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REDRESSAL OF INVESTORS GRIEVANCES AND ARBITRATION PROCEDURE
The grievances of investors against listed companies and members of the Exchange are redressed by the Exchange. The Exchange also assists in arbitration process both between members & investors and members inter-se.
Investors. grievances against companies.
Investors.
grievances against member-brokers of the Exchange.
Complaints of members inter-se.
Resolution of complaints through
arbitration.
(a) Investors. grievances against companies.
The investors' complaints against the companies are forwarded by the Exchange to the concerned companies and a copy of the letter sent to the company is also forwarded to the complainant. He is advised to intimate the Exchange if his complaint is not resolved within 45 days. If a company fails to redress the complaint within 45 days, a reminder is sent. If a company still fails to respond to a large number of complaints pending against it, then a consolidated list of complaints is sent to it to resolve the same within 30 days. Inspite of the above efforts, if the complaints are not resolved, the company officials are asked to appear before the Investors' Grievance Redressal Committee (IGRC) appointed by the Governing Board of the Exchange to resolve all the investors grievances. This Committee consists of five members including a retired judge of Mumbai High Court. The company officials are impressed by the committee members to resolve all the pending grievances immediately. Through the above process, Investors' Service Cell was able to reduce the pending complaints considerably in the last two years. Inspite of these efforts, if the company fails to resolve complaints, then the scrip is likely to be to be shifted to "Z" group. A "Z" category company means that it has not complied with various provisions of listing agreement including non-resolution of investors' complaints. Through creation of "Z' category, the Exchange cautions investors to be more careful in their investments in scrips of such companies. Further, if a company fails to resolve investors' grievances, the Exchange may suspend trading in the scrip.
(b) Investors. grievances against member-brokers of the Exchange.
The Exchange handles complaints of investors against members and vice-versa. The complaints of investors are forwarded by the Exchange to the concerned members to settle within 7 days from the receipt of the letter. In case no reply is received from a member, a reminder is sent and the member is informed that if he does not reply/resolve the complaint immediately, a fine of Rs.500/- is levied on him. He is also directed to settle the matter expeditiously. In order to resolve the complaints expeditiously the matter is placed before the IGRC wherein both the investors and members present their case. After hearing both the parties, the Committee gives a decision which is binding on both the parties. In case a member fails to implement the decision of the IGRC, then the matter is referred to the Executive Director for taking disciplinary action against the member which includes referring the matter to the Disciplinary Action Committee.
(c) Complaints of members inter-se.
The complaints of members against other members of the Exchange generally pertain to:
i) settlement objections;
ii) Bad delivery of securities;
iii) Auctions, Re-auctions, Spot transactions, Call / Dividend adjustments, etc.; and
iv) Non-implementation of arbitration awards.
Members are required to lodge complaints against other members in the prescribed format in duplicate along with the necessary proof in support of the same. The complaints are then forwarded to the concerned respondent members asking them to either resolve the same under advice to the Exchange or offer their comments/explanation thereon within three days of the receipt of the same. In order to resolve the complaints of members interset a Brokers. Consultative Committee was appointed by the Governing Board. This Committee consists of five members of the Exchange. Whenever the complaints are received, the same are immediately put before the Committee. The Committee gives an award after hearing both the parties and if a party fails to implement the award then a show cause notice is issued to it. Inspite of this, if a member does not implement the award, then the Investors. Service Cell directly debits valan account of the member in the Clearing House and credits the other member. s account. As a result of the above, the number of pending complaints of members interse has been considerably reduced.
(d) Resolution of complaints through arbitration.
With a view to ensuring speedy and effective resolution of claims, differences and disputes between non-members and members and members inter-se, the Exchange has laid down a set of procedures for arbitration thereof. These procedures are duly embodied in the Rules, Bye-laws and Regulations of the Exchange, which have been duly approved by the Government of India/SEBI, under the Securities Contracts (Regulation) Act, 1956.
Under the Rules, Bye-laws and Regulations of the Exchange, an in-house arbitration machinery has been provided to decide on :
All contracts of sale and purchase of securities entered into on the trading platform of the Exchange are subject to Mumbai jurisdiction and any disputes arising in respect of such contracts are necessarily required to be submitted for arbitration. However, complaints from non-members (clients/investors) against members and complaints of members inter-se are in the first case generally investigated by the Exchange. For the purpose of investigation, documentary proof like contract notes, bills, statement of accounts and relevant documentary proof are called for from the parties. If required, personal meetings of the parties are also arranged in cases where issues to be resolved are of a complicated nature. As a last resort, where there are claims and counter-claims and the matter cannot be easily resolved by the intervention of the Exchange officials, the parties are advised to file an arbitration reference. The Exchange has amended the Bye-laws relating to arbitration between members with effect from 29th August, 1998 after getting the approval from SEBI.
The provisions relating to Arbitration Committee which deals with arbitration between members inter-se are laid down in the Bye-laws Nos.282 to 315 of the Rules, Bye-laws and Regulations of the Exchange.
A three tier arbitration machinery has been provided in the Exchange to decide on disputes between members. All claims, complaints, differences and disputes between members arising out of or in relation to any bargains, dealings, transactions or contracts are subject to arbitration and are referred to the Arbitration Committee. The Arbitration Committee is appointed by the Governing Board every year. For the year 2000-2001, the Governing Board has appointed 23 members of the Exchange as members of the Arbitration Committee.
A Committee of three arbitrators from the Arbitration Committee is constituted by the Secretary of the Arbitration Committee to look into such disputes if the value of the claim exceeds Rs. 25,000, while only one arbitrator will hear the dispute if value is less than Rs. 25,000. A member filing an arbitration reference is required to attach a coupon of Rs.100/- along with his arbitration application. Both the applicant and the respondent or their authorised representatives are required to be present in the arbitration meetings. After hearing the parties, the arbitrators give the award.
An aggrieved member, who is not satisfied with the award of the Lower Bench Arbitration Committee, may file an appeal before the Full Bench of the Arbitration Committee within seven days from the date of receipt of the award by him provided the sum involved in the award is not less than Rs.50,000/-. The member who desires to file an appeal before the full bench of the Arbitration Committee is also required to deposit the amount of the award or shares as stated in the Lower Bench award with the Exchange along with a fee of Rs.500/-. The deposit amount/shares are retained with the Exchange until the case is decided by the Full Bench. In the Full Bench Arbitration meetings, all the members of the Arbitration Committee decide the case of appeal against the award of the Lower Bench.
Appeal before the Governing Board :
A member who is not satisfied with the award of the Full Bench Arbitration Committee may prefer an appeal before the Governing Board provided the amount of the award of the Full Bench Arbitration Committee is not less than Rs.1,00,000/-. An appeal should be filed within seven days from the date of the award of the Full Bench Arbitration Committee by paying a fee of Rs.700/- and also by depositing the award amount/shares as stated in the award with the Stock Exchange. The Governing Board is the final appellate authority in the case of arbitration between members. Beyond this level there is normally no appeal provision but in exceptional situations the Governing Board may permit a member to make a further appeal to a Court of Law.
In addition to the three tier arbitration machinery as stated above, "Patawat Arbitration", i.e., disputes arising out of physical delivery of securities, is held after every settlement (Patawat). In this arbitration, all the members of the Arbitration Committee participate and award "Chukadas" (awards) on the objection memos indicating whether documents delivered are "in order" or "not in order". The members/their representatives obtain the "Chukadas" in the Patawat Arbitration sessions. The member is required to affix a coupon of Rs.50/- on the objection memo, stating the nature of the objection as per the "Uniform norms for Good/Bad delivery" guidelines standardized by SEBI across the Stock Exchanges while obtaining the award.
Bye-laws Nos. 248 to 281 of the Rules, Bye-laws and Regulations of the Exchange deal with the procedure regarding arbitration between non-members (clients/investors) and members of the Exchange. At present members of the Exchange as well as outsiders act as arbitrators in the disputes and claims filed by the non-members against members of the Exchange and vice-versa. The Exchange has since appointed a panel of 24 outside arbitrators consisting of retired Judges, Chartered Accountants and other persons from the financial field in addition to 16 members of the Exchange. This is pursuant to instructions from SEBI to reconstitute the Arbitration Committee comprising of 40% of the members of the Exchange and 60% outsiders, i.e., those who are not members of the Exchange.
The Exchange has recently amended Bye-laws relating to Client v/s. Member arbitration in conjunction with Arbitration and Conciliation Act, 1996, passed by the Government of India. This has become effective from 29th August, 1998. Under the new amended bye-laws there is a panel of three arbitrators, one appointed by the applicant, one by the respondent and the third by the Exchange. In case the value of the disputed claim is less than Rs. 1 lakh, then only one arbitrator is appointed and if the value is greater than Rs. 1 lakh, then there are three arbitrators for the case. Under the new amended bye-law after getting the arbitration award, the aggrieved party can appeal to the arbitration tribunal for any typographical/computational error, if any, occurred in the award within fifteen days from the receipt of the award. In the amended Bye-law which provides for an appeal whereby the aggrieved party within fifteen days of the receipt of the award can file to the arbitration tribunal for re-hearing the whole case. On receipt of the appeal, the Exchange appoints an appeal bench consisting of five arbitrators who re-hear the case and then give the decision. The judgment of the appeal bench is by a majority decision and binding on both the parties. The final award of the bench is enforceable as if it were the decree of the Court. Bye-laws of the Exchange provide that all arbitration references be closed normally, within a period of four months.
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