Profits from Broker’s Mistake belong to the Trader – Rules Bombay HC

Sections 71 and 163 of the Contract Act – Unjust Enrichment

Profit earned from misusing the margin of the petitioner in the demat account of the respondent

The short but interesting issue that arises for consideration is whether Petitioner can pocket profits earned by Respondent through trades executed by him using his own skill and risk, but by making use of margin erroneously reflected in his trading account on account of glitch in Petitioner’s system.

There is no dispute that the total margin deposit was Rs.3176/- as on 26.7.2022.

If an owner leaves a cow in the custody of another person and the cow has a calf, the person with whom cow Is left must return not just the cow but also the calf to the owner.  In the present case, there was no voluntary provision of margin made available to the respondent, the provisions of section 71 are pressed into service.

Whether the margin made available to the respondent by the petitioner can be treated as “goods” for application of Sections 71 and 163 of the Contract.  However, the  term “margin money” virtually means monetary security, the same would not be covered by definition of the term “goods”.   Therefore, the provisions of Sections 71 and 163 would not strictly appliy to the transactions in question.

Also, reflection of undue margin in the account of a trading member is akin to making available mere opportunity to trade.

Arbitral Claim for reversal of profits gained from the usage of undue margin.