The Bombay High Court has raised questions over the use of SEBI’s Online Dispute Resolution (ODR) mechanism for complex disputes involving allegations of fraud, while setting aside an arbitral award passed against ABB India Ltd in a decades-old share transfer case.
Justice Somasekhar Sundaresan quashed an August 2024 arbitral award that had directed ABB to restore 1,550 shares of the company and 310 shares of Hitachi Energy India to investor Sunil Jaisingh, or compensate him based on the market value of the shares.
Justice Somasekhar Sundaresan observed that “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” in an order dated June 9.
ODR scrutiny
The court was also critical of the manner in which the arbitration proceedings were conducted under the ODR framework. It said the tribunal appeared to have treated a 60-day timeline for completion of proceedings as mandatory, despite dealing with a complex dispute involving allegations of fraud, limitation issues and third-party rights.
“The Learned Arbitral Tribunal appears to have fallen for the adage that justice delayed is justice denied and forgotten the adage that justice hurried is justice buried,” the order said.
Justice Sundaresan said the tribunal had adopted a “completely irrational, arbitrary and non-judicial approach to adjudication” by deciding the dispute without granting further hearings after the pleadings were completed and without fully examining contested questions of fact.
The observations came while the court was hearing ABB India’s challenge to an August 2024 arbitral award passed under the ODR mechanism.
The dispute traces its origins to 175 ABB shares originally held by Jaisingh’s father, who died in 1988. Jaisingh sought transmission of the shares in 1992. According to court records, ABB’s then registrar and transfer agent returned the documents and sought probate of the will before processing the request.
Jaisingh later claimed that the original share certificates were misplaced by his lawyer and resurfaced only in 2021. By then, however, the shares had already been transferred and dematerialised in 1998-99. Following bonus issues, a stock split and ABB’s demerger of its power business, the original holding would have translated into 1,550 ABB shares and 310 shares of Hitachi Energy India.
After complaints filed with SEBI were closed and conciliation under the ODR framework failed, the matter proceeded to arbitration before a three-member tribunal appointed through a BSE-empanelled ODR institution.
“The fraud in issuance of share certificates lies at the heart of the proceedings, making the dispute non-arbitrable,” the court held.
The judgment said that the shares had already been transferred to third parties, including institutional investors, and said questions relating to how the shares were transferred and dematerialised required investigation. The court called several findings of the tribunal “perverse” and “irrational”, and set aside the award, allowing ABB’s petition.