Online Dispute Resolution (ODR) System for Capital Markets 

Introduction:

A new ODR system involving institutions, conciliators and arbitrators for the capital market is being implemented by the Securities and Exchange Board of India (SEBI). The system aims to streamline dispute resolution in the securities market through a common ODR portal, leveraging online conciliation and arbitration.

ODR Institutions:

As per SEBI, Market Infrastructure Institutions (MIIs) will identify and empanel independent ODR institutions. These institutions will have qualified conciliators and arbitrators. MIIs will operate a common ODR portal in consultation with empanelled ODR institutions. All market participants, including listed companies and specified intermediaries, will enrol on the ODR portal.

Initiation of Dispute Resolution Process:

• Investors first lodge complaints with market participants, escalating through SCORES guidelines if not resolved.
• If still dissatisfied, investors can initiate dispute resolution through the ODR portal within legal limitations.

ODR Portal and Allocation System:

• MIIs establish and operate the ODR portal, connecting with ODR institutions and SEBI portals, having the necessary facility to enrol the investor/client and the Market Participant, and to file the complaint/dispute and to upload any documents or papers pertaining thereto and updates on the complaint/dispute. Market participants and MIIs are required to display a link to the ODR portal on their websites and apps.

• ODR Portal features are reviewed and upgraded periodically, subject to inspection for compliance.

Conciliation:

ODR Institution that receives the reference of the complaint/dispute shall appoint a sole independent and neutral conciliator from its panel of conciliators. MIIs shall ensure that appropriate measures (like relevant qualifications or expertise and should not be connected to any disputing party) are put in place regarding the appointment of conciliators by the ODR Institutions. The appointed conciliator initiates one or more meetings within 21 calendar days (extendable by 10 days with mutual consent) from their appointment.

The conciliator actively facilitates a consensual resolution, considering advice on required services for service-related complaints or issuing findings on admissibility for trade-related disputes. If successful, a settlement agreement is executed online, requiring the Market Participant to pay the admissible claim value. The Market Infrastructure Institution (MII) monitors compliance with the agreement.

If no resolution occurs within the stipulated period, the conciliator determines the admissible claim value. If necessary, the dispute proceeds to online arbitration, subject to payment by the Market Participant. Failure to deposit the amount may result in consequences as determined by the Stock Exchange and could lead to being declared as not 'Fit and Proper' under SEBI regulations.

Arbitration:

Appointment in Arbitration: ODR institutions appoint neutral arbitrators within 5 days for claims exceeding Rs 30,00,000. An arbitral tribunal may be formed for such high-value claims. Arbitrators must issue awards within 30 calendar days of appointment. Parties can challenge awards under Section 34 of the Arbitration Act within 7 days.

Withdrawal from Arbitration: Parties can withdraw before the arbitrator's appointment, with a refund (after deducting expenses not exceeding Rs 100). Withdrawal is not permitted after the arbitrator's appointment.

Hearing and Award: For claims over Rs 1,00,000, the Sole Arbitrator or Arbitral Tribunal conducts hearings and issues the arbitral award within 30 calendar days of appointment. Interim relief may be provided, and parties can seek correction/rectification of the award under the Arbitration and Conciliation Act, of 1996.

Challenge and Compliance: The party against the award must submit an intention to challenge under Section 34 of the Arbitration Act within 7 calendar days. If a stay is not granted within 3 months from the award's receipt, complete adherence to the terms is required.

Challenging an Award: Market Participants wishing to challenge an award must deposit 75% of the payable amount with the relevant MII before initiation. Failure to deposit may result in consequences by the Stock Exchange, potential 'Fit and Proper' violations, and registration cancellations or business activity suspensions.

Form of Proceedings:

Online conciliation and arbitration are facilitated through the ODR portal with audio-video participation. Venue deemed to be the place of the relevant MII's registered office.

Fee and Charges:

No fees for registering a complaint on the ODR portal.

Conciliation fees range from Rs 3,240 to Rs 4,800, with additional ODR institution fees.

Arbitration fees vary based on claim value, with separate fees for arbitrators and ODR institutions.

Applicable GST, Stamp Duty, etc., borne by the concerned market participant.

Conclusion:

The introduced ODR system provides a structured and transparent mechanism for resolving disputes in the capital market, utilizing online conciliation and arbitration processes. It aims to ensure timely and fair resolution while incorporating measures to maintain the integrity of the system.