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FAQ's - ARBITRATION

To settle disputes between trading members, investors, clearing members, sub-brokers, authorized persons etc. through a quasi-judicial process is called the Arbitration. It is aimed at quickly resolving the disputes. Arbitration is preceded with complaint resolution process. When either of the parties is not satisfied with the complaint resolution process or the complaint is not resolved amicably between parties, the parties may choose the route of arbitration.

The dispute arising out of transactions done on the Exchange by the parties or anything incidental thereto are eligible for arbitration mechanism provided by the Exchange.

Arbitration framework at the Exchange is governed by Rules, Byelaws, Regulations & Circulars issued by the Exchange and SEBI, from time to time.

(a) Investors/Clients who have disputes against the Trading Members/Sub-brokers/Authorized Persons with regard to trades and transactions done on the Exchange or anything incidental thereto;

(b) Trading Members who have claim, dispute or difference against investors/Sub brokers/Authorized Persons/Clearing Members and vice versa, with regard to the trades and transactions done on the Exchange or anything incidental thereto.

As per stipulations of SEBI, the limitation period for filing an arbitration application is governed by law of limitation. As of date, as per Limitation Act, 1963, 3 years from date of dispute is the time period within which parties are required to approach the Exchange for filing arbitration.

Complaint resolution through Investor Service Cell (ISC) is administrative in nature whereas arbitration is a quasi-judicial process. Hence, once arbitration proceedings are initiated against the trading member, the complaint filed with the ISC is treated as closed.

Once a trading member is expelled/declared defaulter he ceases to be a member of the Exchange. However, Exchange issues a public advertisement inviting claims against such trading members. Investors may prefer their claim to the Defaulters Committee Section within the stipulated time.

Forms and lists of documents required to be submitted when arbitration is filed against trading member are provided below :

Sl. No. Forms/ Documents Purpose
1 Arbitration Form Application for arbitration
2 Statement of Case Brief description of the case, date wise summary of events leading to the dispute, basis of arriving at the claim amount and relief sought through arbitration
3 Cheque / Pay Order / Demand Draft in favour of ICEX Towards cost of arbitration
4 Statement of Accounts / DP statements In case of dispute for funds / securities
5 Copies of the relevant Contract Notes & Bills, Pan card copy As referred in the statement of case to substantiate the claim.

Arbitration application forms are available on Exchange website. An applicant may download the same and use the form for filing application. Alternatively, a request for forms can be made to the Exchange by sending an email to grievance@icexindia.com along with the complete postal address, so that the forms can be mailed to them. The forms can also be obtained from any of the Regional Arbitration Centres

A statement of case is a brief history of the dispute from the beginning to the end. Entire date wise sequence of events which took place between the investor and the trading member needs to be described. Statement of case is the first source of information which the sole arbitrator/ arbitrator panel refers to in advance to understand the case and hence it is very significant.

The arbitration application has to be filed at the designated Arbitration Centre which may be regional or at Mumbai. Exchange has established arbitration centre at Mumbai currently.

SEBI the market regulator has prescribed the arbitration process. Arbitrator is selected from the Pool of all the arbitrators of the exchanges. By current norms A panel of three arbitrators is constituted if the claim value is more than Rs 25 lakh and a sole arbitrator is appointed if the claim value is less. Applicants have to give preference of arbitrators while filing their plea, which is then matched in a computer.

The applicant at the time of making arbitration application has to give preference of arbitrators in Form I. Likewise, on admission of the matter, preferences of arbitrators are called from the respondent and arbitrators are appointed through a computerized automated process as per SEBI Circular dated March 18, 2013, in which neither the Exchange officials nor the parties to arbitration are directly involved.

The deposit to be made by the investor at the time of making arbitration application is as under :

Amount of Claim /Counter Claim, whichever is higher (Rs.) If claim is filed within six months If claim is filed after six months
≤ 10,00,000 1.3% subject to a minimum of Rs.10,000 3.9% subject to a minimum of Rs.30,000
> 10,00,000 - ≤ 25,00,000 Rs. 13,000 plus 0.3% amount above Rs. 10 lakh Rs. 39,000 plus 0.9% amount above Rs. 10 lakh
> 25,00,000 Rs. 17,500 plus 0.2 % amount above Rs. 25 lakh subject to maximum of Rs. 30,000 Rs. 52,500 plus 0.6 % amount above Rs. 25 lakh subject to maximum of Rs. 90,000

For the purpose of computing the six month period following would be considered: (a) six month period shall be computed from the end of the quarter during which the disputed transactions were executed. (b) time taken by trading member to resolve the dispute of the investor or one month from date of receipt of dispute by the member, whichever is earlier, is exempt while calculating the six month period. (c) time taken by the Investor Service Cell of Exchange to resolve the dispute will be exempted while calculating the six month period.

Stamp duty is applicable on the awards passed by arbitrators. The amount of stamp duty payable is to be deposited along with the deposit mentioned in (14) above. Initially the stamp duty is to be deposited with the Exchange based on the claim amount of the matter filed and on passing of the award, the stamp duty is calculated on the final award amount passed in the matter. The amount of stamp duty payable on the award is governed as per the stamp duty applicable to the particular state and may differ for every Regional Arbitration Center (RAC).

The respondent has to reply by way of Form II provided to him by the Exchange. The Form II comprises of respondent’s choice of arbitrators and statement of defense to the claim along with the required deposit amount.

A counter claim is an amount claimed by a respondent against the applicant in an arbitration matter. The counter claim is arrived at by the respondent on the basis of amount or of monies dues to him from the applicant.

The arbitrator panel fixes a date for hearing on which the investor and trading member have to appear before the arbitrator panel to present their case. In case the claim amount is less than Rs.25,000, the arbitrator may or may not hold hearings and pass the award based on the documents submitted by both the parties. If the claim amount is more than Rs.25,000, the arbitrator may hold hearing/s unless specifically denied by both the parties in writing.

If the hearing date fixed by the arbitrator panel is not suitable to either parties or the parties are unable to attend the same, then they can apply for adjournment/postponement of hearing. The parties should make an application in writing to the Exchange giving reasons for seeking adjournment/postponement well in advance, so as to enable the Exchange to forward such request to the arbitrator panel. The arbitrator panel on their discretion may grant the adjournment subject to such conditions as may be deemed fit in the matter.

Investors may attend the arbitration proceedings and defend the matter on their own or appoint authorized representative or a counsel/attorney/advocate to defend the matter by executing a notarized/registered power of attorney. In case the investor decides to be represented through a counsel/attorney/advocate, only then the trading member will be provided with an equal opportunity to appoint a counsel/attorney/advocate.

The arbitrator panel is required to complete arbitration proceedings within four months from the date of appointment of arbitrator/s and pass the award. However, the period can be extended by two more months by the Relevant Authority based on the request of either of the parties to arbitration or the arbitrator panel.

Award is judgment passed by the arbitration panel which gives a direction to either of the disputing parties as regard to their claim raised in the arbitration matter.

If after the appointment of the arbitrator panel, the parties settle the dispute amicably, then the arbitrator panel will record the settlement of the dispute in the form of an arbitration award on agreed terms. However, the agreed terms have to be in respect of transactions on the Exchange and all documents in support of this need to be furnished by the parties.

Party against whom the arbitral award has been passed will bear the costs of arbitration. The Exchange gives a full refund of deposit to the party in whose favour the award has been passed.

If either of the parties is aggrieved by the award, the aggrieved party may approach the Exchange with an application in the prescribed format for appeal before the appellate arbitrators, along with applicable deposit, within a period of 30 days from the date of receipt of the arbitral award or the aggrieved party can challenge the award u/s 34 of Arbitration and Conciliation Act, 1996 in the court nearest to the address provided by constituent in the KYC form or as per the change in address communicated thereafter by the constituent to the trading member.

The award once passed by the arbitrator is final and binding on the parties unless challenged before a higher forum. In case of certain corrections or interpretation required to be made in the award, any party to arbitration can file application with the Exchange u/s 33 of Arbitration and Conciliation Act, 1996 for correction or interpretation of award, within one month from the date of receipt of award. The Exchange will forward the application to the concerned arbitrator/s and in case the arbitrator/s feel/s the requirement of correction/interpretation in the award as requested, he can do so by passing a separate order.

When the arbitral award given by the arbitrator panel is in favour of the investor then the exchange will set aside the award amount from the deposits of the trading member and the same will be kept in a separate escrow account with the exchange. If the trading member fails to prefer an appeal against the award within the specified time, then the award amount is released to the investor.

Forms and lists of documents required to be submitted while filing an appeal application with the Exchange are as follows :

Forms / Documents Purpose
Mandatory
1. Form no. III. For filing appeal against the award passed
2. Statement of appeal Brief description of the grounds which are to be placed in the appeal and relief sought through the appeal process
3. Cheque /Pay Order/Demand A party filing an appeal before the appellate panel shall pay a fee not exceeding Rs. 30,000, as may be prescribed by the stock exchange, in addition to statutory dues (stamp duty, service tax, etc) along with the appeal. In case the party filing the appeal is a client having claim/counterclaim of upto Rs. 10 lakh, then the party shall pay a fee not exceeding Rs. 10,000/- Towards cost of appeal

There is a fixed cost of Rs 30,000/- along with stamp duty charges etc. as applicable, which shall be borne by the Appellant only. The fees are non-refundable. In case the claim/counterclaim of the investor is upto Rs 10 lakh, then the investor shall pay a fee of Rs 10,000/- .

The investor has to the reply in Form IV provided to him by the Exchange. The Form IV comprises of investors choice of arbitrators and statement of defense to the appeal.

The appellate arbitrator panel comprises of three arbitrators who are different from the ones who passed the original arbitral award appealed against.

The appellant at the time of preferring an appeal submits his preferences of arbitrators in Form III and after admission of appeal, the respondent may submit his preference of arbitrators in Form IV. Based on the preferences received, the appellate arbitrator panel is appointed by a computerized automated process as per SEBI Circular dated March 18, 2013, in which neither the Exchange officials nor the parties to arbitration are directly involved.

The appellate arbitrator panel hears both the parties and passes an appellate arbitral award. The appellate arbitral award may set aside decision of the original arbitral award or uphold the same.

When the appellate arbitral award is passed in favour of investor: (a) Trading member may settle the award and confirm the same to the Exchange; (b) Trading member may challenge the appellate arbitral award under section 34 of the Arbitration and Conciliation Act, 1996 before the court nearest to the address provided by constituent in the KYC form or as per the change in address communicated thereafter by the constituent to the trading member.

The petition under section 34 of the Arbitration and Conciliation Act 1996, shall be filed in the court nearest to the address provided by constituent in the KYC form or as per the change in address communicated thereafter by the constituent to the trading member.

Regional Arbitration Centres (RACs) :

Mumbai Delhi
Chennai Surat

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