SQL "OR" statement not working in Oracle 10.2.0.2

I'm encountering below issue executing the following statement in Oracle SQL. I'm not sure if this is a bug or not, but this used to work before.

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When commenting CONDITION A, it is returning 11340 rows.

 select /*+ INDEX (ITEM itemixc) */
   d.local_acc_no as Account,
   e.group_code,
   f.grp_code,
   f.country,
   f.type,
   substr(e.group_code,1,(length(e.group_code)-1)),
   a.short_code,
   b.short_no
   from  lsub a,item b, db_ssrreport_date c, bank d,acgr e ,db_ssr_trpsetup f
   where b.corr_acc_no = d.corr_acc_no
   and a.corr_acc_no = b.corr_acc_no
   and d.corr_acc_no = e.corr_acc_no and b.flag_2 = 0
   and (b.value_date <= last_day(add_months(c.rpt_dte,-1)) )
   and  claim_flg != 1
   and  
   (
-- CONDITION A
--   (e.group_code = f.grp_code and upper(f.country)='SINGAPORE' and f.type in ('INTERNAL'))
--   or
-- CONDITION B
   (substr(e.group_code,1,(length(e.group_code)-1)) = f.grp_code and upper(f.country)='SINGAPORE' and f.type in ('ARAPINTERNAL'))
   )
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When commenting CONDITION B, it is returning 88 rows.

 select /*+ INDEX (ITEM itemixc) */
   d.local_acc_no as Account,
   e.group_code,
   f.grp_code,
   f.country,
   f.type,
   substr(e.group_code,1,(length(e.group_code)-1)),
   a.short_code,
   b.short_no
   from  lsub a,item b, db_ssrreport_date c, bank d,acgr e ,db_ssr_trpsetup f
   where b.corr_acc_no = d.corr_acc_no
   and a.corr_acc_no = b.corr_acc_no
   and d.corr_acc_no = e.corr_acc_no and b.flag_2 = 0
   and (b.value_date <= last_day(add_months(c.rpt_dte,-1)) )
   and  claim_flg != 1
   and  
   (
-- CONDITION A
   (e.group_code = f.grp_code and upper(f.country)='SINGAPORE' and f.type in ('INTERNAL'))
   --or
-- CONDITION B
   --(substr(e.group_code,1,(length(e.group_code)-1)) = f.grp_code and upper(f.country)='SINGAPORE' and f.type in ('ARAPINTERNAL'))
   )
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But when I use both conditions using "OR", logically it should return 11428 rows, but it is actually returning 499282 rows (!!)
The rows that are not supposed to be picked up also gets picked up.

 select /*+ INDEX (ITEM itemixc) */
   d.local_acc_no as Account,
   e.group_code,
   f.grp_code,
   f.country,
   f.type,
   substr(e.group_code,1,(length(e.group_code)-1)),
   a.short_code,
   b.short_no
   from  lsub a,item b, db_ssrreport_date c, bank d,acgr e ,db_ssr_trpsetup f
   where b.corr_acc_no = d.corr_acc_no
   and a.corr_acc_no = b.corr_acc_no
   and d.corr_acc_no = e.corr_acc_no and b.flag_2 = 0
   and (b.value_date <= last_day(add_months(c.rpt_dte,-1)) )
   and  claim_flg != 1
   and  
   (
-- CONDITION A
   (e.group_code = f.grp_code and upper(f.country)='SINGAPORE' and f.type in ('INTERNAL'))
   or
-- CONDITION B
   (substr(e.group_code,1,(length(e.group_code)-1)) = f.grp_code and upper(f.country)='SINGAPORE' and f.type in ('ARAPINTERNAL'))
   )

Can you pls assist with this?