JSA Advocates & Solicitors (“JSA”) successfully represented Sharekhan Limited (“Sharekhan”) before the Hon’ble Bombay High Court (“BHC”) in proceedings challenging awards passed by an arbitral tribunal constituted under the National Stock Exchange of India Limited’s (“NSE”) byelaws and rules, in a matter related to certain trades executed in an account held by Clients of Sharekhan who alleged that such trades were executed by an Authorised Person (“AP”) of Sharekhan, without authorization from the client.
By its judgment dated December 24, 2025, the BHC allowed Sharekhan’s challenge to the arbitral awards, noting (inter alia) that the clients had willingly permitted the AP to execute trades on their behalf, relied on her skill, and assumed the risks inherent in stock market volatility. It was also held that failure to maintain pre-trade confirmations would not necessarily create a liability on the stockbroker to compensate the client in respect of losses suffered. In the given circumstances, BHC held that the Clients could not subsequently disown the trade transactions.
Key observations of the Hon’ble BHC.
- Client’s conduct and consent: It was noted that where the Clients have knowingly permitted an AP to trade on their behalf and have taken the benefit (and risk) of such trading, they cannot later repudiate the transactions merely because outcomes were unfavourable.
- SEBI circular on recording instructions (22 March 2018): It was held that the arbitral tribunal had proceeded solely on the basis that Sharekhan had failed to maintain written/ recorded instructions for the trades (as contemplated under the SEBI Circular dated 22 March 2018) and, on that basis alone, treated the trades as “unauthorised”. The BHC reiterated that a broker’s failure to maintain pre-trade authorisations is, at most, non-observance of regulatory directives, and does not automatically render trades unauthorised or become a standalone basis for shifting trading losses to the stockbroker.
- Rejection of “50–50” liability approach: The BHC rejected the arbitral tribunal’s method of mechanically splitting liability equally amongst the parties, without determination of loss or damages, and awarding 50% of the claim. It was noted that claims must be adjudicated on settled principles governing proof of loss and award of damages, and an arbitrary apportionment of liability is inconsistent with the fundamental policy of Indian law—making such awards vulnerable under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996.
This judgment further strengthens the view taken by the Bombay High Court in a line of recent decisions arising from broker-client disputes, especially in matters involving allegations of unauthorised trading.
The JSA Securities Litigation and Advisory Team comprised Pulkit Sukhramani, Partner; Anshuman Sugla and Samreen Fatima, Senior Associates & Juan D’souza, Associate.
Pulkit Sukhramani specializes in Securities Litigation and Advisory.