SEBI Proposes Reforms to the Online Dispute Resolution Framework for the Indian Securities Market

On July 23, 2026, the Securities and Exchange Board of India ("SEBI") issued a consultation paper proposing significant changes to the Online Dispute Resolution ("ODR") Framework applicable to the Indian securities market. The proposals seek to address operational and procedural issues experienced since the implementation of the ODR mechanism in 2023, with the objective of strengthening investor protection, reducing procedural delays, improving enforceability of arbitral awards and simplifying the grievance redressal process.

The proposed framework represents a notable policy shift by reassigning several responsibilities from ODR institutions to Market Infrastructure Institutions ("MIIs"), integrating the SCORES and ODR processes more efficiently and introducing procedural reforms intended to make dispute resolution more transparent and time-bound manner.

Transfer of ODR Administration to Market Infrastructure Institutions

One of the most significant proposals is the transfer of responsibility for administering online conciliation and arbitration from the existing ODR institutions to MIIs, including recognised stock exchanges, clearing corporations and depositories. Under the proposed framework, while dispute resolution will continue to be conducted entirely through an online platform, MIIs will assume responsibility for administering conciliations and arbitrations, maintaining panels of conciliators and arbitrators, allocating disputes and overseeing the overall dispute resolution process.

The proposal stems from practical challenges encountered under the existing framework. According to SEBI, stakeholders highlighted concerns relating to the appointment of arbitrators, delays in payment of fees, enforceability of arbitral awards, record management and regulatory oversight. Since most intermediaries and listed entities are already subject to the regulatory supervision of MIIs, SEBI considers that MIIs are better placed to administer dispute resolution proceedings and ensure compliance with procedural requirements.

The proposed model also seeks to consolidate operational accountability within institutions that already perform core regulatory functions in the securities market. This is expected to strengthen supervision, improve enforcement of awards and facilitate greater consistency in the administration of investor disputes.

Integration of SCORES and ODR to Eliminate Procedural Duplication

SEBI has also proposed a streamlined grievance escalation process by integrating the existing SCORES mechanism with the ODR framework.

Under the present framework, investor grievances unresolved through SCORES are first reviewed by Designated Bodies before proceeding through additional procedural stages prior to conciliation. The consultation paper proposes removing certain intermediary steps by permitting unresolved grievances to move directly from the review conducted by the Designated Bodies to the conciliation stage under the ODR mechanism. According to SEBI, this change is expected to reduce the overall dispute resolution timeline by approximately 21 calendar days.

The revised framework continues to require investors to first lodge complaints on SCORES. Regulated entities would remain responsible for submitting an Action Taken Report within twenty-one calendar days. Where an investor remains dissatisfied, the grievance may be reviewed by the relevant Designated Body. If the dispute remains unresolved following such review, or if the prescribed timelines are not complied with, the matter may proceed directly to online conciliation.

By integrating the grievance redressal and dispute resolution processes more closely, SEBI seeks to reduce duplication of proceedings while preserving opportunities for early resolution before formal arbitration is initiated.

Revised Framework for Appointment of Conciliators and Arbitrators

The consultation paper also introduces substantial reforms to the appointment process for conciliators and arbitrators.

Under the proposed framework, MIIs will maintain approved panels of conciliators and arbitrators meeting prescribed eligibility criteria relating to qualifications, experience, integrity and expertise in securities laws, arbitration and financial markets. The proposed eligibility requirements also contemplate minimum professional experience together with suitability standards designed to enhance the quality and independence of dispute resolution.

A notable feature of the revised framework is the reintroduction of party participation in the appointment of arbitrators. Each party will be permitted to indicate its preferred arbitrators from the approved panel maintained by the relevant MII. Where a common preference emerges, the selected individual will be appointed as the sole arbitrator. In the absence of a common preference, appointment will be undertaken through a Centralised Arbitrator Appointment Process ("CAAP"), excluding the names already preferred by the parties.

This proposal reflects concerns expressed by market participants that the current framework provides limited opportunity for parties to participate in the appointment process. By restoring an element of party autonomy while retaining an objective appointment mechanism where necessary, SEBI seeks to enhance confidence in the neutrality and transparency of arbitration proceedings.

Strengthening Investor Protection Through Enhanced Enforcement Measures

The proposed framework also introduces several measures intended to improve enforcement of arbitral awards and strengthen investor protection.

Where an arbitral award is challenged before a competent court, the party preferring such challenge will generally be required to make interest free deposit of one hundred per cent of the award amount with the concerned MII within the prescribed timeline. These deposits are intended to safeguard the interests of successful parties while judicial proceedings remain pending.

Importantly, where an arbitration award is passed in favour of an investor and the regulated entity proposes to challenge the award, the investor may seek interim relief from the deposited amount. Subject to appropriate undertakings, MIIs may release an amount not exceeding fifty per cent of the award or ₹5 lakh, whichever is lower.

The consultation paper further proposes that where an investor fails to refund any interim relief following an adverse judicial determination, sthe securities of such investor lying in the demat account(s) or the mutual fund holdings shall be frozen, the amount is repaid. The proposal also contemplates freezing securities held in dematerialised accounts or mutual fund holdings until compliance is achieved.

Collectively, these measures seek to balance investor protection with safeguards against abuse of the appellate process while improving compliance with arbitral awards.

Greater Flexibility for Alternative Investment Fund Investors

The consultation paper also proposes important changes affecting Alternative Investment Funds ("AIFs").

Under the existing framework, disputes involving AIFs generally fall within the ODR mechanism. Recognising concerns expressed by investors, SEBI has proposed allowing AIF investors to retain the flexibility of resolving disputes through dispute resolution mechanisms agreed contractually between the parties, instead of mandatorily proceeding through the ODR framework.

Additionally, SEBI has proposed amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 to extend existing investor protections currently available where an AIF is constituted as a trust to AIFs established as companies or limited liability partnerships. The proposed amendment seeks to ensure that investors receive equivalent protection irrespective of the legal structure adopted by the fund.

These proposals demonstrate SEBI's intention to provide greater contractual flexibility while promoting consistency in investor safeguards across different organisational forms.

Revised Timelines to Expedite Dispute Resolution

A recurring theme throughout the consultation paper is the emphasis on reducing timelines across the dispute resolution process.

The draft circular prescribes timelines for every stage of the process, including grievance resolution by regulated entities, review by Designated Bodies, appointment of conciliators and arbitrators, completion of conciliation proceedings, issuance of arbitral awards and post-award compliance requirements. Arbitration awards are proposed to be issued within three months of appointment of the arbitrator or arbitral tribunal, subject to limited extensions supported by recorded reasons.

The proposed timeline-driven approach reflects SEBI's objective of creating a more predictable and efficient dispute resolution mechanism capable of addressing investor grievances without prolonged procedural delays.

Expanded Responsibilities of Market Infrastructure Institutions

The proposed framework substantially expands the operational responsibilities of MIIs beyond merely administering dispute resolution proceedings.

Among other responsibilities, MIIs will be required to maintain panels of conciliators and arbitrators, formulate comprehensive Standard Operating Procedures, administer case allocation, supervise conciliations and arbitrations, monitor compliance with timelines and undertake enforcement action against regulated entities where necessary. MIIs will also jointly maintain the ODR Portal and periodically review its operational framework.

The consultation paper further contemplates comprehensive Standard Operating Procedures covering operational matters such as empanelment of neutrals, conflict management, conduct of proceedings, maintenance of records, fee collection, treatment of chronic complaints and enforcement mechanisms. These measures are intended to promote greater consistency and operational uniformity across all participating MIIs.