Ayushmaan Ashutosh Singh*
INTRODUCTION
SEBI had incorporated the ODR mechanism to resolve financial conflicts between investors and market participants. On paper, it can account for only those disputes which are arbitrable in nature, a forthright import of the principle settled in Vidya Drolia and Rashid Raza. However, in practice, the circular assigns no stage, decision-maker, or evidentiary process to test this mandate before the dispute passes to conciliation or arbitration.
This gap has been manifested in the outcome of ABB India ltd. v. Sunil Hariram Jaisingh, decided by Bombay HC on June 9, 2026. The dispute is concerned with shares actively claimed by a person from 1992 being improperly transferred to multiple third parties through issuance of duplicate share certificates. The claim came on board after three decades through ODR, where the arbitral tribunal, in blatant disregard of principles of natural justice and arbitrability, passed the award. HC set aside the award, holding it is based on “blatant perversity and patent illegality”
HC didn’t treat this as a random arbitrator problem; in its concluding analysis, it raises a systematic concern with ODR itself. It stated, “whether a dispute of the instant nature can at all form the subject matter of the ODR mechanism is a wider question that has arisen in the matter.”
TRAJECTORY OF FACTS: ACTUAL CASE
The present case dates back to the shareholdings of Jaisingh(claimant) father in ABB India Ltd. in 1987. In November 1988, Jai’s father died; accordingly, he applied for transfer of shares to his name in 1992 by submitting share certificates and relevant documents through a lawyer named Amar Talreja. TCS, who was managing the shares of ABB, returned the application along with certificates and asked for probate of the will to effect transmission. Later, Mr Talreja had lost the certificates and informed the same to Mr Jai. It has been noted by the court that Mr Jai was occupied in his family matters and did not try to trace the certificates and continue the procedure. In 2021, after a bizarre three decades, Mr Talreja is said to have found the original share certificates in his office and informed Jai of the same. Now the real battle kicks off; Jai submitted the relevant document and certificate to ABB for transfer of the shares in his name. In a sudden twist, duplicate share certificates had been issued, and those shares had also been dematerialised in 1998-99. Therefore, Jai’s certificates were not valid now. This dispute was further compounded by the demerger of ABB in 2020, which led to 175 shares of ABB being converted into 1550 shares of ABB and 310 shares of Hitachi. Lastly, all the shares have been transferred to new investors when it got dematerialized.
Jaisingh invoked the newly made ODR framework stipulated in the master circular of SEBI. Following the procedure, conciliation had taken place. The conciliator closed the case on the ground that the case involves unascertained fraud, which is the essence of the matter; hence, conciliation was not possible it requires investigation and trial.
The matter moved to an arbitration tribunal constituted by the ODR framework; without delving into the foundational principle concerning arbitrability of dispute, the tribunal straightaway decided to take the matter on board and proceed towards a final award. The tribunal has done only one hearing, that too on a section 16 application, and demanded further pleadings from respondents. Without hearing respondents, without any investigation of fraud, without framing any issue of limitation concerning a dispute that came after 3 decades, without assessing contributory negligence of Jai and gravely ignoring the arbitrability principle, the tribunal proceeded with the award. The tribunal directed ABB to restore shares, including shares in Hitachi or failing which they have to pay compensation based on market value. ABB approached the Bombay High Court, which put aside the impugned award on grounds that the present issue consists of a serious case of fraud, limitation issue and third-party effects. Auxiliary, the court stated that assuming this concern doesn’t exist, the award suffers from serious legal infirmities.
CHECKPOINT DEFECT: CORRECT STANDARD WITHOUT A CHECKING MECHANISM
SEBI, through its circular, notified amendments in SEBI Regulation 2023, incorporated ODR. The procedure begins with a direct complaint with the concerned market participant, secondly with a complaint on the SCORES portal. If the party is not satisfied with these small resolution procedures, then it can move to online conciliation and further to online arbitration.
Para 13 of the circular clearly states that disputes which are pending in any other forum and disputes which are non-arbitrable in terms of Indian law cannot be initiated through the ODR mechanism. However, narrow deadlines under this mechanism give no time to arbitrators to effectuate the non-arbitrability guideline mandated, which is clearly evident through the present case.
The guideline states conciliator has to conclude the resolution within 21working days, with a maximum extension of 10 working days. Para 22 of the circular states Arbitral Tribunal has to conduct one or more hearings and pass the arbitral award within 30 working days, which is extendable to a maximum of 30 days on a reason to be furnished in writing.
The circular superficially states only arbitrable matters can be dealt with under ODR. However, no independent timeline and mandatory emphasis is provided for ascertaining the same. In the present case of Jaisingh, the High Court has explicitly stated,
“53..By contending that a sacrosanct deadline of 60 days had to be met, without even indicating how such 60-day period was being computed, the Tribunal has fallen into grave error and returned findings that are both perverse and patently illegal, rendering the Award wholly untenable.”
Even after a clear warning from the conciliator that “present dispute involves fraud at its very foundation” which requires investigation through trial, the Tribunal went directly into passing the award. The Tribunal, in multiple instances, cited the urgency to pass the award within the deadline; this was the reason for not hearing ABB after inviting fresh pleadings from it, causing blatant violation of natural justice.
While the deadline is justified for the real purpose of ODR, which is faster resolution of disputes, it’s a flagrant error when it is being used for disputes which are not arbitrable. Contradictorily, the new circular of SEBI on ODR has instead brought the provision of bypassing conciliation entirely and moving directly to arbitration if
THE CONCEPT OF NON-ARBITRABILITY
The question whether a dispute is arbitrable or not is well settled through numerous precedents of the apex court. In the landmark case of Vidya Drolia v. Durga Trading, the court had laid down a fourfold test to check the arbitrability of disputes:
“76. Disputes will not be arbitrable if it satisfies any of the four conditions, firstly, when cause of action and subject matter relate to right in rem, secondly when it affects third party rights, thirdly when dispute relates to sovereign and public interest function and lastly when it is expressly or by necessary implication non-arbitrable as per statute”.
Further, in A.Ayyasamy v. A.Paramasivam, the court had held that mere allegation of fraud simpliciter may not be the ground to nullify the effect of arbitration. Only in those cases where fraud is of a serious nature involving complex issues does a trial allow nullification of arbitration and transfer of suit on the merits. Further, cases involving allegations of forgery of documents in support of a plea of fraud must be decided by trial.
Hence, while superficial or minute frauds are allowed to proceed towards arbitration, serious frauds having complex issues and evidence which will affect third parties must be avoided from arbitration. In the present case, the dispute involves huge fraud, beginning from the 1990s, having complex issues of fake share certificates and illegal transfers, which both the conciliator and further the High Court have referred as non-arbitrable.
Hong Kong’s Financial Dispute Resolution Scheme (FDRS)
Hong Kong addresses financial disputes in a very similar way as SEBI in India handles, first matter advances to the concerned institution, then mediation and lastly to arbitration. However, it has certain vital pre-entry filters for disputes which help to transfer non-arbitrable disputes to court in the very beginning.
Outside the court process, an individual investor may apply for FDRS only when their dispute involves a claim of not more than HK $1 million and further, they must file the dispute within the limitation period of 24 months. While not an exact pill to cure the arbitrability issue, the limitation period and monetary limit would have already set aside three decades-old disputes similar to Jaisingh.
REFORMING UNCHECKED MECHANISM OF DISPUTE RESOLUTION
This piece suggests two reforms in the ODR mechanism. Firstly, a pre-filter mechanism and secondly, the separation of arbitrability scrutiny from the mandatory deadline of award.
Limitation period gate
The present case of Jaisingh was three decades old, clearly touching upon the rule of limitation law, yet still reached the final procedure of the ODR system without any reasoned justification of delay. Ironically, SEBI in its circular at Para 14 explicitly mentions “disputes through ODR can be initiated when within the applicable law of limitation”
The reason why the matter still reaches there inclines towards vagueness in the guideline and improper training of arbitrators. However, to address the concern, putting other things aside, would be to incorporate Hong Kong’s limitation cap explicitly. The limitation cap is already cited in guideline the problem is with coherent recognition.
SEBI should adopt a similar 24-month-based limitation cap starting from when the grievance arose or when the investor knew or reasonably ought to have known of it, whichever is later. This must be checked by ODR before referral to conciliation. Additionally, this should not act as an absolute bar for disputes, similar to Hongkong provision on the extension mechanism must also be incorporated, where ODR could entertain the dispute exceeding the limitation cap if it found the delay to be lawfully explained.
Decoupling of arbitrability ruling from Merits clock
In the present case, ABB raised the arbitrability objection through a section 16 application before the tribunal. However, the tribunal, ignoring the same due to a short time period squeeze, directly passed the award. The same has been recognised by the High Court, that the “reason of such ignorance was the obsession to pass the award within the deadline even if that blatantly violates the law”.
The proposed mechanism could be explained in three aspects:
(1) Mandatory bifurcation trigger
Whenever any party or conciliator to the dispute before ODR raises an arbitrability objection to the dispute. This should separate the procedure into two phases, firstly the arbitrability phase and secondly the actual merit phase.
(2) Clock only begins after preliminary objection clearance
The arbitral tribunal must first decide the arbitrability of the dispute, which will not be subjected within mandatory award-passing time limit of 30 days or 60 days. After a decision on admissibility is undertaken, the clock should again start its pendulum. This change will bring more emphasis on arbitrability when contended. For avoiding delay based misuse of this provision, a time limitation could be added in checking the arbitrability. Our aim is separation and not the delay in the process. As arbitrability of a dispute could be decided within a short period of time, the same will not contribute to delaying the process. In the present case, the problem is not the lack of training; the issue is combining time stamp to decide arbitrability and merits both. Which diverge the concern of arbitrability.
(3) Swift appealability
Rather than placing an appeal on the arbitrability ruling through section 34, which took two years in the present case. The appealability of the ruling on arbitrability should work on the mechanism of section 37(2)(a) of the Arbitration and Conciliation Act. This allows immediate appeal on the ruling of section 16 application by the arbitrator. This will save time for the losing party by allowing them to appeal without waiting for the final award to be passed. An appeal under this can be passed to either MII for faster resolution or directly to the commercial High Court.
Training of arbitrators
It must be noted that while training of arbitrators is needed. However, that alone can’t address the issue at hand. As the HC held in Jai’s case, the arbitrator has correctly put the arbitrability principle (Vidya Drolia principle) on board but fails to apply that principle due to strict 60-day timeline compulsion. Hence, the actual issue lies in the lack of emphasis on arbitrability, compounded by the strict timeline.
CONCLUSION
The HC ruling in ABB India Ltd. has highlighted a major lacuna in the ODR mechanism of SEBI. Where substantive provision of arbitrability was attached to the circular, however, the same was misplaced when it comes to actual practice. The piece proposes a dual remedy to address this lacuna: a limitation-based pre-filter and a bifurcation of mandated time. These resolutions will save the time of the parties who first invest their fees and time in arbitration, then ironically spend the same in the trial process.
* The author is a second-year Law student at Hidayatullah National Law University, Raipur. The author may be contacted at ayushmaan.253300@hnlu.ac.in.
This blog reflects the personal views of the author and does not necessarily represent the views of The Policy Chronicle.