Bombay High Court Refuses to Halt SEBI ODR Arbitration Against ITC; Holds MSE Allocation Not Patently Without Jurisdiction and Leaves Limitation, Locus Objections Open
Bombay High Court Rejects ITC’s Challenge to SEBI ODR Arbitration; Holds MSE Allocation Not Patently Without Jurisdiction and Directs Objections Before Arbitrator
Facts
The petitioner, ITC Limited, filed a writ petition under Article 226 challenging communications dated 24 October 2024 and 26 November 2024 issued through the Online Dispute Resolution framework established by SEBI. The communications required ITC to participate in arbitration initiated by Respondent No. 2, Ashok Mootha, and to comply with requirements including payment of arbitral fees.
SEBI had introduced a common Online Dispute Resolution Portal through its Master Circular dated 31 July 2023 for disputes in the securities market, providing online conciliation followed, where necessary, by online arbitration. Metropolitan Stock Exchange of India Limited (“MSE”) was one of the Market Infrastructure Institutions participating in that framework, while Jupitice Justice Technology Pvt. Ltd. was the ODR institution facilitating the proceedings.
The underlying dispute dated back to 1989. One Prakash Chand Baid was stated to have purchased 85 shares of ITC from three existing shareholders. Around the same time, ITC declared a one-to-one bonus issue. Since the original shares were still registered in the names of those shareholders on the record date, 85 bonus shares were issued in their names. The base shares were thereafter registered in Baid’s name.
Ashok Mootha, who claimed to have acted as Baid’s stockbroker, later asserted rights over those bonus shares and the corporate benefits accruing from them. Correspondence on the issue resumed decades later, including communications from 2014 onwards and a request in 2021 seeking transfer of the bonus shares and related benefits.
A complaint lodged on SEBI’s SCORES Portal in 2021 was stated by ITC to have been closed. After the ODR framework came into operation in 2023, the complainant lodged several complaints which were allocated on a round-robin basis to different institutions including NSE, BSE, NSDL, CDSL and MSE. According to ITC, those complaints were rejected on grounds such as limitation, jurisdiction, maintainability, locus and duplication.
The present complaint, described by ITC as the fourteenth complaint, was allotted to MSE on 25 August 2024. The Conciliation Officer issued a report dated 16 October 2024 recording that the complaint was time-barred, and the conciliation ended without settlement.
The complainant thereafter invoked arbitration. ITC objected principally on the ground that its securities were neither listed nor traded on MSE, and therefore MSE was not the “relevant Stock Exchange” contemplated by SEBI’s Master Circular. MSE acknowledged that ITC was not listed on it but stated that the complaint had been allotted through SEBI’s round-robin ODR mechanism.
When ITC was subsequently called upon to participate in arbitration and pay the applicable fees, it approached the Bombay High Court seeking to stop the process.
Issues
The principal issues before the Court were:
- Whether MSE lacked jurisdiction to administer the dispute because ITC’s securities were not listed or traded on MSE.
- Whether round-robin allocation through SEBI’s ODR Portal could confer authority upon MSE despite the “relevant Stock Exchange” requirement under paragraph 16 of the Master Circular.
- Whether the complaint concerning events dating back to 1989 was ex facie barred by limitation under paragraph 14 of the Master Circular.
- Whether earlier complaints concerning the same bonus shares barred the present proceedings by principles analogous to res judicata or abuse of process.
- Whether the complainant had locus standi, particularly in the absence of an established transfer of the shares into his name.
- Whether the nature of the dispute concerning bonus shares, rectification and corporate benefits fell outside the ODR framework or was non-arbitrable.
- Whether these objections amounted to such a patent jurisdictional defect that the High Court should stop arbitration at the threshold under Article 226.
- Whether ITC was nevertheless bound to participate in arbitration and pay fees while preserving its objections.
Petitioner’s Arguments
ITC argued that the impugned communications were ex facie without jurisdiction because its securities were admittedly neither listed nor traded on MSE.
According to ITC, paragraph 16 of the Master Circular requires disputes involving a listed company to be referred to an ODR institution empanelled by the relevant Stock Exchange. Since MSE was not ITC’s relevant exchange, it could not obtain jurisdiction merely because a software-based round-robin allocation sent the complaint to it.
ITC further argued that the dispute concerned rectification of the register of members and entitlement to shares and corporate benefits, which according to it required adjudication by a competent court or tribunal rather than through the ODR mechanism.
On limitation, ITC stressed that the bonus shares had been issued in 1989, whereas the ODR framework itself came into existence only in 2023. It contended that paragraph 14 of the Master Circular expressly permits ODR only within the applicable limitation period and that a claim raised more than three decades later was plainly barred.
ITC also relied on the history of repeated complaints before NSE, BSE, NSDL, CDSL, MSE and other forums. According to it, substantially identical complaints had already been rejected and the latest proceeding amounted to:
- repetitive litigation;
- abuse of process; and
- an attempt to reopen issues already concluded.
It invoked principles analogous to res judicata.
Another objection concerned locus. ITC argued that Ashok Mootha described himself as Baid’s broker but asserted personal entitlement to the shares despite there being no valid document transferring the base shares from Baid to him.
Finally, ITC argued that it should not be compelled to incur arbitral costs and participate before a forum which, according to it, fundamentally lacked jurisdiction.
Respondent’s Arguments
SEBI opposed the petition and argued that the relief sought was excessively broad.
It submitted that restraining MSE and the ODR institution from proceeding would materially interfere with the market-wide round-robin allocation framework created under the Master Circular.
SEBI maintained that the ODR framework had been designed as an integrated dispute-resolution mechanism for securities-market disputes involving investors, listed companies, intermediaries and other regulated participants.
The position, in substance, was that ITC’s objections could be raised in the arbitral process and did not justify terminating that process through writ jurisdiction at its inception.
Analysis of the Law
1. Article 226 does not make the High Court an appellate forum over ODR proceedings
The Court first defined the scope of its jurisdiction.
The question was not whether ITC’s substantive objections were strong or weak, but whether the initiation of arbitration suffered from such a clear, patent and demonstrable absence of authority that writ intervention was justified before the arbitral forum could examine them.
The Court held that Article 226 was not being exercised as an appellate jurisdiction over the ODR process.
Questions concerning the complainant’s ultimate entitlement to bonus shares, limitation, locus, res judicata and maintainability ordinarily ought not to be conclusively determined at this preliminary stage unless the material demonstrated an unmistakable legal bar.
2. SEBI’s ODR framework is a regulatory dispute-resolution mechanism
The Court examined the architecture of the Master Circular.
It described the ODR system as a structured mechanism for disputes between investors or clients and listed companies, specified intermediaries and regulated entities.
It was not merely an informal administrative facility; it was a regulatory dispute-resolution mechanism established by SEBI, with escalation from grievance redressal to conciliation and then arbitration.
3. Limitation objection was substantial but belonged before the arbitral forum
Paragraph 14 of the Master Circular provides that ODR may be initiated only within the applicable limitation period, calculated with reference to the relevant issue or transaction.
The Court expressly recognised that ITC therefore had a substantive limitation objection.
However, it distinguished between having a strong limitation defence and proving that initiation of arbitration itself was a nullity.
The mere fact that the underlying events dated to 1989 did not entitle the High Court to bypass the adjudicatory mechanism contemplated by the Master Circular. The arbitral forum could apply paragraph 14 to determine whether the claim was barred.
4. MSE allocation raised a serious issue but did not establish patent lack of jurisdiction
Paragraph 16 establishes round-robin allocation of disputes but also states that disputes involving a listed company are to be referred to ODR institutions empanelled by the relevant Stock Exchange.
The Court held that the round-robin mechanism could not be read in isolation from that qualification.
ITC’s objection that MSE was not the relevant exchange was therefore described as “undoubtedly a serious one.”
However, determining whether the allocation was invalid required consideration of:
- ITC’s precise listing status;
- the exchanges relevant to the dispute;
- the nature of the complaint; and
- the manner in which the ODR Portal allocated it.
The mere fact that ITC was not listed on MSE did not, by itself, conclusively establish a patent absence of authority sufficient to justify stopping arbitration through writ jurisdiction.
5. Mandatory participation does not eliminate jurisdictional objections
Paragraph 20(b) provides that once conciliation fails and an investor pursues online arbitration, the market participant shall participate and comply with applicable deposit and fee requirements.
The Court characterised this language as mandatory.
However, the Court carefully qualified this proposition.
Mandatory participation does not:
- create jurisdiction where none exists;
- amount to admission of the underlying claim;
- waive a valid jurisdiction objection; or
- prevent the participant from raising limitation, maintainability, locus or arbitrability objections.
Its purpose is to prevent a market participant from unilaterally terminating the ODR process merely because it disputes the claim.
6. Substantial objection is not automatically a threshold jurisdictional bar
The Court drew an important distinction between an objection being serious and it being jurisdiction-destroying.
ITC’s contentions regarding:
- the passage of time;
- absence of share transfer;
- complainant’s locus;
- earlier proceedings;
- limitation; and
- nature of the relief
were all substantial matters.
But they required adjudication on facts and law. Their seriousness alone did not transform them into a patent jurisdictional bar justifying termination of the ODR arbitration under Article 226.
7. Repeated complaints may amount to abuse, but that requires factual examination
The Court did not dismiss ITC’s concern that the complainant had repeatedly approached different forums.
It expressly observed that repeated use of a statutory or regulatory dispute mechanism cannot become a means of indefinitely reopening concluded proceedings.
However, whether res judicata or abuse of process actually applied required examination of:
- the earlier proceedings;
- parties involved;
- reliefs sought;
- orders passed; and
- grounds on which those proceedings were disposed of.
The arbitral forum was better placed to undertake that exercise at the present stage.
8. Locus was also a disputed question for arbitration
ITC maintained that the complainant was not a registered shareholder and had no valid transfer instrument.
The Court found that this directly raised a disputed question concerning the complainant’s substantive entitlement.
Since the complainant asserted a contrary right, locus could not be conclusively determined in writ proceedings merely by accepting ITC’s version.
9. Nature of bonus-share dispute did not automatically exclude ODR
The Court similarly refused to hold at the threshold that the bonus-share dispute was necessarily outside the ODR framework.
The Master Circular expressly extends to specified disputes involving investors/clients and listed companies concerning securities-market services.
Whether the precise relief sought by the complainant ultimately falls within that jurisdiction must be examined in light of his pleadings and the nature of the claim.
Precedent Analysis
The judgment is principally based upon interpretation of SEBI’s Master Circular dated 31 July 2023 and the limits of writ intervention at the threshold of the ODR arbitral process, rather than upon an elaborate survey of external judicial precedents.
Its central doctrinal approach is that a High Court should distinguish between:
- a patent lack of jurisdiction, capable of being identified without factual adjudication; and
- substantial objections relating to jurisdiction, limitation, locus, maintainability, res judicata or arbitrability which require adjudication by the designated forum.
The Court found the present case to fall in the second category.
The judgment therefore reinforces the principle of forum-first adjudication within a specialised regulatory dispute-resolution mechanism: where the arbitral forum is competent to examine objections and there is no obvious jurisdictional nullity, Article 226 ordinarily should not be used to terminate proceedings before those objections are decided.
Court’s Reasoning
The Court considered ITC’s objection concerning MSE to be the strongest aspect of the case.
It acknowledged that paragraph 16 refers to the “relevant Stock Exchange” and that ITC was admittedly not listed on MSE.
But the complaint had entered the SEBI-created ODR Portal, had been allocated through its prescribed mechanism, had already proceeded through conciliation, and thereafter moved to arbitration.
In these circumstances, the Court was not satisfied that the MSE allocation was so obviously illegal that the entire proceeding could be declared void without allowing the specialised forum to examine the objection.
The Court therefore deliberately did not decide that MSE had jurisdiction on merits.
Instead, it held only that the alleged defect was not sufficiently patent to warrant extraordinary writ intervention at the threshold.
This distinction was expressly preserved: ITC remains free to argue before the arbitral forum that the reference could not validly be administered by an institution empanelled by MSE under paragraph 16.
Likewise, the Court did not decide:
- whether the claim is time-barred;
- whether the complainant has locus;
- whether previous proceedings create res judicata;
- whether repeated complaints constitute abuse of process;
- whether the dispute is maintainable; or
- whether the dispute is arbitrable.
Every one of those objections was expressly left open.
The Court also rejected ITC’s contention that it could simply refuse participation by describing the complaint as frivolous. The Master Circular does not permit a market participant to unilaterally determine that a complaint lacks merit and thereby terminate the ODR process.
Conclusion
The Bombay High Court dismissed ITC’s writ petition and refused to quash the communications requiring it to participate in arbitration.
The Court held that the communications dated 24 October 2024 and 26 November 2024 could not, on the material before it, be characterised as ex facie void or wholly without authority. Importantly, ITC’s objections were not rejected on merits; they were left to be adjudicated by the appropriate arbitral forum.
ITC was directed to comply with the ODR requirements, including payment of applicable arbitration fees within 14 days from uploading of the judgment.
Such participation is expressly without prejudice to ITC’s right to raise objections regarding:
- jurisdiction;
- improper allocation to MSE;
- limitation;
- locus;
- maintainability;
- res judicata;
- abuse of process; and
- arbitrability.
Upon compliance, MSE and the ODR institution were directed to proceed with arbitration in accordance with SEBI’s Master Circular and applicable procedure.
The writ petition was accordingly dismissed with no order as to costs, and the Court expressly clarified that it had expressed no opinion on the merits of the complainant’s underlying bonus-share claim.
Case Details
Case: ITC Limited v. Metropolitan Stock Exchange & Ors.
Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction
Case Number: Writ Petition No. 694 of 2025
Judges: Justice R. I. Chagla and Justice Farhan P. Dubash
Date: 21 August 2026
Result: Writ petition dismissed; ITC directed to participate in SEBI ODR arbitration and pay arbitral fees within 14 days, with all jurisdictional and maintainability objections expressly kept open.
