Arbitral Award – Legitimacy of trading – Absence of prior written consent – NSE Regulations
The petitioner had broking account with the respondent – stock broker since 2006. The disputes relate to the sales during the period of 1st April 2017 to 4th July 2018.
According to the petitioner, it was unauthorized since there was no prior recorded and written instructions for any sale during the said period.
Regulation 3.2.1 of the National Stock Exchange (Capital Market) Trading Regulations, 1994, provides that a stock broker shall ensure that appropriate confirmed order instructions are obtained from the client before placement of order.
The entire case rests on treating one single regulatory requirement of the need to have prior written or recorded instructions for every trade executed on the stock exchange as mandatory requirement would result in the trade being illegitimate.
Every single trade in the Dispute Period has entailed transmission of the contract notes by stock broker to client to the designated email account and SMS alerts about every trade have been sent to the designated mobile number of the client – petitioner. There is movement of securities from client demat account to the broker account. The client did not raise any claim about any trade being unauthorized on examining such alerts.
The production of prior authorization is obviously as evidentiary requirement i.e. a procedural requirement. In the event of inability to produce prior evidence of order placement,
Judgment dated 27.3.2025 of the High Court of Bombay in Commercial Arbitration Petition No.1175 of 2019 with Arbitration Petition No.1216 of 2019 of Ulhas Dandekar Vs. Sushil Financial Services Pvt Ltd.
