisory before the bank made the transfer. Clause 14(9)(a) of the Scheme allows a complaint to be closed as settled only when an agreement has been reached between the parties.
