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AC Chokshi Share Broker Private Limited v. Jatin Pratap Desai and Another

Civil Appeal · 2025 INSC 174Decided 10 Feb 2025
C.A. No.-002227-002227 - 2025 (arising from SLP(C) No. 18393 of 2021)
Justice Pamidighantam Sri Narasimha · Justice Sandeep Mehta

Background

A husband and wife each held separate trading accounts with a stock broker. After a 2001 stock market crash left the wife's account with a large debit balance, the broker - acting on the husband's oral instruction - transferred a credit balance from the husband's account to the wife's account to partly offset her losses, and later sought to recover the remaining shortfall from both of them jointly through arbitration. An arbitral tribunal held both spouses jointly and severally liable, but the Bombay High Court's Division Bench later set aside the award as against the husband alone, reasoning he should not have been dragged into arbitration or held liable for his wife's debts.

Decision Breakdown

The Supreme Court held that the stock exchange's arbitration bye-law was broad enough to cover the husband, since his own conduct - representing that the accounts would be jointly operated and orally authorising the fund transfer - amounted to an oral undertaking of joint and several liability that fell within the arbitration clause's scope. It further held that the High Court had overstepped its very limited power to interfere with arbitral awards, effectively re-examining the facts and merits instead of confining itself to whether the award was perverse or patently illegal; since the tribunal's findings were reasonable and supported by evidence, and the exchange's own bye-laws permitted the broker's adjustment of funds between the linked accounts, there was no illegality. The Court set aside the High Court's order and restored the arbitral award in full, holding the husband jointly liable with his wife for the outstanding amount plus interest.

Lesson Learnt

Courts have very narrow power to overturn an arbitration award - they cannot re-weigh the evidence or substitute their own view of the facts, and a person who conducts themselves as jointly responsible for a family trading account (even without a written agreement) can be bound by arbitration and held liable for its debts.

Official source (sci.gov.in)View Judgment (PDF)

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