Ref. : ER/Press/’04/valedict.14/dG

Investor Ombudsman Needs Support to
be Effective : Justice Shah

An institution of Ombudsman for redressal of investor grievances can be effective and efficient only if it is equipped with an adequate infrastructure, including manpower, and supported by adequate law enabling investors to file a proper complaint in a proper forum, observed Hon’ble Mr. Justice M. B. Shah, Chairman, National Consumer Disputes Redressal Commission, New Delhi, here today.

He was delivering the presidential address at the valedictory function of a two-day Seminar on ‘Dematerialisation : Investor Concerns’, organised by Consumer Education and Research Society (CERS), Ahmedabad, and the Stock Exchange, Mumbai, on 28 and 29 February 2004.

Mr. Justice Shah was responding to one of the recommendations of the Seminar that the present system of arbitration of investor grievances be replaced soon by an Investor Ombudsman. “The system of Investor Ombudsman should be fairly elaborate,” the recommendation added, “so that quick and inexpensive remedies are available at the investor’s doorstep on the similar model of consumer fora and consumer commissions under the consumer Protection Act (CPA), 1986.”

Mr. Justice Shah said that the setting up of such an institution would not be effective without adequate supporting staff and necessary infrastructure as was the case with civil courts and consumer courts. The CPA is a mandate of Parliament which states, among other things, that matters should be disposed of within 90 days. But the present state of affairs in most consumer courts was known to all, he added.

“Are we having adequate, efficient, competent fora for consumers?” Mr. Justice Shah wondered, adding that lack of infrastructure had created problems not only for the consumer fora but also for civil courts and a number of tribunals, too. Similarly, an institution of Investor Ombudsman might not achieve much in such circumstances, he added.

“Have share holders any right or control over depositories where an estimated seven lakh crore shares are handled by depository participants?” Mr. Justice Shah asked. “What action can they take except arbitration?” There are no provisions against depository participants’ erroneous or fraudulent transactions or handling of the accounts, he added.

Therefore, he suggested, adequate protection to investors was required and there must be adequate law for the purpose.

Hon’ble Mr. Justice M. S. Parikh, President, Gujarat State Consumer Disputes Redressal Commission, Ahmedabad, said that dematerialisation was beneficial provided it was honestly implemented by the agencies concerned, i.e. depository participants, stock exchanges, depositories, and companies.
He said that the entire system should be made simple so that any fraud was more likely to be detected. A complex system, on the other hand, might encourage fraud.

Earlier, Ms Lata Amin, CERS, presented the recommendations of the two-day Seminar before the house gathered at the valedictory function.

The recommendations welcomed and endorsed the major recommendations of the Bhave Committee that the companies, as the biggest beneficiaries of cost reduction, should bear the entire cost. The recommendations included that overall charges be considerably reduced across the board to ensure that maximum benefit is passed on to small investors; no amount be charged for closing a demat account as a consumer does not pay to close a bank account; SEBI, depositories and the Department of Company Affairs (DCA) undertake and support massive education and awareness programme for investors.

Earlier, Prof. Manubhai Shah, Chairman Emeritus, CERC, delivered the welcome address and lastly Dr. C. J. Shishoo, Trustee, TORCH, Ahmedabad, proposed a vote of thanks.

Date : 1 March 2004
Place : Ahmedabad

Pritee Shah
Editor
INSIGHT - The Consumer Magazine

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CONSUMER EDUCATION AND RESEARCH SOCIETY
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Ahmedabad- 380 054 (INDIA)
Phone: 079-7489945-46 Fax: 079-7489947
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Web Site: http://www.cercindia.org
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