TMI BlogMaster Circular for Online Resolution of Disputes in the Indian Securities Market(Updated as on August 11, 2023)X X X X Extracts X X X X X X X X Extracts X X X X ..... ined under the aegis of Stock Exchanges and Depositories (collectively referred to as Market Infrastructure Institutions ( MIIs )), 1 by expanding their scope and by establishing a common Online Dispute Resolution Portal ( ODR Portal ) which harnesses online conciliation and online arbitration for resolution of disputes arising in the Indian Securities Market. Investors and Listed Companies/Specified Intermediaries/Regulated entities under the ambit of ODR 2. Disputes between Investors/Clients and listed companies (including their registrar and share transfer agents) or any of the specified intermediaries / regulated entities in securities market (as specified in Schedule A ) arising out of latter s activities in the securities market, will be resolved in accordance with this circular and by harnessing online conciliation and/or online arbitration as specified in this circular. Listed companies / specified intermediaries / regulated entities OR their clients/investors (or holders on account of nominations or transmission being given effect to) may also refer any unresolved issue of any service requests / service related complaints 2 for du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s described below) are not required to incur any costs for development and maintenance of the ODR Portal during the period of such exclusion. 6. Each MIIs will identify and empanel one or more independent ODR Institutions which are capable of undertaking time-bound online conciliation and/or online arbitration (in accordance with the Arbitration and Conciliation Act, 1996 and any other applicable laws) that harness online/audio-video technologies and have duly qualified conciliators and arbitrators. The norms for empanelment of ODR Institutions are specified in Schedule C of this circular as also the continuing obligations of the ODR Institutions. The ODR Portal shall have due connectivity with each such ODR Institution as is required for undertaking the role and activities envisaged in this circular. Such ODR Portal shall establish due connectivity with the SEBI SCORES portal / SEBI Intermediary portal. 7. All the MIIs shall participate on the ODR Portal and provide investors/clients and listed companies (including their registrar and share transfer agents) and the specified intermediaries / regulated entities in the securities market access to the ODR Port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar days to the investor/client for resolution of the dispute which has not been satisfactorily resolved between them. 13. The dispute resolution through the ODR Portal can be initiated when the complaint/dispute is not under consideration in terms of the paragraph 11 above or SCOREs guidelines as applicable or not pending before any arbitral process, court, tribunal or consumer forum or are non-arbitrable in terms of Indian law (including when moratorium under the Insolvency and Bankruptcy Code is in operation due to the insolvency process or if liquidation or winding up process has been commenced against the Market Participant). 14. The dispute resolution through the ODR Portal can be initiated when within the applicable law of limitation (reckoned from the date when the issue arose/occurred that has resulted in the complaint/date of the last transaction or the date of disputed transaction, whichever is later). ODR Portal and allocation system 15. The ODR Portal shall have the necessary features and facilities to, inter alia , enrol the investor/client and the Market Participant, and to file the complaint/dispute and to upload any documents or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. 18. Such conciliator shall conduct one or more meeting/s for the disputing parties to reach an amicable and consensual resolution within 21 calendar days (unless extended for a maximum period of 10 calendar days by consent of the disputing parties to be recorded in writing/electronically) from the date of appointment of conciliator by the ODR Institution, which shall do so within 5 days of receipt of reference of the complaint/dispute by the ODR Institution. Apart from attempting to actively facilitate consensual resolution of the complaint/dispute, the conciliator may consider advising the Market Participant to render required service in case of service-related complaints/disputes and/or consider issuance of findings on admissibility of the complaint/dispute or otherwise in case of trade related complaints/dispute (as the case may be). 19. If the process of conciliation is successful, the same shall be concluded by a duly executed settlement agreement between the disputing parties. Such an agreement shall be executed and stamped through an online mode, as permissible in law. When such agreement requires the Market Participant to pay the admissible claim value to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r before release of the said amount to the investor/client, the MII shall obtain appropriate undertaking/ indemnity / security in such form, manner and substance from the investor/client to ensure return of the amount so released, in case the arbitration proceedings are decided against the investor/client. If the arbitration proceeding is decided against the investor/client, subject to the terms of the arbitral award, such investor/client should return the released amounts. If the investor/client fails to return the amount released, then the investor/client (based on PAN of the investor/client) shall not be allowed to trade on any of the Stock Exchanges or participate in the Indian Securities Market till such time the investor/client returns the amount to the Market Participant. Further, the securities lying in the demat account(s) or the mutual fund holdings of the investor/client shall be frozen till such time as the investor/client returns the amount to the Market Participant. If security had been obtained, the same could be enforced/realised and adjusted towards the amount required to be returned. In the event, the arbitration proceeding is decided in favour of the investor/cli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberty to extend such time for disputes exceeding claims and/or counterclaims of Rs 1,00,000/- (Rupees One Lakh) (or such other sum as the Board may specify from time to time), upto a further period of 30 calendar days (or such other period as the Board may specify) and for reasons to be recorded in writing/electronically, when the matter requires detailed consideration. The Sole Arbitrator or Arbitral Tribunal may, having regard to the nature of the claim and/or counterclaim, provide interim relief as may be required for reasons to be recorded after affording hearing to the parties to the dispute. The parties may make an application under the relevant section of the Arbitration and Conciliation Act, 1996 for correction/rectification of the award. 23. Upon the conclusion of the arbitration proceedings and issuance of the arbitral award, subject to the terms of the arbitral award, when such arbitral award requires payment of any amount by the Market Participant or performance by it of a certain nature, then such payment shall be made by the Market Participant within a period of 15 calendar days from the date of the arbitral award (unless such award requires payment sooner), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stor/client. If the challenge is decided against the investor/client, subject to the judgement of the appellate forum, such investor/client should return the released amounts. If the investor/client fails to return the amount released, then the investor/client (based on PAN of the investor/client) shall not be allowed to trade on any of the Stock Exchanges or participate in the Indian Securities Market till such time the investor/client returns the amount to the Market Participant. Further, the securities lying in the demat account(s) or the mutual fund holdings of the investor/client shall be frozen till such time as the investor/client returns the amount to the Market Participant. If security had been obtained, the same could be enforced/realised and adjusted towards the amount required to be returned. In the event, the challenge is decided in favour of the investor/client, subject to the terms of the judgement of the appellate forum, the MII shall release the balance deposit held by it (as deposited by the Market Participant) to the investor/client. The MII shall also monitor the due compliance by the Market Participant with the terms of the arbitral award/judgement of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conciliator ) - for successful conciliation - for unsuccessful conciliation ₹ 4,800/- ₹ 3,240/- ODR Institution s fees, in addition to the conciliator s fees ( to be collected by ODR Institution ) ₹ 600/- Applicable GST, Stamp Duty, etc. on actual outgoings shall be borne by the concerned Market Participant Such fees may be borne by the MIIs and will be recoverable by them from the concerned Market Participant against whom the complaint/dispute is raised. Such fees shall be borne directly by the concerned Market Participant if it is initiating the dispute process. The Market Participant shall not shift the incidence of such fees to the investor/client at any time. Unsuccessful Conciliation : In the event the disputing parties are not able to arrive at a settlement within the stipulated time (or such extended period as agreed to by them) it shall be said to be unsuccessful conciliation. Late Fees: Initiation of conciliation process after six months from the date of transaction/dispute arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied then the person choosing to initiate the arbitration can deposit the fees payable on such person s behalf and shall be recoverable from such person through the arbitration process. Subject to the terms of the arbitral award, the person who is successful in the arbitration proceedings shall receive a refund of amounts deposited by such person. Late Fees: Arbitration initiated after one month of failure of conciliation and upto six months, the fees payable would be double of the non-refundable fees specified in the table above. Arbitration initiated after six months by a Market Participant will require payment of, additional fee of 50% of the fees, specified in the table above applicable per additional month of delay and which shall be on non-refundable basis. Such late fees shall be collected by the MIIs and applied in relation to operationalization and effective functioning of the ODR Platform and for the purposes as specified by the Board from time to time. The fees shall be uniform across MIIs, ODR Institutions, conciliators and arbitrators . 29. All other usage or administrative fees as well as out-of-pocket expenses borne by the MIIs or the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatsoever. Roles and Responsibilities of MIIs 31. MIIs shall enter into appropriate agreements with ODR Institutions outlining the role and responsibilities of each party in adherence to this circular, and also specify mechanism for handling and resolution of their inter-se disputes. The MIIs and the ODR Institutions empaneled by MIIs may also enter into necessary and appropriate contractual frameworks with the Market Participants, for them and their investors/clients in the Indian Securities Market, participating on the ODR Portal and in the ODR mechanism as specified. 32. All MIIs (and the ODR Institutions empaneled by MIIs as applicable) shall enter into agreements with financial institutions/Banks for opening accounts and effective receipt, payment and disbursal of any amount including the fees, payments as required to be made vide the settlement agreement / arbitral awards or at the time of initiating an arbitration or challenge to an arbitral award, etc. 33. MIIs shall ensure that resolution of complaints/disputes referred on the ODR Portal are undertaken by the ODR Institutions empaneled by the MIIs within the stipulated timelines. 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaints/disputes resolved by means of conciliation c. Aggregate number of complaints/disputes resolved by means of arbitration d. Aggregate value of claims decided in favour of investors/clients e. Summary of complaints/disputes on the ODR Portal against each category of specified intermediary or regulated entity and against listed companies Responsibilities of the Market Participants 41. All agreements, contractual frameworks or relationships entered into by Market Participants with investors/clients in the Indian Securities market presently existing or entered into hereafter shall stand amended or be deemed to incorporate provision to the effect that the parties agree to undertake online conciliation and/or online arbitration by participating in the ODR Portal and/or undertaking dispute resolution in the manner specified in this Circular. 42. The Market Participants shall promptly attend to all complaints or disputes raised by its investors or clients in accordance with applicable SEBI rules, regulations and circulars. The communications shall clearly specify, the availability of the SCOREs portal and the ODR Portal to the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions (and /or sections of the same dealing with mediation, conciliation and arbitration) issued by the Board till date on the subject matter and such supersession shall be the date of implementation of the first phase or second phase, as applicable, specified above. For ease of reference, such circulars are listed below: a. Circular No. SEBI/HO/MRD1/ICC1/CIR/P/2022/94 dated July 4, 2022 Page 18 of 28 b. Circular No. SEBI/HO/MRDSD/DOS3/P/CIR/2022/78 dated June 3, 2022 c. Circular No: SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/76 dated May 30, 2022 d. Circular No.: SEBI/HO/CFD/SSEP/CIR/P/2022/48 dated April 8, 2022 e. Circular No SEBI/HO/CDMRD/DoC/P/CIR/2021/649 dated October 22, 2021 f. Circular No. SEBI/HO/MRD1/ICC1/CIR/P/2021/625 dated September 2, 2021 g. Circular No. SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated November 6, 2020 h. Circular No. SEBI/HO/MRD/DDAP/CIR/P/2020/16 dated January 28, 2020 i. Circular No. CIR/CDMRD/DCE/CIR/P/2018/48 dated March 14, 2018 j. Circular No. CIR/CDMRD/DEICE/CIR/P/2017/77 dated July 11, 2017 k. Circular No: CIR/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017 l. Circular No: SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal in terms of Section 15T of SEBI Act, 1992 (other than matters escalated through SCOREs portal in accordance with SEBI SCOREs Circular), Sections 22A and 23L of Securities Contracts (Regulation) Act, 1956 and 23A of Depositories Act, 1996 shall be outside the purview of the ODR Portal. 51. The MIIs are directed to: a. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately; b. disseminate the aforesaid provisions on their website and bring the same to the notice of all stakeholders including the Market Participants and investors/clients in the Indian Securities Market. 52. This Circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. This circular is issued with the approval of the competent authority. 53. This Circular is available on the SEBI website at www.sebi.gov.in under the link Legal Master Circulars . This circular consolidates the circulars list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aneled with it, is not empaneled as the primary/first ODR Institution with any other MII . 2. An MII shall collect requisite information of a ODR Institution desirous of being empaneled for providing ODR services for the Indian Securities Market. Such information shall include: copies of registration certificate, memorandum of association and articles of association/ constitutional documents, rules governing conciliation and arbitration, PAN, Legal Entity Identifier number, composition of its board of directors, governing bodies and advisory councils, if any, and details of its shareholders and investors, and list of its authorised officials / signatories. Changes if any to any of these may be notified to the concerned MII promptly. An MII may drop an ODR Institution from its panel, if there is a delay in notifying or if the changes are viewed by the concerned MII as not conducive to continuance of the ODR institution on the panel. 3. An ODR Institution shall also furnish other credentials that are deemed relevant to the empanelment process including: details of conciliators and arbitrators empaneled by the ODR Institution, norms for such empanelment, fees, costs and ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR Institutions role and responsibility: 7. An ODR Institution empaneled by an MII should be/become a member of association/trade body having as its members MII empaneled ODR Institutions for the Indian Securities Market on or before October 31, 2023. Details of such association / trade body shall be furnished to the MIIs and the Board, and shall include: copies of registration certificate, memorandum of association and articles of association/ constitutional documents, PAN, Legal Entity Identifier number, composition of its board of directors, governing bodies and advisory councils, if any, and details of its members, and list of its authorised officials / signatories. Such association / trade body shall undertake such activities and perform such roles and responsibilities as may be specified from time to time. 8. Any complaint received against a conciliator or arbitrator shall be promptly examined by the ODR Institution and the findings/conclusions/actions taken will be reported to the MII. MII may conduct its own review into such a process and/or specific matter. Any complaint against an ODR Institution shall be promptly examined by the MII and post the findings/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any complaints/grievances against the ODR Institutions with respect to their services pursuant to this circular shall be resolved in accordance with agreements entered into the MIIs with their ODR Institutions. 14. MIIs shall ensure that the empaneled ODR Institutions have adequate infrastructure, manpower and resources to assist the former in maintaining compliance with their responsibilities under paragraphs 31 40 of this circular. Schedule D Suggested norms for empanelment of Conciliators and Arbitrators The following factors are suggested for empaneling a person as a conciliator or arbitrator by the ODR Institutions: 1. Age: between 35 years to 75 years. 2. Qualification in the area of law, finance including securities market, accounts, economics, technology, management, or administration. 3. Experience: Minimum 7 years of experience as provided below. 4. Professional experience as outlined below could be considered: a. Financial services including securities market i.e. Banks, NBFCs, MIIs, other intermediaries of securities market; b. Legal services Certified professionals handling conciliation, and /or arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, i.e., whether any party to the proceeding had any dealings with or is related to the Conciliator and Arbitrator; iv. Not engage in acts discreditable to his/her/their responsibilities; v. Avoid any interest or activity which is in conflict with the conduct of his/her/their duties as a conciliatory or arbitrator; vi. Avoid any activity that may impair, or may appear to impair, his/her/their independence or objectivity; vii. Conduct proceedings in compliance with the principles of natural justice and the relevant provisions of the Arbitration and Conciliation Act, 1996, the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the Rules, Regulations and Bye-laws framed thereunder and the circulars, directions issued thereunder, and the contractual arrangements; viii. Undertake training courses as may be specified time to time by the Board, including from NISM; ix. Endeavour to pass arbitral award expeditiously and within prescribed time; x. Pass reasoned and detailed arbitral awards; and xi. Maintain confidentiality with respect to the proceeding and its associated recordings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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