Bombay High Court Sets Aside Arbitral Awards Fixing Sharekhan’s Liability For Investor Losses In F&O Trades
Safiya Malik
The High Court of Bombay Single Bench of Justice Sandeep V. Marne, by an order dated 24 December 2025, allowed petitions filed by Sharekhan Limited and set aside the Investors Grievance Redressal Committee order and the arbitral awards that had directed the broker to reimburse investor clients for F&O trading losses and related charges. The dispute arose after trades were executed through the broker’s authorised person, with the clients alleging that the transactions were unauthorised and that non-maintenance of trade confirmations under SEBI’s 22 March 2018 circular shifted liability to the broker. The Court held that where clients had permitted another person to trade and were informed through contract notes and text messages, they could not later disown those trades to recover market losses from the broker; regulatory non-compliance may attract disciplinary action but does not, by itself, create compensation liability.
Sharekhan Limited a SEBI-registered stockbroker and member of the National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE), provided an online/offline trading platform to its clients. Dr. Monita Kisan Khade and Kisan Rajaram Khade, wife and husband, were Sharekhan’s clients from 2008 to 2020 and traded in the Equity Cash and Futures & Options (F&O) segments. After Monita retired in 2015, she attended a stock-market class and met Mrs. Siddhi Pandurang Jagade @ Siddhi Ketan Pednekar who represented herself as a trading expert and was an Authorised Person (AP) of Sharekhan. The couple’s accounts were transferred to Siddhi, authorising her to carry out trades, including in F&O; Monita stated she gave telephonic instructions but claimed no order was placed by her for any F&O trading. Several F&O trades were executed and losses accrued; shares in their demat accounts were used as margin and were required to be sold to square off F&O liabilities.
Monita and Kisan approached NSE’s Investors Grievance Redressal Committee (IGRC), alleging unauthorised trading by Siddhi and claiming losses of Rs. 37,69,497 and Rs. 12,60,017 respectively. IGRC (31 January 2022) held that Sharekhan did not maintain call recordings for pre-/post-trade confirmations for the disputed F&O trades, and that email confirmations of ledger balances did not necessarily show acceptance; it also noted negligence by Monita and Kisan in not monitoring their accounts, and awarded 100% F&O brokerage, GST reversal, and 50% of losses (including quantified amounts in each claim).
Sharekhan challenged the IGRC decision before a sole arbitrator under NSE rules; by awards dated 14 November 2022, the sole arbitrator dismissed Sharekhan’s claims, relying (inter alia) on SEBI Circular dated 22 March 2018 requiring brokers to keep evidence of client order placement (including telephone recordings) and finding no call records/pre-trade confirmations for the F&O trades. Sharekhan’s appeals were dismissed by a three-member Appellate Arbitral Tribunal by orders dated 2 June 2023, which again relied on the SEBI Circular and recorded Sharekhan’s explanation that the AP had no landline and orders were placed on Siddhi’s mobile. The petitions invoked Section 34 of the Arbitration and Conciliation Act, 1996 to challenge the appellate awards.
The Court observed that “mere failure to maintain written or recorded trade confirmations by stock broker cannot be a ground for trading member to wriggle out of losses suffered out of such trades.”
It noted that the arbitral fora had “mainly relied upon Petitioner’s failure to scrupulously follow the requirement of maintaining pre-trade and post-trade confirmations under SEBI Circular dated 22 March 2018.”
Referring to precedent, the Court recorded that “the SEBI Circular dated 22 March 2018 is directory and not mandatory from the perspective of evidentiary standard for determining whether the client indeed traded or not.”
The Court further stated that “failure to adhere to the regulatory directives by SEBI or NSE may entail necessary disciplinary measures against the Stock Broker. However, the same would not necessarily create a liability on the stockbroker to compensate the client/investor in respect of the losses suffered in the trade transactions.”
On the conduct of the investors, the Court observed that “Respondents specifically admitted that they had trusted Siddhi and had allowed her to effect trades on their behalf.” It added that “this is not a case where trades were effected in a blatantly unauthorised manner by an unknown person.”
Regarding the method of awarding losses, the Court recorded that “award of damages or compensation cannot be without proof of loss suffered.” It held that “straightaway awarding 50% of loss suffered in the trades executed in F & O Segment is required to be deprecated.”
The Court concluded that “the impugned Awards are clearly unsustainable and liable to be set aside. The Petitions are accordingly allowed. The Order of IGRC, Award dated 14 November 2022 passed by the learned sole Arbitrator and Award dated 2 June 2023 passed by Appellate Arbitral Tribunal are set aside.”
“Considering the facts and circumstances, there shall be no order as to costs. With disposal of the Petitions nothing would survive in the Interim Applications and the same are disposed of.”
Advocates Representing the Parties
For the Petitioners: Mr. Kunal Katariya, Advocate, with Mr. Pulkit Sukhramani, Mr. Anshuman Sugla, Ms. Samreen Fatima and Mr. Juan D’Souza
For the Respondents: Mr. Chirag Dave, Advocate, with Mr. Shubham Kalbere
Case Title: Sharekhan Limited v. Monita Kisan Khade & Anr.
Case Number: Arbitration Petition Nos. 532 and 557 of 2024
Bench: Justice Sandeep V. Marne
