One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.
Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.
TL;DR: If a merchant has refunded the whole amount and the bank still bills credit card EMI interest on that same sum, that is very likely a deficiency of service under the Consumer Protection Act, 2019. You have two routes: the RBI's banking Ombudsman (free, faster, no lawyer needed) or the District Consumer Commission (a judicial forum with wider powers). Pick one and run with it. Running both at the same time is a bad idea.
The statement landed in his inbox on a Tuesday, and the line that made no sense had nothing to do with anything he had bought. Roughly eleven thousand rupees in interest and charges, on an air conditioner Rohit Kulkarni never received.
The sequence was ordinary enough. He booked the unit from Croma in Pune on a Kotak Mahindra Bank credit card, somewhere around twenty-nine thousand rupees, and converted the purchase into a six-month EMI. Fifteen minutes later he cancelled. Nothing shipped. Nothing was delivered.
The merchant pushed the full amount back to the card a few days later, split across two credits, one of them a few rupees short and the second making up the difference. Both credits sit inside the bank's own statement.
The EMI plan stayed open for two months anyway. Instalments billed. Interest billed. When the bank finally reversed those instalments, it added debit adjustment interest plus GST, worked out as though the whole sum had been sitting unpaid from day one.
Level 1 rejected his complaint. A written representation stamped at the branch and emailed to the Nodal Officer the same day drew no reply for fifteen days.
By then Kulkarni had spent weeks on phone calls that went nowhere. He approached the Chamber of Advocate Sudhir Rao, and the matter was reframed as a consumer dispute rather than a routine service request, which changed how the bank's grievance desk responded. Advocate Sudhir Rao's expertise in banking and consumer disputes helped secure an order in the client's favour.
Key Facts of the Case
- A consumer goods purchase of roughly twenty-nine thousand rupees was made on a Kotak Mahindra Bank credit card and converted into a six-month EMI plan.
- The order was cancelled almost immediately. The product was never delivered and never shipped.
- The merchant credited the entire purchase amount back to the card across two transactions, both visible in the bank's own statement.
- Despite the credits, the EMI plan remained open for about two months, with instalments and interest billed throughout.
- When the bank reversed the instalments, it levied "debit adjustment interest" and GST calculated on the assumption that the money
- calculated on the assumption that the money had never come back at all.
- His Level 1 complaint was rejected. A written representation, stamped at the branch and emailed to the bank's Nodal Officer the same day, went unanswered for fifteen days.
What the statement did not show was any dispute about the refund itself. The credits were sitting right there, in the bank's own file. The interest had been charged on money that had already returned to the account.
Everything above is his account of it. The bank's file may well show a cancellation request logged on a different date, or an internal note about how EMI reversals are timed. We only have one side until they produce theirs.
Can a Bank Charge Credit Card EMI Interest After a Full Refund?
A bank can charge interest on a credit card EMI when it has lent you money and you have not repaid it. That is the normal case. When the merchant has already returned the full purchase price to the card, there is no outstanding borrowing to charge interest on — and continuing to bill interest anyway is where the legal problem starts.
Two separate things happened here, and keeping them separate matters.
The EMI plan and the merchant refund are processed on different clocks
EMI conversion happens on the card issuer's system. The merchant refund happens through the payment network. They are not synchronised, and a bank will usually say that any lag is a system limitation rather than something it decided to do. That argument carries some weight for a short overlap — a few days of delay is hard to attack.
It carries far less weight for two months of billed instalments followed by "debit adjustment interest" charged on the full sum from day one. At that point the bank is not describing a timing mismatch. It is describing a charge it has calculated and posted.
Where the deficiency of service lies
Under the Consumer Protection Act, 2019, a bank is a service provider, and a deficiency in service is defined to include a shortfall in the quality, nature or manner of performance that is required by law or has been undertaken under a contract. Section 2(11) carries that definition. Charging interest on an amount that the bank's own records show was credited back is a shortfall of that kind — there was no principal to charge on, and no contract term that says otherwise.
There is a second angle. Charging a consumer for something that was never supplied, or for a sum already returned, can also be looked at as an unfair trade practice. The two grounds are usually pleaded together, because on some facts one will be easier to prove than the other.
What the RBI's card rules add
The RBI's directions on credit and debit card issuance and conduct require card issuers to deal with billing disputes, EMI conversions and reversals in a defined way, and to close customer complaints within a set period — generally thirty days. Those directions do not create a private right of action by themselves, but they do two useful things. They set the standard against which the bank's conduct gets measured, and they give the Ombudsman something concrete to apply.
The bank's own grievance machinery is also part of this. A Nodal Officer who does not reply for fifteen days is not a small detail; it is a failure of a step the RBI framework requires the bank to operate.
What can actually be claimed
Realistically, the claim is the interest and GST that stayed on the account after the reversals, plus any late payment fee or credit bureau reporting caused by the disputed EMI, plus compensation and litigation cost. On a purchase of around twenty-nine thousand rupees, that first figure is often small — a few hundred rupees, not a few thousand.
That does not make the complaint pointless. A wrong entry on a credit report is the part that hurts, and a commission can direct correction of records and compensation for the harassment of chasing it. But it is worth being straight: if nothing was reported to a credit bureau and the interest stayed on the card, the money at stake may not justify the time a contested consumer case takes.
RBI Banking Ombudsman or Consumer Commission: Which One?
You have two forums. They do not do the same thing, and the choice is not purely about which is "better".
The Ombudsman route
Complaints against banks go to the RBI's Integrated Ombudsman Scheme, 2021. It is free. You do not need a lawyer. It is handled on paper and online, and the Ombudsman can direct the bank to reverse a charge, pay for a loss caused by its conduct, and pay something towards your expenses. An award the complainant accepts binds the bank.
The sequence matters. You must first complain to the bank and give it a chance to answer. If the bank rejects the complaint or says nothing within thirty days, you can escalate. As a general rule a complaint must be filed within one year of the bank's reply, or of the point at which it should have replied — check the current scheme text against your own dates, because that limit has sunk more complaints than the merits ever have.
The consumer commission route
A complaint under Section 35 of the Consumer Protection Act, 2019 goes to the District Consumer Disputes Redressal Commission. For a claim of this size, that is the District Commission — its pecuniary limit is fifty lakh rupees. It can order refunds, removal of wrongful charges, compensation for mental agony, correction of records and costs. Filing is possible through the e-Daakhil portal, and you can appear in person.
This route is slower. Months, in many commissions, and longer in some. What it gives you that the Ombudsman does not is a judicial order and the ability to have the matter treated as a contested dispute with evidence on both sides.
Do not run both at once
The Ombudsman will not entertain a complaint that is already pending before, or has been decided by, another forum. So the practical rule is: pick one, finish it, and keep the other in reserve. Filing everywhere at once tends to get you rejected at both ends.
What to Do First: A Step-by-Step Sequence
- Pull the paper together before you write to anyone. The card statements covering the purchase, the EMI conversion confirmation, the cancellation record, both refund credits, and every charge you are disputing.
- Write to the bank's Nodal Officer, not the call centre. Mark it as a complaint, state the date of the transaction, the date of the refund credits, the exact amount disputed, and what you want done. Send it by email and by a tracked letter. Keep the receipt.
- Wait thirty days. If the bank resolves it, close the file. If it rejects the complaint or stays silent, you now have the gateway to escalate.
- Escalate to the RBI Ombudsman if the amount is small and the real issue is a wrong charge or a wrong credit report entry. Free, faster, no lawyer needed.
- File before the District Consumer Commission under Section 35 if the bank has reported you to a credit bureau, if the charges are large, or if you want a judicial finding rather than a settlement.
- Watch the limitation. A consumer complaint must be filed within two years of the cause of action under Section 69. The clock on this one likely started when the disputed interest was billed, not when the bank last replied to you.
What to Send the Chamber
If you are in this position, send three things to /contact-us: the card statement pages showing the EMI instalments, the disputed interest and the refund credits; the complaint you filed with the bank and the date it was acknowledged, along with any reply; and a two-line note saying what you want reversed or corrected.
If nothing has been filed with the bank yet, say so. It changes the order of what gets done, and there is no point paying for a commission filing that the Ombudsman could have closed in six weeks.
Frequently Asked Questions
Can I really file a consumer case over a few hundred rupees of interest?
Yes. There is no minimum amount for a District Commission complaint. Whether it is worth it is a different question. If a credit bureau entry was caused by the disputed EMI, the case usually justifies itself. If it is only the residual interest and GST, the Ombudsman is the more sensible first move.
Is there a deadline?
Two years from the cause of action for a consumer complaint under Section 69 of the Act, and generally one year for an Ombudsman complaint from the bank's reply or the point it should have replied. Do not treat either as generous. Put the date in your calendar the day you get the statement.
The merchant refund came in two credits and one was a few rupees short. Does that hurt me?
Not on the face of it — the second credit completed the balance, and both are on the statement. The bank may still try to argue that the account was not fully squared on the EMI due date. That is an argument about a few rupees, and a commission is unlikely to build much on it, but expect it to be raised.
Do I need a lawyer for either route?
No. The Ombudsman route is designed for consumers acting on their own, and you can appear in person before a District Commission. A lawyer helps most where the bank disputes the facts, where a credit report entry has to be undone, or where the bank's reply raises a contract term you need answered.
What if the Ombudsman rejects my complaint?
A rejection by the Ombudsman does not shut the door. You can still go to the District Consumer Commission or, in some situations, to a civil court. Check the limitation position first, because the time spent with the Ombudsman may have eaten into it.
Can the bank simply reverse the charge and close the matter?
It can, and often does once a complaint reaches the right desk. A reversal does not automatically cover compensation for the weeks spent chasing it, or the cost of getting a credit bureau entry corrected. Decide whether you want the money back or the record set right — sometimes you need both.
This article is general information about Indian law and is not legal advice on your own situation. Every complaint turns on its own dates, documents and bank records.
Advocate Sudhir Rao, Supreme Court of India