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Bombay HC – Brokerage Agreements are binding and NSE Circular cannot retroactively invalidate them

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The petitioner is the stock broker registered with SEBI.   The respondent is the client of the petitioner. On 25.9.2007, there was agreement between the parties in respect of BSE and NSE.

The respondent paid AMC at Rs.6000/- per year from 2007 to 2012 and availed the benefit of reduced brokerage of.

From 2013 to 2020, the respondent did not pay AMC charges and the trading account got deactivated.

In May 2021, the respondent started transactions in Future and Option segment.  The petitioner raised invoice of Rs.5,08,893.2 ps for brokerage.

The respondent made complaint to the NSE.  The Grievance Redressal Committee of NSE rejected the complaint.

The respondent invoked arbitration.   In the arbitral award dated 26.4.2022, the petitioner was held responsible for not securing KYC documents from the respondent at the time of re-initiation of trading in May 2021 and directed to pay Rs.4,87,513/- for the difference in brokerage charges solely based on the NSE Circular of 10.2.2020.

Three-members Arbitral Appellate Tribunal dismissed the appeal of the petitioner on 29.8.2022.

In my view, the above finding recorded by the learned sole Arbitrator and Appellate Arbitral Tribunal about need to secure fresh instruction (meaning execution of fresh contract) governing brokerage before permitting trades in 2021, is against most basic notions of justice and in conflict with the public policy of India. Indian law does not permit contract to operate for one purpose and not for the other. The contract is held valid for legitimizing the trades but is held illegal for charge of brokerage.

Judgment dated 9.12.2025 of the High Court of Bombay in Arbitration Petition No.94 of 2024 of Sharekhan Limited   Vs.  Darshini Shah

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