SEBI Proposes Major Overhaul of Online Dispute Resolution Framework

New Delhi, India Jul 25, 2026 ALN: The Securities and Exchange Board of India (SEBI), the regulatory authority for the securities and capital markets in India, has recently unveiled a significant proposal aimed at overhauling its Online Dispute Resolution (ODR) framework. This initiative represents a strategic move to enhance the efficiency and investor-friendliness of the dispute resolution process within the securities market, which has become increasingly critical as the market continues to grow and evolve. SEBI is currently seeking public comments on this proposal until August 13, indicating its commitment to inclusivity and stakeholder engagement in the regulatory process.

The proposed changes will shift the responsibility for dispute resolution from existing ODR institutions to Market Infrastructure Institutions (MIIs). MIIs encompass a broad range of entities, including stock exchanges, depositories, and clearing corporations, which play a pivotal role in the functioning of the securities market. This shift is intended to streamline the dispute resolution process, thereby improving the overall experience for investors who often face challenges when navigating disputes related to their investments.

Feedback from MIIs, investors, and other stakeholders has been instrumental in shaping this proposal. Concerns raised included significant delays in the appointment of arbitrators, complications related to the payment of arbitrators, difficulties in enforcing arbitration awards, and various procedural bottlenecks that have impeded timely resolutions. Such issues have underscored the need for a more efficient and responsive framework that can adapt to the needs of a dynamic market.

To address these challenges, SEBI has proposed to reintegrate certain features from the pre-ODR mechanism. In the earlier framework, MIIs had greater control over the empanelment and administration of conciliators and arbitrators, which allowed for a more streamlined process. SEBI noted that MIIs possess better control and enforceability over intermediaries and listed entities, many of which are registered with MIIs in some capacity. Consequently, the proposal suggests transferring the responsibility of handling dispute resolution from ODR institutions to MIIs, thereby allowing them to leverage their existing structures and resources.

One key aspect of the proposed framework is the introduction of a system that allows both disputing parties to indicate their preferred arbitrators from an approved panel before a final appointment is made by the MII. This feature is designed to enhance the autonomy of the parties involved in the dispute and ensure that they have a say in the selection of their arbitrators. However, it is important to note that the appointment of conciliators will continue to be managed by MIIs from their empanelled lists, maintaining a level of oversight and control.

In a noteworthy addition to the proposed framework, SEBI aims to provide greater flexibility for investors in Alternative Investment Funds (AIFs). The proposal suggests allowing these investors to choose an alternative dispute resolution mechanism if such an arrangement exists under agreements between the parties, rather than mandatorily using the ODR platform. This flexibility could potentially lead to more tailored and efficient dispute resolution processes, catering to the specific needs and preferences of investors.

Furthermore, SEBI is looking to streamline the grievance redressal process by facilitating a more direct transition for unresolved investor complaints under the SEBI Complaints Redress System (SCORES). Under the proposed changes, complaints that remain unresolved will be able to move directly from the review stage by Designated Bodies to the conciliation stage within the ODR framework. This adjustment is expected to significantly reduce the overall dispute resolution timeline by approximately 21 calendar days, thereby expediting the resolution process for investors.

In a related proposal, SEBI is also considering amendments to the AIF Regulations to extend the protection available to investors' money held in trust against liabilities arising from dispute resolution. Currently, this protection is only applicable to AIFs that are structured as trusts. The proposed changes would ensure that all AIFs, regardless of their structure—be it trusts, companies, or limited liability partnerships (LLPs)—benefit from this protection. This move is expected to bolster investor confidence and promote a more secure investment environment across various fund structures.

Another significant aspect of the proposal involves the resolution of disputes based on the monetary value of claims. SEBI has proposed that disputes involving claims exceeding ₹30 lakh be resolved by a three-member arbitral tribunal, while cases with lower claims will continue to be adjudicated by a sole arbitrator. This tiered approach is designed to ensure that more complex and higher-value disputes receive the attention and expertise they require, while simpler cases can be resolved more efficiently.

In addition, investors will be allowed to seek interim relief of up to 50% of the award amount or ₹5 lakh, whichever is lower, in instances where a regulated entity challenges an arbitration award. This provision aims to provide investors with some immediate financial relief while the dispute is being resolved. However, both investors and regulated entities challenging an award will be required to deposit 100% of the award amount with the MII, ensuring that there are financial safeguards in place during the arbitration process.

SEBI has underscored the importance of public input on these proposals, emphasizing that stakeholder feedback is crucial for refining and enhancing the effectiveness of the proposed framework. By encouraging stakeholders to submit their comments by the deadline of August 13, SEBI is demonstrating its commitment to transparency and collaboration in the regulatory process. This engagement not only allows for a diverse range of perspectives to be considered but also fosters a sense of ownership among stakeholders in the development of the regulatory landscape.

In conclusion, the proposed overhaul of SEBI's Online Dispute Resolution framework represents a significant step towards enhancing the efficiency and investor-friendliness of the dispute resolution process in the Indian securities market. By shifting responsibilities to MIIs, incorporating feedback from stakeholders, and introducing measures to streamline the process, SEBI aims to create a more responsive and effective system for resolving disputes. As the consultation period progresses, the input from investors, MIIs, and other stakeholders will be crucial in shaping the final framework, ensuring that it meets the needs of all parties involved in the securities market.