Oct 19, 2023

Circular on Online Resolution of Disputes in Indian Securities Market

SEBI, by way of its Circular dated July 31, 2023, read with the corrigendum cum amendment dated August 04, 2023 (collectively, the ‘ODR Circulars’), has introduced a common Online Dispute Resolution Portal (‘ODR Portal’) to harness online conciliation and arbitration for resolution of disputes in the Indian securities market. The ODR Portal will be established and operated by the SEs and the depositories (collectively, ‘MIIs’), in consultation with their empaneled Online Dispute Resolution Institutions.

The ODR Circulars envisage two categories of disputes which can be resolved thereunder:

i.    Mandatory Resolution: Disputes between investors/ clients and listed companies or any of the specified intermediaries/ regulated entities (listed companies, together with such intermediaries and entities, the ‘Market Participants’); and

ii.   Voluntary Resolution: Institutional or corporate clients can resolve disputes with specified intermediaries/ regulated entities in securities market, either in terms of the ODR Circulars, at their option, or by harnessing any independent institutional mediation, conciliation and/or online arbitration in India.

A brief summary of the dispute resolution process prescribed under the ODR Circulars is set out below:

i.    Initiation: The investor/ client is required to first lodge their grievance directly with the Market Participant, and thereafter, escalate it to the SCORES portal (which is an online platform designed to help investors to lodge their complaints with SEBI, pertaining to securities market), and finally to the ODR Portal, in the event it has not been redressed satisfactorily at each stage;

ii.   ODR Portal and Allocation System: A complaint/ dispute initiated through the ODR Portal will be allocated to ODR Institutions on a round-robin system;

iii.  Conciliation: ODR Institutions must appoint a conciliator who must seek to facilitate amicable resolution within 21 days from date of appointment. A settlement agreement must be executed if the conciliation is successful. If, however, the matter is not resolved, the investor, client or Market Participant may initiate online arbitration; and

iv.   Arbitration: Within five calendar days of reference of the dispute, ODR Institutions must appoint a sole arbitrator, or a panel of three arbitrators, in the event the claim/ counter-claim amount exceeds INR 30 lakh (approx. US$ 36,000). Where the claim/ counter-claim amount is INR 1 lakh (approx. US$ 1,200) or below, a document-only arbitration process is required to be completed within 30 calendar days of the arbitrator’s appointment. Where the claim/ counter-claim amount exceeds INR 1 lakh (approx. US$ 1,200), hearings may be conducted, and the arbitration process is required to be completed within 30 calendar days of the arbitrator’s appointment.

The ODR Circulars also set out the norms for empanelment and continuing obligations of the ODR Institutions, the roles, and responsibilities of MIIs and the responsibilities of the Market Participants. SEBI has contemplated a two-phased implementation of the ODR framework.




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