The Securities and Exchange Board of India issued a circular dated July 31, 2023, providing the guidelines for online resolution of disputes in the Indian Market.
The SEBI ODR Circular
introduces a comprehensive and all-encompassing framework designed to
effectively tackle a diverse array of potential conflicts that are anticipated
to arise within the dynamic landscape of the securities market. The primary
goal of this circular, as envisioned by the Securities and Exchange Board of
India (SEBI), is to elevate the efficacy of the dispute resolution process
within the established structure of Stock Exchanges and Depositories, which are
collectively known as Market Infrastructure Institutions (MIIs).
In line with this objective,
the circular seeks to achieve a twofold enhancement: firstly, by streamlining
the mechanisms employed for the resolution of disputes, and secondly, by
expanding the scope of responsibilities vested in these vital MIIs. By
entrusting these institutions with a broader mandate, the SEBI ODR Circular
envisions a more proactive and influential role for Stock Exchanges and
Depositories in the overarching governance of the securities market.
The Circular encompasses the
complete procedure for resolving disputes, encompassing guidelines for
commencing the online dispute resolution process, the operations of the ODR
platform, and the diverse range of dispute resolution mechanisms accessible to
investors and other participants in the market.
As per the circular, a Common
Online Dispute Resolution Portal has been introduced. The MIIs shall establish
and develop a common Online Dispute Resolution Portal. The MIIs will enter into
an agreement amongst themselves outlining the nature of their responsibilities
amongst themselves, the cost of development, operating, upgradation and
maintenance. The SEBI is entitled to undertake an inspection of the ODR
Platform from time to time in order to ensure the orderly functioning of the
ODR Portal.
Every Market Infrastructure
Institution (MII) must identify and establish a selection of independent Online
Dispute Resolution (ODR) organizations. These entities should possess the
capacity to conduct prompt online conciliation and/or arbitration processes in
accordance with the stipulations outlined in the Arbitration and Conciliation
Act of 1996, along with relevant legal statutes.
INITIATION OF
DISPUTE THROUGH ODR PORTAL
The investors or clients shall
first take up their grievances with the Market Participant by lodging their
complaints directly with the concerned market participant. If the grievance
raised with the market Participant is not redressed satisfactorily, then the
grievance may further be escalated on the SCORES Portal. In case the investors
are still not satisfied with the outcome, then they can further initiate with
the dispute resolution on the ODR Portal.
Additionally, the concerned Market
Participants also have the power to initiate dispute resolution through the ODR
Portal after having given due notice of 15 calendar days to the investors or
clients for resolution of disputes which have not been satisfactorily resolved
between them.
Any complaint or dispute
initiated through the ODR Portal will be referred to an ODR Institution
empanelled by a MII, and the allocation of cases would be done on the
market-wise basis on a round robin system.
CONCILIATION
Upon receiving the reference
of complaint or dispute, the ODR Institution shall appoint a sole independent
and neutral conciliator from its panel of conciliators. The conciliator upon
being appointed, shall conduct one or more meetings for the disputing parties
so that the disputing parties can reach an amicable and consensual resolution
within 21 calendar days, unless the time is extended by a maximum period of 10
calendar days. The ODR institution is required to appoint the conciliator
within a period of 5 days of receipt of the complaint or dispute.
It is the duty of Conciliator
so appointed to facilitate a consensual resolution of the complaint/dispute.
Additionally, it is also the duty of the Conciliator to advice the Market
Participants to render the required service in case of service-related
complaints or disputes.
On successful resolution
through the conciliation process, the process shall be concluded by a duly
executed settlement agreement between the disputing parties.
ARBITRATION
In case any dispute is pursued
by an investor or client through the process of online arbitration, then the
ODR Institution is required to appoint a sole, independent, and neutral
arbitrator within a period of 5 calendar days from the date of receipt of
reference.
The Arbitration proceedings
are dependent upon the value of claim or counterclaim. If the aggregate of the
claim and/or counter claim exceeds Rs. 30,00,000 or such amount as may be
specified by SEBI, then the matter will be referred to an Arbitral Tribunal
consisting of three Arbitrators within a period of 5 calendar days of receipt
of reference. In case the value of claim or counterclaim is more than Rs.
1,00,000, the Sole Arbitrator is required to conduct one or more hearings and
pass the arbitral award within a period of 30 calendar days. On the other hand,
if the value of claim or counter claim is less than or equal to Rs.1,00,000,
then the Sole Arbitrator is required to conduct document-only arbitration and
pass the arbitral award within a period of 30 calendar days of appointment in
the matter.
Upon the issuance of arbitral
award, in case the party against whom the order has been passed intends to
challenge the award so granted, then the concerned party will be required to
submit such an intention within 7 calendar days. However, in the course of such
a challenge, in case a stay on the said award is not granted within a period of
3 months from the date of receipt of such award, then complete adherence to the
terms of the arbitral award is required to be done. Further, if the Market
Participant wishes to challenge the arbitral award, then the Market Participant
is first required to deposit 75% of the amounts payable in terms of the
arbitral award.
The ODR Institutions are
required to conduct the arbitration and conciliation through online mode which
enables the investors or clients to participate through online or audio-video
means.
ROLE PLAYED BY
MARKET PARTICIPANTS
The Market Participants shall
play a very important in the entire Online Dispute Resolution process. All
agreements, contractual frameworks or relationships entered by the Market
Participants with the Investors or clients in the Indian Securities Market
which are presently existing, or which will be entered after the introduction of
ODR mechanism shall be deemed to be amended and include the provisions of
online conciliation or online arbitration.
It is also the responsibility
of the Market Participants to duly train their staff in attending to the
complaints or disputes raised and further handling the references arising from
the SCOREs portal or the ODR Portal.
The ODR Institutions are
required to conduct conciliation and arbitration in the online mode, which
enables the investors or clients to participate through online or audio-video
mode. The investors or clients may also participate in the online conciliation
and arbitration by accessing or utilizing the facilities of Investor Service
Centers (ISCs) operated by the MIIs.
For online proceedings,
the venue and seat of the online proceedings shall be deemed to be the place
where the relevant MIIs have their registered office.
Moreover, the MIIs
(Market Intermediaries) and the Online Dispute Resolution (ODR) organizations
authorized by the MIIs have the responsibility to maintain a balanced ratio
between the count of conciliators and arbitrators within the ODR organization's
panel, relative to the volume of complaints or disputes received. This approach
aims to handle a reasonable quantity of complaints effectively at the same
time, ultimately leading to prompt resolution within the designated timeframe. The
conciliators and arbitrators who are instituted on the panel of ODR
institutions are required to undergo training and certification programs or
they should possess sufficient experience so that such an arbitrator or
conciliator can be regarded as qualified or expert in online dispute
resolution.
RESPONSIBILITIES
AND ACCOUNTABILITY OF ODR INSTITUTIONS
· MIIs shall inspect and/or audit the ODR Institution.
· MIIs shall ensure that ODR Institutions abide by the SEBI regulations, circulars, and advisories.
· Any complaints/grievances against the ODR Institutions w.r.t their services shall be resolved as per the agreements between ODR Institutions and MIIs.
This Article has been Compiled by Akash Gupta (Principal Associate).
You can direct your queries or comments to the author at info@factumlegal.com
Disclaimer-
The contents of this article should not be construed as legal opinion. This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this article.
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