Investor Grievances

BSE has established a Department of Investors Services (DIS) to redress investors' grievances. Since its establishment in 1986, the DIS has played a pivotal role in enhancing and maintaining investors' faith and confidence by resolving their grievances either against listed companies or against BSE's Trading Members. The services offered by DIS are as under:

(a) Investors' Grievances against Listed Companies

Investors' complaints against listed companies are forwarded by BSE to the concerned companies, with a copy sent to the complainant. The investors are advised to inform BSE if the complaints are not resolved within 30 days. If a company fails to redress the complaint within 30 days, BSE sends a reminder to the company.BSE  follows-up with the companies and / or their Registrar & Transfer Agents, to resolve such complaints. If the total number of pending complaints against a company exceeds 25 and remain unresolved by the company for more than 45 days, then steps are initiated by BSE to suspend trading in the securities of such company till the complaints are resolved. BSE may also transfer such scrips to, "Z" Group.

A "Z" category company indicates that it has not complied with various provisions of the listing agreement including non-resolution of investors' complaints. Through creation of "Z' category, BSE cautions investors to be more careful in their investments in such companies.

Investors are expected to submit their complaints in the prescribed Complaint format to the concerned Regional Arbitration Centre of BSE, by confirming geographical jurisdiction on the basis of an investor's address.  Filing of complaint at the concerned Regional Arbitration Centre will enable to process the complaint expeditiously.

Visit of Registrar & Transfer Agents to BSE

BSE regularly organizes visits of Registrars & Transfer Agents (RTAs) at its Registered Office to allow Trading Members and investors to have direct interface with them for redressal of complaints against companies listed on BSE.

(b) Investors' Grievances against BSE's Trading Members

Investors are expected to submit their complaints in the prescribed Complaint Form 

Effective from 31^st January, 2009, the Complaint against trading members of the Exchange or Applications for Arbitration should be filed at the concerned Regional Arbitration Centre referred to in column 1 below covering that State or Union Territory of India, referred to in Column 2 below, within which the most recent address / registered office address of the constituent, as duly communicated in writing to the trading member in accordance with law, is located. Provided in respect of a non-resident Indian Constituent, the Seat of Arbitration shall be Regional Arbitration Centre which covers the States and Union Territories given in Column 2, in which lies the address or the Registered Office address, as the case may be, of the trading member, depending upon corporate or non-corporate membership of the trading member. The hearings shall be held in the concerned Regional Arbitration Centre in which the Applicant had duly filed the Application for Arbitration.

JURISDICTION OF COURTS 

The complaints of investors against BSE's Trading Member's are forwarded to the concerned Trading Members for resolution within 7 days. In case no reply is received from the Trading Members or the reply received from the Trading Member does not redress the complaint, the same is placed before Investors' Grievances Redressal Committee (IGRC). 

BSE provides  services of IGRC which, in its meetings, mediates and counsels te disputing parties for finding amicable solution, for which the Exchange sends Notice to both parties to remain present before the said IGRC. In cases, where an amicable solution cannot be reached.  IGRC suggests the parties to opt for an arbitration if they so desire.  It records the final outcome in the matter in the form of minutes, a copy of which is handed over to the parties or mailed to an absent party.

In case a Trading member fails to implement its part of decision recorded in the said minutes of tghe IGRC, necessary disciplinary action against it is initiated by BSE.

IGRC is a two member's Committee, presently constituted by a retired Justice of High Court and a Trading Member.  The Exchange has formed IGRCs, separate for each Regional Arbitration Centre to deal with the cases coming within their respective geographical jurisdiction. It will be in the interest of investors to ascertain the concerned Regional Arbitration Centre for filing his / her complaint, since the period consumed in redressal of complaint through IGRC will not be considered while measuring period of 'limitation' in filing arbitration application, if opted, provided the complaint is filed at the concerned Regional Arbitration Centre. 

Investor Protection Fund

BSE set up an Investor Protection Fund (IPF) on July 10, 1986 to meet the claims of investors against defaulter Members, in accordance with the Guidelines issued by the Ministry of finance, Government of India.

IPF is managed by the Trustees appointed by BSE.

The Fund corpus is created as follows:

The Members contribute Re.0.01 per Rs.1 lakh of gross turnover, which is debited to their General Charges Account.

BSE contributes, on a quarterly basis, 1% of the listing fees collected by it. The entire interest earned by BSE on 1% security deposit kept with it by companies making public/rights issues is credited to the Fund.

As per the SEBI directive, auction proceeds that have been impounded in certain cases where price manipulation / rigging was suspected are transferred to the Fund.

The surplus lying in the account of the defaulters after meeting their liabilities on BSE is released to them after transferring 5% of the surplus amount to this Fund.

As at the end of June 2008 (30/06/2008), the corpus of IPF was Rs.370 crore.

Compensation Policy

The maximum amount presently payable to an investor from this Fund in the event of a default by a Trading Member is Rs.10.00 lakhs. (This has been progressively raised by BSE from Rs.10,000 in 1988 to the present level). 

The arbitration Award obtained by investors against defaulters are scrutinized by the Defaulters Committee, a Standing Committee constituted by BSE, which may recommend to the Trustees of the Fund for release of the awarded amount or the amount fixed by the said Committee or Rs.10 lakhs, whichever is lower. After the approval of the Trustees of the Fund, the amount is disbursed to the investors from the Fund.
 
 

Arbitration

With a view to ensuring speedy and effective resolution of claims, differences and disputes between non-Trading Members and Trading Members and Trading Members inter-se, BSE has laid down an arbitration procedure. This procedure is duly embodied in the Rules, Bye-laws and Regulations of BSE, and duly approved by the Government of India/SEBI, under the Securities Contracts (Regulation) Act, 1956. 

All contracts of sale and purchase of securities entered into on the trading platform of BSE are subject to the exclusive jurisdiction of the Courts in Mumbai save and except as otherwise specifically provided in the rules, Byelaws and Regulations of BSE, and any dispute arising in respect of such contracts shall be referred to and decided by arbitration as provided in the Rules, Byelaws and Regulations of BSE.

The disputing parties, namely the Trading Member and Non-Trading Member are expected to send documentary proof like contract notes, bills, statement of accounts and relevant documentary proof along with the prescribed Arbitration Form, duly filled in.

The Arbitral Tribunal is appointed from the Arbitration Committee appointed for the purpose. The Committee consists of retired Judges of High Court, experienced Solicitors, Advocates, Chartered Accountants, Company Secretaries, and Trading Members. Arbitral Tribunals, consisting of arbitrator / s other than non-trading members are appointed to decide the disputes between the Trading Members and Non-Trading Members.

1. Arbitration between Trading Members inter-se
   
   Arbitration Committee
   
   The provisions relating to Arbitration Committee which deals with arbitration between Trading Members inter-se are laid down in the Bye-laws Nos.282 to 315 of the Rules, Bye-laws and Regulations of BSE.
   
   A three-tier arbitration machinery has been provided at BSE to decide on disputes between the Trading Members. All claims, complaints, differences and disputes between Trading 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 BSE's Board of Directors, every year.
   
   Lower Bench Arbitration
   
   A Committee of three Arbitrators from the Arbitration Committee is constituted to look into such disputes if the value of the claim exceeds Rs. 25,000, while only one arbitrator hears the dispute if value is less than Rs. 25,000. A Trading Member filing an arbitration reference is required to attach a coupon of Rs.100.00 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 Trading 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 if the principal amount of the claim disallowed by the lower bench to the Appellant exceeds Rs 1,00,000 or if the amount awarded against the Appellant by the lower bench (without taking into account interest from the date of Award) exceeds Rs.1,00,000. The Trading 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 BSE along with a fee of Rs.500. The deposit amount/shares are retained with BSE 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 Board of Directors
   
   A Trading Member who is not satisfied with the award of the Full Bench Arbitration Committee may prefer an appeal before the Board of Directors if the principal Amount of claim disallowed by the full bench of the Arbitration Committee to the party dissatisfied with the Award exceed Rs.5,00,000 or if the amount awarded by the full bench against a party dissatisfied with the Award (without taking into consideration interest from the date of Award ) exceeds Rs. 5,00,000. 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.750 and also by depositing the Award amount / shares as stated in the Award with the Stock Exchange. The Board of Directors is the final Appellate Authority in the case of arbitration between Trading Members. Beyond this level, there is normally no Appeal provision but in exceptional situations, the Board of Directors may permit a Trading Member to make a further appeal to a Court of Law.
   
   Patawat Arbitration
   
   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 members of the Arbitration Committee participate and "Chukadas" (Awards) are given on the objection memos indicating whether documents delivered are "in order" or "not in order". The Trading Members / their representatives obtain the "Chukadas" in the Patawat Arbitration sessions. The Trading Members are 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 while obtaining the award.
   
   
2. Arbitration between Non-Trading Members and Trading Members
   
   Bye-laws Nos. 248 to 281 of the Rules, Bye-laws and Regulations of BSE deal with the procedure regarding arbitration between non-Trading Members and Trading Members of BSE.
   
   An Arbitral Tribunal of one arbitrator is appointed, in case the value of the disputed claim is upto Rs. 10 lakhs, If the value is greater than Rs. 10 lakhs, an Arbitral Tribunal of three arbitrators is appointed. Arbitral Tribunals constituted by only non-trading Member / s are appointed to decide such arbitration references. A party dissatisfied with the Award can file an Appeal with BSE under its  Rules, Bye-Laws and Regulations or it can file an Application  of the Arbitration and Conciliation Act (TACA) 1996 in the Court of Law. In case if appeal is preferred in BSE, the same is decided by the Appellate bench of five Arbitrators and the Award passed by the Appellate Bench is final and binding on the parties subject to challenge u/s 34 of TACA. The award is enforceable as if it were the decree of the Court on an expiry of a period, provided under section 34(i) of TACA. Bye-laws of BSE provide that an arbitration reference be decided normally within a period of 3 months, from the date on which the Arbitral Tribunal held first hearing on it. However, an extension for a maximum period of 3 months may be considered by, the Exchange.

1. Statement of the case explaining brief history of the relationship of applicant with the respondent, details about the dispute and the nature of transaction/s and bifurcation of the claim amount into claim on account of genuine delivery based transaction and square off transaction/s.
    
2. Contract Notes pertaining to the transaction in dispute
    
3. Bills issued/ received by the applicant
    
4. Copy of the Statement of Accounts  given by the Trading member.
    
5. Documents pertaining to receipt / delivery of shares
    
6. Any other documents in support of the claim
    
7. An accurate list of the documents produced
    
8. PAN / GIR No. of the applicant
    
9. Certified copy of the Balance Sheet of the applicant showing the dues
    
10. Copy of acknowledgement of the latest Income Tax Return
    
    

There are various forms for Arbitration proceedings depending upon whether the claim amount is up-to Rs. 10 lakhs or is above Rs.10 lakhs.

In case of claims up to Rs. 10 lacs, the applicant proposes the names of three Arbitrators and respondent gives consent to any one of them and such  person consented by the respondent acts as an Arbitrator in the matter. In case the respondent fails to consent or refuses to consent to any of the proposed Arbitrators, the Managing Director, and Chief Executive Officer of BSE as per Rules, Bye-laws and Regulations of BSE, appoints the Arbitrator in the matter. In such cases, a sum of Rs. 3,970.80 (being the institution fee of Rs. 1,000.00, arbitration fees of Rs. 2,250.00, Clerkage of Rs. 250.00, stamp paper of Rs. 100.00 and Service Tax @ 10.30%) is charged to the applicant and arbitration fee of Rs. 2,757.50 (being arbitration fee of Rs. 2,250.00, Clerkage of Rs. 250.00 and Service Tax @ 10.30%) is charged to the respondent.

In case of claims above Rs. 10 lacs,an Arbitral Tribunal of three Arbitrators is appointed; one each by an applicant, respondent and the Managing Director and Chief Executive Officer of BSE under its Rules, Bye-Laws and Regulations. If parties or any of the parties authorize/s BSE to appoint an Arbitrator on his / her / their behalf or if the parties or any of the parties fail/s to appoint the Arbitrator/s, the Managing Director and Chief Executive Officer of BSE, appoints the Arbitrator/s on their behalf. In such cases, a sum of Rs. 8,934.30 (being the institution fee of Rs. 1,000.00, arbitration fees of Rs. 6,750.00, Clerkage of Rs. 250.00, cost of stamp paper of Rs.100.00 and Service Tax @ 10.30%) is charged to the applicant and arbitration fee of Rs. 7,721.00 (being arbitration fee of Rs. 6,750.00, Clerkage of Rs. 250.00 and Service Tax @ 10.30%) is charged to the respondent.

A copy of the documents filed by the applicant along with Forms 3, 4 and 5 / 3A, 4A and 5A (as applicable) are sent by BSE to the respondent advising him / her / them to submit the details of counter claim, if any, consent to the proposed arbitrator / appointment of arbitrator (as applicable), payment of arbitration fees (as applicable). Both parties are intimated by BSE regarding the appointment of arbitrators.

Subsequently, Notice of Hearing is sent to the parties. The hearings are then arranged as decided by the Arbitrators. Minutes of every hearing is prepared and taken on record. Advocates may appear on behalf of each party after taking permission from the Arbitral Tribunal.

As per the provisions of Bye-laws 254 of the Rules, Bye-laws and Regulations of BSE, " the Arbitral Tribunal shall make the award within three months from the date of entering upon the reference or within an extended time, which if approved by the Managing Director and Chief Executive Officer of BSE, shall not be more than three months. . The award has to be a speaking award. Ex-parte awards are also given. The final award is taken on stamp paper of Rs. 100 and  signature / s of Arbitrator / s are obtained on the final award. The award is forwarded to the applicant as well as to the respondent.

Any party to the arbitration, within 15 days from the date of receipt of Award, may request the Arbitral Tribunal to correct any computational / arithmetical / clerical / typographical / any error or to give an interpretation of a specific point or part of the Award or to make an additional Award as to claims presented in the Arbitration proceedings, but omitted in the Award.

Appeal provision in the Bye-laws pertaining to Non-Trading Member V/s Trading Member Arbitration

Time Limit : Appeal against the Award of the arbitrators is to be filed within 15 days from the date of receipt of the award. However if a party is unable to file an appeal within the specified period the appeal should be accompanied by an application supported by affidavit setting forth the facts on which the appellant relies to satisfy the Appeal Bench in respect of causes for the delay. The Appeal Bench may, on sufficient cause being shown for the delay, condone the delay.

Deposit : A party appealing against an award is required to deposit with the Exchange, the amount or securities (or value thereof) due under the Award, if the award has been passed against him. This amount is deposited with an understanding that the said amount shall be released to the party in whose favor the Appeal is decided, if the same is not challenged in the Court under the provisions of TACA.

Fees for Appeal : A party appealing against an award is required to pay the necessary appeal fees, presently being, Rs. 18,309.80 which includes arbitration fees of Rs. 15,000.00, institution fee of Rs. 1,000.00, Clerkage of Rs. 500.00, Stamp paper of Rs. 100.00 and Service Tax @ 10.30%).

Appeal Memo : A party desiring to prefer an appeal against an award of the Arbitrator(s) is required to submit seven sets of Memorandum of Appeal (Form 12) mentioning clearly therein the grounds of objections to the Award appealed from along with copies of relevant documents.

Appeal Bench : The Appeal filed by a party against an award will be heard and decided by an Appeal Bench of five Arbitrators, appointed by the Managing Director and Chief Executive Officer of BSE. The Appeal Bench decides the appeal expeditiously as far as possible within one month of the filing of the Appeal.
 
 

SETTLEMENT OF AWARDS

If an Award is given against a Trading Member of BSE and the Trading Member fails to implement the Award, a show cause notice is issued by BSE to the Trading Member. If the matter is still not resolved, it is placed before the  Disciplinary Action Committee (DAC) and Board of Directors of BSE for suitable directions in the matter, including  declaring the trading member, a defaulter.

Unless challenged by either of the parties, an arbitration award becomes a decree on an expiry of three months from the date on which it is received by the party and a decree can be executed through a competent court of law.

DEFAULTER RELATED MATTERS

An Award against a defaulter Trading Member, is placed before the Defaulters'  Committee (DC). The awarded amount or the amount fixed by the DC or Rs. 10,00,000 whichever is lower, is given from the BSE's Investor Protection Fund.

Assets of a Trading Member comprises of the following :

1. Securities to be received by the Trading Member for the settlement
   
   
2. Membership security deposit (in terms of cash, Fixed Deposit Receipts, securities lying with BOI Shareholding Limited)
   
   
3. Fixed Deposit collected from a Trading Member for the construction of the BSE's buildings
   
   
4. Car parking deposit.
   
   
5. Bad Deliveries claimed by the Trading Member (who is subsequently declared defaulter), when rectified by the respective Trading Member. When a Trading Member is declared a defaulter, the DC clubs all these assets and disburses the same priority wise as given below. Liabilities of a defaulter arise only out of those transactions which are carried out at BSE.
   
   

Priority of Disbursement

Once a Trading Member has been declared a defaulter, his liabilities are settled in the following order of priority :

1. Dues of the Trade Guarantee Fund.
   
   
2. Dues to SEBI, BSE, and Clearing House, as decided by DC.
   
   
3. Trading Members who have obtained arbitration awards against the defaulter in respect of Bad Delivery claims.
   
   
4. Non-Trading Members who have obtained arbitration awards against the defaulter.
   
   
5. Dues to the Investor Protection Fund (IPF).
   
   

Only in case the 1st preference in the above mentioned list is satisfied fully, the Committee proceeds towards the 2nd preference in the list, and so on. In case the 1st preference has been fully satisfied and the remaining assets are not sufficient to satisfy the 2nd preference fully, the 2nd preference is satisfied on a pro-rata basis, and so on. In case a Court of Law declares the defaulter as adjudicated insolvent, all the above claims stand at par.