How effective are our redressal systems?

Last Updated: Tue, May 22, 2012 04:50 hrs

Real estate developers often delay handing over properties to buyers. But how many buyers approach consumer courts to get redressal? How many file FIRs on loss of wallets or mobile phones? Not many. The common reason cited is, "It will take forever".

In the last financial year, the National Stock Exchange (NSE) received 5,325 complaints, of which 4,025 were resolved. The rest have been carried forward. The Bombay Stock Exchange (BSE) received 2,907 complaints and 1,836 were resolved. For stock market-related grievances, investors should first approach the concerned broking firm/fund house/ intermediary. If the issue remains unresolved at that level, they should approach the arbitration committee set up by the exchanges for this purpose.

Consumer activist Jehangir Gai says the arbitration committee is very effective and resolves most cases. He plans to do so for Menezes, a Goa resident, who had opened a trading account with a Mumbai-based broking firm, through a sub-broker. The sub-broker managed Menezes' account. One day, he found the sub-broker using his account to trade without his approval. Worse, he had notched up a loss of Rs 13 lakh. On approaching the broking firm, Menezes was told it was his worry. Gai has asked Menezes to file a consumer complaint or approach the arbitration committee.

Issues Redressal authority
> Banks and related products,
Reserve Bank of India
> Company performance and
Ministry of Corporate Affairs
> Listed companies' performance
and investments
Securities and Exchange
Board of India
> Insurance, products and
Insurance Regulatory
and Development Authority
> Commodities Forward Markets Commission
> Pension fund Pension Fund Regulatory and
Development Authority
> Housing finance companies National Housing Bank
Source: Sebi website

If the total number of pending complaints against a company exceeds 25 and remain unresolved for over 45 days, the exchange steps in. It can suspend trading in the company's stock or may transfer it to the 'Z' group. This indicates the firm has not complied with the listing agreement and investors should be cautious.

According to a Reserve Bank India (RBI) report on the ombudsman scheme (June 30, 2011), only 30 per cent of complaints were resolved in 2010-11. Around 51 per cent were non-maintainable or outside the ombudsman's ambit. The remaining 19 per cent remain with the ombudsman.

The procedure to file a complaint is similar for banks and insurers. You have to first complain to the insurer/bank and wait for 15 and 30 days, respectively, for a response. In case of no or unsatisfactory response, you can knock on the respective ombudsman's door. If not satisfied by the ombudsman's verdict, you could move a consumer court.

Insurance experts say many cases are closed and not resolved as the statistics are often unreliable. "If an insurer cannot respond in 15 days, it has to give a valid reason for the same to the regulator. This leads insurers to revert for the sake of reverting, without considering the customer," says a lawyer. Insurance-related complaints can be lodged with the regulator as well, while complaints filed on an insurer's website can be viewed by the regulator.

According to Gai, it is better to approach the consumer forum than go through the ombudsman for banking and insurance-related problems. "Reason: Many times, the ombudsman gives different verdicts on similar cases. But, consumers are unaware and do not take the case forward (to the consumer court)." For instance, a doctors' association had taken a group medical policy. The insurer did not have a third party administrator (TPA) and had authorised a committee to process claims. The claim was routed through the association within 30 days of filing it at the committee meeting. Four doctors filed claims after one such meeting. By the time the committee met next to process the claims, 30 days had passed. The insurer refused to honour the claims. The doctors approached the ombudsman independently. One of them hired an advocate and the rest appeared individually. While the advocate got 50 per cent of his client's claim, the rest did not get anything, who then moved the consumer forum, which ruled in their favour.

A financial planner who did not wish to be named, said, though there are redressal systems, these are rudimentary. "There is no one place that a consumer can go to. These problems are unavoidable and beyond one's control. However, the onus is on the consumer to get his redressal resolved," he says.

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