Court sent notice to SEBI to deal with complaints

The petition by Textport Creations and its director Samir Goenka alleges that the SEBI Grievance Redressal System, or SCORES, violates the principles of natural justice by mechanically redressal of complaints. According to the petition, the system also fails to provide copies of the replies sent by the party against whom the complaint has been filed.

“Therefore, no opportunity is given to the complainant to respond to the reply,” it argued.

A SEBI spokesperson did not respond to queries seeking comment.

Goenka had invested an amount of 10 crore in Portfolio Management Service (PMS) of ASK Investment Managers Pvt Ltd. Ltd. His father had committed to make an additional investment 25 crores. According to the petition, the father of the petitioner was verbally promised a return of 18% on his investment in 2017.

But, the return was not given. Goenka’s father died in 2019, and the principal amount was eventually returned to the family of the petitioner. interest component of 4.5 crore was adjusted against the contribution of 10 crore that the petitioner had to invest in PMS.

However, the petition alleged that there was a delay in transferring the unit from the petitioner’s father to the nominee and the family had to bear the cost. 30.3 lakhs. The petitioners filed three complaints on the SEBI score system, but they were disposed of on the ground that no documentary evidence was provided about the promise of 18% return.

According to the petition, the word limit of 1,000 characters and the size limit of 2 MB for attachments also prevent the aggrieved persons from filing a detailed complaint.

Goenka is not alone. There are other instances where a fully automated grievance redressal system has left investors unhappy.

New Delhi resident Kartik Sharma was disappointed with the lack of resolution of his complaints to the market regulator through SCORES. “I Invested” 10 Lakh of my hard earned money in Yes Bank AT1 Bond (Additional Tier-1 Bond). I was sold the bond by a Yes Bank Relationship Manager as I was a customer of the bank. I complained to SEBI about wrong application document, and my complaint was forwarded to RBI (Reserve Bank of India) from where I have not got any redress till date. Later, SEBI initiated judicial proceedings against the officials of Yes Bank and imposed a fine on the bank. But all this money will go to the government when it should actually go to the aggrieved persons,” Sharma said.

According to him, the amount involved, even if small, makes a difference to the salaried person.

These examples highlight that while a fully automated system helps in quick redressal and clearing the backlog of complaints, a little more calibration may be required in some cases.

An example is the Securities and Appellate Tribunal (SAT) judgment on 15 November 2019, where the tribunal called SEBI’s online grievance management system only “eyewitness”. This was in response to a case filed by a group of investors, which alleged that SEBI had converted their complaint to “market intelligence” and refused to investigate the action taken or provide satisfactory information.

SAT in its judgment had said, “We have no hesitation in stating that SEBI has not performed its duties as a regulator in this matter and has kept the complaint pending for more than six years, which in its There is so much in you. The Tribunal fails to fathom why the complaint could not have been decided unless the SEBI officials had a vested interest in not deciding the matter.

“Such a computer-generated settlement of a serious complaint has a major bearing on the conduct of the defendants who have treated minority shareholders in this shabby manner,” SAT said in its ruling.

The matter pertains to complaints filed by 22 minority shareholders of Bharat Nidhi Limited, which holds 24.41 per cent stake in Bennett, Coleman & Company Limited (BCCL). PNB Finance and Industries Limited (PNBF) and Camac Commercial Company Limited also hold 9.29 per cent and 13.3 per cent stake in BCCL, respectively. In the case, minority investors have cited incorrect disclosures on promoter shareholding by BCCL, PNBF and CAMAC.

In a January 2020 order, the Supreme Court held that although SEBI may relax to some extent in acting as a regulator, the facts and circumstances of the case did not warrant casting objection. Subsequently, some of the observations in the SAT order were reduced.

As per SEBI data, till October 31, there were over 4,100 complaints pending on the SCORES platform, of which 29 were pending for more than three months.

On an average complaints are resolved in 36.8 days. The highest number of complaints are pending against investment advisors in the last three months, followed by complaints regarding refunds, allotments, dividends, transfers, bonuses, entitlements, redemptions and interest. According to the annual report of SEBI, in FY 2011, the rate of redressal through SCORES increased by 27.3%.

The number of review requests also sheds light on the matter. In FY21, out of 2,159 complaints received by SEBI, 941 were pending as on March 31, 2021. Still, they are better than last year, when 1,173 complaints out of 2,228 were pending.