Human Intervention in Digital Grievance Redressal: Delhi High Court’s Landmark Ruling
In a landmark decision that underscores the imperative for human intervention in digital grievance redressal mechanisms, the Delhi High Court in Sarwar Raza v. Ombudsman, Reserve Bank of India & Anr. (Neutral Citation: 2025:DHC:10520) has ruled that complaints filed under the Reserve Bank-Integrated Ombudsman Scheme, 2021 (RB-IOS, 2021) cannot be rejected through automated, mechanical processes devoid of reasoned scrutiny.
Delivered recently on November 27, 2025, by Justice Prathiba M. Singh, the judgment mandates second-level human review by trained legal personnel for all rejections, reinforcing the Ombudsman’s role as a robust consumer protection forum rather than a “toothless division” of the Reserve Bank of India (RBI). This ruling not only addresses systemic lapses in handling unauthorized banking transactions but also aligns with Supreme Court precedents emphasizing fair practices and accountability in financial grievance mechanisms.
The decision arrives at a critical juncture, as India’s digital banking ecosystem expands rapidly, with unauthorized electronic transactions reported at over 1.4 lakh cases in 2023-24 alone, per RBI data. By prioritizing human oversight, the Court aims to prevent perfunctory dismissals that escalate disputes to overburdened courts, thereby promoting efficient, transparent resolution and bolstering public trust in regulated entities.
Case Facts: A Tale of Fraud, Reversal, and Systemic Failure
The petitioner, Sarwar Raza, an advocate practicing in Delhi, became ensnared in a fraudulent credit card episode in April 2022. Citibank N.A. (Citibank), without any solicitation from Raza, issued a second credit card linked to his primary account. Mere hours after issuance, an unauthorized transaction of ₹76,777 was debited via Paytm as a purported “rent payment” to an unknown entity. Raza, who had explicitly instructed Citibank not to activate the card, promptly reported the fraud to the bank and the Delhi Police Cyber Cell, filing an FIR under relevant provisions of the Indian Penal Code and Information Technology Act, 2000.
Bank’s Response and Recovery Action
Initially, Citibank provisionally credited the disputed amount to Raza’s account, acknowledging the fraud under RBI’s Customer Protection Guidelines on Limiting Liability in Unauthorized Electronic Banking Transactions (2017 Circular). However, the bank reversed this credit within days, classifying the transaction as legitimate and initiating coercive recovery measures. Recovery agents harassed Raza with threatening calls, home visits, and demands for payment, exacerbating his distress. The episode also tainted his CIBIL score, impacting his creditworthiness.
Complaints Before the RBI Ombudsman
Aggrieved, Raza escalated the matter to the RBI Ombudsman under the RB-IOS, 2021, filing two complaints (Nos. N202223022001847 and N202223022001848).
- The first was rejected on the ground that it was filed through an advocate (Raza himself), deemed impermissible despite the Scheme allowing authorized representatives where the complainant is the advocate.
- The second was dismissed for allegedly not first approaching the bank—a contention Raza refuted, as he had lodged multiple complaints with Citibank.
Both rejections were system-generated, lacking any reasoned order or accountability for the decision-maker.
Judicial Criticism of Mechanised Rejections
Justice Singh, in para 12 of the judgment, lambasted this approach: “The rejection of complaints by the Ombudsman by a mechanised model results in more disputes being filed in consumer forums, commercial courts, civil courts and writ petitions. This is completely contrary to the intent of the Reserve Bank-Integrated Ombudsman Scheme, 2021, which is to provide quick and effective redressal to customers.”
The Court further noted in para 15 that Raza received no prior intimation of the transaction on his registered mobile number, a fact “shrouded in mystery,” highlighting potential lapses in Citibank’s KYC and notification protocols. This prompted Raza to file Writ Petition (Civil) No. 16659/2022, seeking quashing of the rejections, restoration of his account, and costs for harassment.
Key Case Details at a Glance
| Particular | Details |
|---|---|
| Case Title | Sarwar Raza v. Ombudsman, Reserve Bank of India & Anr. |
| Neutral Citation | 2025:DHC:10520 |
| Date of Judgment | November 27, 2025 |
| Presiding Judge | Justice Prathiba M. Singh |
| Disputed Amount | ₹76,777 |
| Digital Platform Used | Paytm |
| Relevant Scheme | Reserve Bank-Integrated Ombudsman Scheme, 2021 |
| Writ Petition Number | W.P. (Civil) No. 16659/2022 |
Judicial Directives: Safeguards for Accountability and Relief
The Court’s 23-page judgment delivers multifaceted relief while issuing systemic directives to fortify the Ombudsman framework. For Raza, Justice Singh directed Citibank to:
Relief Granted to Raza
- Re-credit ₹76,777 to his account forthwith, without levying interest, late fees, or penal charges on the disputed amount (para 28).
- Restore his CIBIL score to its pre-transaction status, absent any independent defaults (para 29).
- Pay ₹1 lakh in costs to Raza for the “harassment caused by recovery agents,” payable by January 15, 2026 (para 30).
Structural Reforms Directed at RBI
Turning to structural reforms, the Court invoked its writ jurisdiction under Article 226 to mandate RBI interventions. In para 35, it declared:
Steps shall be taken for ensuring that all complaints filed by the customers are not rejected simply by a mechanised process. Whenever the complaints filed before the RBI Ombudsman are finally rejected, the same shall undergo a second level human supervision process, by trained legal personnel.
This includes identifying a responsible officer for each rejection, with communications bearing their name and designation to ensure traceability.
Mandatory RBI Directions (Para 38)
| Directive | Requirement | Compliance Deadline |
|---|---|---|
| Complaint Escalation Flowchart | Direct all regulated entities (banks, NBFCs) to display a clear complaint escalation flowchart on their websites, detailing channels from customer care to nodal officers. | January 30, 2026 |
| Ombudsman Staffing | Bolster Ombudsman staffing with adequate human resources to handle the Scheme’s growing caseload. | Ongoing |
| Enforcement of 2017 Circular | Enforce the 2017 Circular “in its letter and spirit,” limiting customer liability in fraud cases to zero if reported within three days, and prohibiting coercive recovery pending investigation. | Immediate |
The Court cautioned against misuse, directing RBI to implement safeguards like complainant verification to prevent frivolous filings (para 40). Compliance reports from RBI and Citibank are due by January 30, 2026.
Alignment with Supreme Court Precedents: Echoes of Fairness and Efficacy
This ruling resonates deeply with Supreme Court jurisprudence on banking oversight and consumer rights, emphasizing substantive justice over procedural technicalities.
In Laxmi Vilas Bank Ltd. v. S. Kasi Viswanathan ((2022) 10 SCC 180), the Apex Court underscored RBI’s statutory duty under Section 35A of the Banking Regulation Act, 1949, to enforce fair practices and curb harassment in debt recovery. Justice Singh echoed this in para 22, observing:
The regulatory safeguards under RBI’s circulars on customer protection and recovery agents must be strictly adhered to,
aligning the Delhi HC’s directives with the SC’s mandate for humane recovery processes.
Similarly, M. Veerappa v. Evening Star Financiers ((2021) 7 SCC 626) stressed that consumer forums must prioritize “meaningful adjudication” over dismissals on hyper-technical grounds, a principle invoked in para 18 to critique the Ombudsman’s automated rejections:
Any empty formality deserves to be weeded out.
The Court drew parallels to the SC’s view that grievance mechanisms like the Ombudsman must deliver speedy, cost-effective relief, not “tantalising promises.”
Additional precedents fortify this alignment. In Reserve Bank of India v. Jayantilal N. Mistry (2016) 2 SCC 165, the SC held that RBI cannot impose mechanical penalties where genuine hardships exist, mirroring the instant case’s rejection of automated closures.
Likewise, ICICI Bank Ltd. v. Shanti Devi Sharma (2018) 18 SCC 516 reinforced zero liability for fraud victims under RBI guidelines if reported promptly, a tenet Justice Singh upheld in para 25 by faulting Citibank’s reversal.
Collectively, these holdings affirm that automated processes cannot supplant the human element in upholding RBI circulars, including the 2017 fraud liability norms and the RB-IOS, 2021’s integration of banking, NBFC, and digital transaction grievances.
Implications for Banking Regulation: Towards a Transparent, Victim-Centric Ecosystem
The Sarwar Raza judgment heralds a paradigm shift in India’s banking grievance architecture, compelling regulated entities to prioritize empathy and accountability over efficiency-driven automation. Banks must now overhaul recovery protocols, eschewing harassment—a scourge affecting millions annually—and adhere scrupulously to the 2017 Circular’s timelines for fraud resolution (three days for zero liability). The mandated flowcharts will democratize access to escalation paths, empowering consumers, especially vulnerable groups like seniors and the differently-abled, as per RB-IOS provisions.
For the RBI, the directive to augment Ombudsman resources addresses chronic understaffing, potentially reducing the 10-15% rejection rate of complaints due to technicalities. This could curtail litigation influx—over 50,000 banking disputes annually reach consumer forums—fostering a lighter judicial burden. Fraud victims gain fortified safeguards: no penal charges on disputed sums, provisional credits pending inquiry, and supervised rejections to weed out errors.
Broader regulatory ripples include enhanced digital forensics in KYC breaches and stricter penalties for non-compliance, aligning with the Digital Personal Data Protection Act, 2023. As Justice Singh concluded in para 42:
The Ombudsman must serve as an effective dispute resolution forum and not function as a mere automated rejection mechanism.
This verdict not only vindicates Raza but charts a humane course for India’s financial inclusion drive, ensuring technology serves, rather than supplants, justice.
Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]
