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  • Pushkar Gadhwal, Kiran Singh

ODR Mechanism in the Securities Market: Amendment to SEBI Regulations

[Pushkar and Kiran are students at Chanakya National Law University.]

The crucial role of the capital market in India's financial health and the significant growth it has experienced over the past two decades, attributed to the establishment of SEBI. However, the Indian capital market's future depends on the involvement of retail investors, which necessitates effective regulatory measures. The adoption of online dispute resolution (ODR) to enhance the investor grievance redressal mechanism, through amendments to the regulations of the Securities and Exchange Board of India (SEBI) includes the establishment of an ODR portal. Through this article, the author explains the process to initiate ODR, its limitations, and the role of arbitrators and conciliators in securities market.


The financial health of a nation is contingent upon its capital market, which subsequently facilitates the provision of direct financing to the corporate sector. The capital market in India encompasses the equity, debt, and derivatives markets, all of which have exhibited remarkable growth, over the past two decades. This growth can be attributed to the establishment of the SEBI in 1988, followed by its legislative approval through the SEBI Act of 1992.

As a result, the Indian capital market has earned recognition as one of the top-performing markets globally. However, the Indian capital market has a higher cost of capital owing to market volatility and unlike some of the developed capital markets, the future of the Indian capital market is contingent upon the involvement of retail investors, who typically lack sophistication and consist of individuals and households. The extent to which these investors participate in the market, as well as the efficacy of regulatory measures in safeguarding and upholding their interests, will play a crucial role in shaping the market's trajectory. Therefore, to enhance the efficacy of the mechanism for addressing investor grievances in the securities market, SEBI through amendments to multiple regulations enabled the implementation of ODR for investors and clients of intermediaries.

Background of the Amendment

The settlement of investment grievances and disputes in the securities market, before this amendment, was carried out through a time-bound complaint redressal process by the appropriate intermediary and market infrastructure institutions (MII) via SEBI Complaint Redressal System (SCORES), which is an online platform specifically designed to assist investors in resolving disputes related to the securities market. However, the SCORES system only offers provisions for mandates and penalties in cases where these mandates are not followed. Additionally, the 30-day time limit acts as a constraint, primarily because to resolve disputes within this time frame, the concerned entities sometimes submit the action taken report without thoroughly examining the complaint. As a result, while the system may show a high rate of dispute redressal, closer examination reveals a lower level of effectiveness of the system.

Need for Online Dispute Resolution

During the COVID-19 pandemic, MII administered the dispute resolution mechanism primarily through online means, utilizing video conferencing tools and electronic filing of documents and service requests. This approach prompted the Financial Sector Legislative Reforms Commission to emphasise the need to acknowledge and adopt online grievance redressal processes, such as ODR, for mediation and adjudication of disputes.

With that objective in mind, a committee consisting of members from various departments was established to investigate this matter of implementation of the ODR mechanism to enhance and optimize the Investor Grievance Redressal Mechanism (IGRM) in the securities market through the utilization of technology. The committee submitted a report that outlined several recommendations for modifications to the IGRM framework. One of the key suggestions is to enhance the existing MII-administered dispute resolution. Currently, this process only applies to disputes involving stock brokers, depository participants, listed companies, and registrars and share transfer agents. The committee proposes expanding the scope of this process to include Investors who have disputes with any other registered intermediary. Additionally, the committee has proposed modifications to the current dispute resolution process which is predominantly a physical process but also incorporates some elements of digitalization after COVID-19.

The committee recommended many changes intending to address the issues of a relatively expensive and time-consuming dispute resolution process, as well as the information asymmetry between the investor or complainant and the regulated intermediaries/entity pertaining to the evidence and documents available to each party involved.

Amendment to SEBI Regulation to Operationalize ODR Mechanism

In light of profound consultations with the public and in alignment with the interests of investors, the current dispute resolution process in the Indian securities market was reorganized to resolve the disputes swiftly and effectively via gazette notification dated 3 July 2023, introducing the SEBI (Alternative Dispute Resolution Mechanism) (Amendment) Regulations 2023. The reorganization involves streamlining the mechanism under the supervision of stock exchanges and depositories, collectively known as MIIs. This is achieved by “expanding their scope and establishing a common" ODR portal. The ODR portal utilizes online conciliation and online arbitration to resolve disputes that arise in the Indian securities market.

The utilization of the ODR mechanism has been expanded to include registered intermediaries/regulated entities and their investors/clients by extending the conciliation and arbitration mechanism administered by MIIs. The expansion of the conciliation and arbitration mechanism is being facilitated through the assistance of ODR institutions. In addition, the SEBI has already approved the implementation of dispute resolution proceedings in a hybrid mode. Lastly, SEBI has granted approval for the integration of the SCORES with the ODR platform which offers investors of all regulated entities an extra avenue for addressing their grievances.

Process to Initiate ODR

To effectively mitigate any concerns/disputes, an investor or client must commence the process of redressal by formally lodging a complaint directly with the related market participant. If the grievance is not resolved properly, the investor or client holds a chance to raise it within the guidelines set forth by SCORES. This can be accomplished by utilizing the SCORES portal and adhering to the prescribed procedure. If the investor or client expresses ongoing dissatisfaction with the explored resolution options, they possess the right to initiate the dispute resolution process through the ODR portal.

Nevertheless, it is imperative to acknowledge that there exist instances wherein particular disputes are precluded from undergoing ODR procedures. This limitation ensues when the complaint or dispute in question is presently under examination or pending before any arbitral process, court, tribunal, or consumer forum. Additionally, disputes/conflicts that are deemed non-arbitrable under the prevailing legal framework in India are also precluded. Moreover, the initiation of dispute resolution via the ODR portal is contingent upon adherence to the law of limitations which is calculated from the occurrence of the disputes/conflicts that have given rise to the complaint, the date of the last transaction, or the date of the disputed transaction, whichever is more recent.

The ODR institution, tasked with receiving the reference pertaining to the complaint or dispute that an investor or client is dissatisfied with, shall exercise its discretion in appointing a solitary arbitrator or conciliator who possesses the qualities of independence and neutrality. This selection shall be made from the institution's pool of arbitrators or conciliators. The requisite qualifications or expertise, as outlined in Schedules D and E of the circular, must be possessed by the arbitrator/conciliators. Furthermore, they must maintain complete impartiality and refrain from any form of affiliation or association with any of the parties entangled in the dispute. The MIIs must guarantee the effective execution of appropriate measures in the process of arbitrator and conciliator selection within ODR institutions.

In the hypothetical scenario of the efficacious implementation of ODR, the outcome of the resolution process would be duly formalized by employing the execution of a settlement agreement, contingent upon the voluntary decision of the parties involved to pursue conciliation as a mode of resolution. The execution and authentication of said agreement shall be conducted through an internet-based platform, in strict adherence to the legal stipulations.

In the realm of online arbitration, after the issuance of the arbitral award, the party upon whom the order has been bestowed is required to express its intention to contest the award within 7 consecutive days, as mandated by Section 34 of the Arbitration and Conciliation Act 1996. Furthermore, in the context of a legal proceeding of this nature, if a petition for a stay is not approved within a timeframe of three months subsequent to the receipt of the arbitral award, it becomes crucial to adhere completely to the provisions delineated within the said award.

Conclusion and Way Forward

The implementation of ODR in the resolution of disputes in securities markets has the potential to significantly transform the procedural aspects and timeframes associated with resolving such disputes. ODR utilizes digital technology and the internet to enable the effective and convenient settlement of disagreements, hence diminishing the need for conventional, expensive, and time-consuming legal processes, by enabling the parties to participate in the settlement of disputes without being constrained by geographical limitations by engaging in the process from their respective places. This method of dispute resolution not only serves to improve convenience and cost, but also plays a role in fostering openness and impartiality in the resolution of conflicts. The potential of ODR to transform the handling of disputes by improving accessibility and user-friendliness suggests its capacity to serve as a paradigm for a globally inclusive and efficient framework for resolving conflicts.


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