The Financial Sector Legislative Reforms Commission (FSLRC) has given shape to a draft law - Indian Financial Code. Under the proposed legislation, a unified financial authority (UFA) will be constituted as a regulator. It proposes to set up a financial redress agency (FRA) for resolving consumer complaints.
The proposed FRA will have its headquarters in Mumbai. It may also establish branch offices. The Board of Members of this agency will comprise of a maximum of seven persons, half of whom would be executive members appointed by various regulatory authorities in consultation with the central government. The others would be non-executive members, two of whom would be nominated by the Reserve Bank of India (RBI) and UFA. The members would be experts in consumer issues. The FRA would be a body corporate, which could sue and be sued in legal proceedings.
The FRA's role would be to redress the complaints of retail consumers of financial services. Its regulations would include stipulation of the fees payable for filing complaints, the amount of compensation which could be awarded, the time frame for mediation and adjudication, etc. and would be subject to review within three years.
An aggrieved consumer cannot directly approach the FRA. He would first have to approach his service provider with a complaint. If his grievance is not resolved or he is not satisfied with the resolution, he can lodge a complaint with the FRA directly or through the regulator. The FRA can take up the complaint provided it is not before any court, tribunal or other authority.
On receipt of the complaint from the consumer, the FRA would try to mediate a voluntary settlement through a mediator. If mediation fails or in case it cannot be completed with a time-bound period, or if a party alleges the settlement recorded in the mediation was obtained through fraud, coercion or misrepresentation, the complaint would have to be referred for adjudication, to be conducted by an independent adjudicator appointed by the FRA.
The adjudicators would be persons capable of dealing with consumer protection issues and the ability to redress consumer disputes, or by persons knowledgeable in finance or law.
The adjudicator has to decide the complaint on the basis of the financial contract between the parties and the applicable provisions of law. The adjudicator would also have the power to award compensation. The adjudicator has to give a reasoned order, which would be enforceable like a decree of a civil court. The order must also inform the parties of their right to appeal against it within a period of 60 days.
The appeal would be before this Financial Sector Appellate Tribunal, to be constituted under the new law. The tribunal would have its main bench at Mumbai, and may constitute benches at other places. It would comprise a presiding officer and two members. The presiding officer would be a sitting or retired judge of a high court or the Supreme Court. The members should have qualifications and experience in law, finance, economics or accountancy. The tribunal's order would also be enforceable, like a decree of a civil court.
A person aggrieved by the tribunal's order would be entitled to challenge it in a second appeal, to be filed within 90 days before the Supreme Court.
When a complaint is made to the FRA and referred for mediation, the dispute cannot be taken to any other court, tribunal or authority. It must follow the channel provided under the Indian financial code, viz. mediation, adjudication, first appeal before the tribunal, and second appeal to the Supreme Court. Alternatively, the procedure under the Indian financial code could be given a go-by and the consumer could instead opt for filing a dispute under the Consumer Protection Act.
Thus, the consumer would have the option of choosing his remedy under the Indian Financial Code or under the Consumer Protection Act. He cannot choose both the remedies or switch from one to the other. While the remedy under the IFC would be either centralised or located in certain important cities, the consumer forum would be more accessible, as there is a district forum in each district.
The writer is a consumer activist
