Dispute – Loss & Excess Margin Due to Technical Glitch of Share Broker’s Platform

Judgment dated 30.10.2026 of the High Court of Bombay in Arbitration Petition No.380 of 2026 of 5 Paisa Capital Limited   Vs.  Ankit Agarwal

Share Trading Loss – Technical Glitch of Trader’s Broker Platform

The petitioner – company is a trading and clearing member as also registered stock broker of the National stock Exchange & Bombay Stock Exchange in the capital market.  The respondent is the client of the petitioner as per the Member – Client Agreement for trading account.

Between 18th September 2018 and 4th October 2018 (the “disputed period”), technical glitches in the Petitioner’s software resulted in an excess holding being reflected in the Respondent’s Demat account. It is the Petitioner’s contention that throughout this period, the Respondent was regularly furnished with contract notes and margin statements, in accordance with the applicable exchange norms, at his registered email address, including during the disputed period.

1. It is the Petitioner’s contention that during the disputed period, the trade logs, including the relevant IP addresses and other transaction-specific details, indicate that all trades executed during that period were attributable to the Respondent. Between 3rd September 2018 and 11th October 2018, the Petitioner sent multiple text messages to the Respondent informing him that his margin cover had fallen below 20%. Through the aforesaid text messages, the Respondent was further advised to transfer sufficient funds to maintain the requisite margin. He was also informed that, failing such replenishment, his positions would be automatically squared off in accordance with the Petitioner’s Risk Policy.

On 6th June 2019, the learned Sole Arbitrator passed the impugned arbitral award whereby the Petitioner’s claim was rejected, and the Respondent’s counter claim was partly accepted to the tune of Rs. 14,30,509/- and a further amount of Rs.1,62,162/- was awarded towards 1,260 bonus shares of Adani Gas Ltd.. In the impugned arbitral award, the learned Sole Arbitrator rejected the Petitioner’s claim of Rs. 6,53,166/- on the grounds that the Petitioner’s responses were evasive, no cogent explanation had been furnished for the second e-mail address, and the explanation attributing the discrepancy to a typographical error was unacceptable. The learned Sole Arbitrator further observed that the Petitioner had sent e-mails reflecting varying amounts in respect of the debit balance in the Respondent’s ledger. Insofar as the counter claim of the Respondent of Rs.14,30,509/-, the learned Sole Arbitrator held that the Petitioner had not dealt with the contentions raised in the Respondent’s statement of defense dated 1st April 2019 save and except by denying it. Insofar as the claim of Rs. 1,62,162/ toward 1,260 bonus shares of Adani Gas Ltd., the same was allowed on the ground that the Petitioner had advanced no cogent reasons for the same. According to the Petitioner, the allegations of the Respondent that the Petitioner itself executed the unauthorized trades in the derivative segment appeared only within the recital of the Respondent’s contentions introduced by the words “Respondent further submitted that” and it is the Petitioner’s contention that there was no finding in respect thereof.

On 17th October 2019, the Appellate Arbitral Tribunal by way of the impugned appellate arbitral award rejected the Petitioner’s appeal and confirmed the impugned arbitral award dated 6th June 2019 passed by the learned Sole Arbitrator. It is the Petitioner’s contention that the Appellate Arbitral Tribunal held that both Petitioner and Respondent have the responsibility to notify each other of any abnormality in the traders trading system observed by them. The Appellate Arbitral Tribunal further held that the Petitioner was in breach of the aforesaid duty and that the Respondent was equally in breach thereof. The Appellate Arbitral Tribunal observed that the Respondent, being aware of his own trading position, ought to have immediately brought any anomaly to the Petitioner’s attention. However, the Respondent failed to do so until the Petitioner debited the amounts arising from the excess margin extended to him. The liability was nevertheless imposed on the Petitioner only on the ground that as the Petitioner was in agreement that there was a system glitch in their account which had given excess margin to the Respondent, the Appellate Arbitral Tribunal came to the conclusion that the losses on account of the aforesaid margins had to be borne by the Petitioner and further held that the aforesaid glitch was not suitably and in time notified to the Respondent.

The primary issue which ought to have been considered by the Appellate Arbitral Tribunal was in respect of the losses that the Respondent had suffered on account of online trading during the disputed period on account of a technical glitch/error which had occurred on the trading portal of the Petitioner offering the Respondent higher margins to trade. It is on this issue as to whether the loss would have to be borne by the Petitioner or the Respondent in the facts of the present case was a task and an exercise that had to be undertaken by the Appellate Arbitral Tribunal by examining the facts and the records available before it. However, on perusal of the impugned appellate arbitral award upholding the impugned arbitral, it is evident that the said exercise has not been undertaken, considering that only the submissions of the parties have been reproduced verbatim and the operative part only records that both the Petitioner and the Respondent had the responsibility to notify each other of any abnormality in the trade or trading system observed by them. It is on this basis that since the system/technical glitch was not reported by either party and especially the Petitioner to the Respondent that the losses arising to the Respondent on account of excess margin allocation have been foisted on the Petitioner.