Complaints pertaining to Shares and Securities of Companies - Practice and procedure

Investors often face issues with regard to their investments in the form of shares etc with listed companies or the intermediaries.

Introduction:

Investors often face issues with regard to their investments in the form of shares etc with listed companies or the intermediaries. On such occasions they find themselves at a loss and often end up chasing the Company which does not respond especially to small retail investors. We take this opportunity to deal with a lesser known route for such investors to deal with disputes with Companies and Intermediaries and exercise their legal rights. In the event of such a complaint the investors should first approach the Company/ intermediary against whom there is a complaint. In case the response is not satisfactory or is not being attended to, SEBI has devised a mechanism for the same under the Securities Exchange Board of India Act. This forum for filing complaints is called SCORES (SEBI Complaints Redress System).
 
Salient Features of SCORES:

Through SCORES, SEBI deals with complaints arising out of issues that are covered under the SEBI Act, Securities Contract Regulation Act, Depositories Act and the rules and regulations made there under along with the relevant provisions of the Companies Act, 2013.
 
However the following matters cannot be considered as complaints in SCORES:

  • Complaint not pertaining to investment in the securities market
  • Anonymous Complaints (except for whistleblower complaints)
  • Incomplete or un-specific complaints
  • Allegations without supporting documents
  • Suggestions or seeking guidance/explanation
  • Not satisfied with trading price of the shares of the companies
  • Non-listing of shares of private offer
  • Disputes arising out of private agreement with companies/intermediaries
  • Matters involving fake/forged documents
  • Complaints on matters not in SEBI purview
  • Complaints about any unregistered/ un-regulated activity
 
Complaints against the following companies cannot be dealt through SCORES even though the complaint may be against a listed entity/ SEBI registered intermediary:-

  • Complaints against the companies which are unlisted/delisted, struck off, vanishing company, placed on the Dissemination Board of the Stock Exchange.

  • Complaints against a sick company or a company where a moratorium order is passed in winding up / insolvency proceedings, or Complaints that are sub-judice, under liquidation or BIFR.

  • Complaints against companies, falling under the purview of other regulatory bodies viz. The Reserve Bank of India (RBI), The Insurance Regulatory and Development Authority of India (IRDAI), the Pension Funds Regulatory and Development Authority (PFRDA), Competition Commission of India (CCI), etc., or under the purview of other ministries viz., MCA, etc.
 
Limitation for filing complaints

An investor may lodge a complaint on SCORES within three years from the date of cause of complaint, where the Investor has lodged the complaint with the listed company or the registered intermediary and the said concern either rejected orpassed an unsatisfactory order on the complaint or did not attend to the complaint.
In case the investor fails to lodge a complaint within the stipulated time, he may directly take up the complaint with the entity concerned or may approach the appropriate court of law.

Ingredients for the complaint and procedure

From 1st August 2018, the registration of allcomplaints on SCORES is mandatory. Investors should provide complaint details in the form of points under a dialogue box provided and can also attach the PDF of the complaint. All details of the case, approaching the Company and rejection or non entertainment should be cited therein. The PAN Number and the email id must be would be mandatorily given. For lodging a complaint on SCORES the complaint will be routed directly to the concerned entity.

Direct complaints will be addressed to the Company/Intermediary and the response will come to the investor without any interference of SEBI officials. The concerned entity is required to send a response to the investor directly within 30 days. If the concerned entity fails to send a response within 30 days to the investor, then the complaint will be routed to SEBI automatically.

In case the resolution is non satisfactory, the investor has to indicate the same against the complaint and then the complaint will be taken up by SEBI. If this is not done within 15 days of receipt of reply from the company, it is presumed that the complaint has been satisfactorily dealt with.

Securities and other laws provide important legal rights and remedies if investors have suffered any wrongdoing. Acting on their own, they can seek to resolve the complaint through the courts, consumer courts, or arbitration. To take advantage of these laws, the complainant must take legal action promptly or they may lose the right to recover funds.

Appeal against an order of SCORES
 
Once the complaint is disposed off by the SCORES, the remedy available with the investor is to approach the Securities Appellate Board. An appeal can be filed under Section 15T of the  Securities and Exchange Board of India Act, 1992 [As amended by the Securities Laws(Amendment) Act, 2014], which reads as under:
 
Appeal to the Securities Appellate Tribunal.
 
15T. 104[(1) Save as provided in sub-section (2), any person aggrieved,— (a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or (b) by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the 106[Board or the Adjudicating Officer, as the case may be,] is received by him and it shall be in such form and be accompanied by such fee as may be prescribed : Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.

(4) On the receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.

(5) The Securities Appellate Tribunal shall send a copy of every order made by it to the 107[Board, the] parties to the appeal and to the concerned Adjudicating Officer. (6) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt with as expeditiously as possible and endeavours shall be made by it to dispose off the appeal finally within six months from the date of receipt of the appeal.
 
Earlier the High Court was usually approached for settling these issues by way of a Writ Petition. In some cases CLB was also approached. However CLB was of the opinion that it does not have the jurisdiction to try cases pertaining to SEBI. In the case of Ashok Dayabhai Shah Vs. SEBI, in Appeal no. 428 of 2019, the Learned Securities Appellate Tribunal , Mumbai held that :
 
“We are of the opinion that an order /communication by the respondent disposing of the complaint of the appellants on the SCORES platform is an appealable order under Section 15T of the SEBI Act. If the complainants are aggrieved by the disposal of the complaint on the SCORES platform the said complainants have a right to file an appeal under Section 15T of the SEBI Act. We are further of the opinion that the computer generated communication by the respondent on the SCORES platform, even though it may be an administrative communication is nonetheless an order since it disposes of the lis between the parties and disposes of the complaint and the issues raised by the complainants. The said communication / order as the case may be, in our opinion, is appealable”.

This completely settled the issue of appeals from orders passed on the SCORES platform.

Special Leave Petition before the Supreme Court Of India

Against the order of the SAT, one can approach the Supreme Court. The appeal can be filed only on a question of law. The limitation for filing appeal is 60 days from the date of receiving a copy of the decision or order of SAT.
 
Conclusion

The above explained mode of resolution of disputes enables the investor to deal with Companies and Intermediaries.