Bombay High Court Sets Aside Award Ordering Sharekhan To Refund Rs 4.87 Lakh In Brokerage

The Bombay High Court has set aside an arbitral award that had directed Sharekhan Limited, a broking firm, to refund Rs 4.87 lakh in brokerage to its client Darshini Shah. The court held that the arbitral tribunal had irrationally treated the same 2007 contract between the parties as valid for permitting trades but invalid for charging brokerage and that such a conclusion was fundamentally inconsistent with Indian contract law.

A single bench of Justice Sandeep V Marne held on December 9, 2025, that the tribunals had misapplied an NSE circular dated February 10, 2020, and observed that 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.” The court described the arbitral findings as “in conflict with the public policy of India.”

The case arose from a 2007 agreement under which Shah enrolled in Sharekhan's Account Maintenance Charges scheme by paying Rs 6 thousand annually for concessional brokerage. After she stopped paying the AMC charges in 2013, Sharekhan treated her as a regular client. When she resumed trading in May 2021, the firm charged standard brokerage and issued an invoice of Rs 5.08 lakh on November 1, 2021.

Shah complained to the NSE claiming excess brokerage and relied on a 2020 circular on inactive accounts to argue that Sharekhan was still bound to treat her under the AMC scheme. When the NSE's grievance committee rejected her complaint, she initiated arbitration.

Before the Sole Arbitrator, Shah contended that because her account had been inactive, Sharekhan was required to obtain fresh KYC documentation and could not rely on the 2007 agreement for charging brokerage. The Sole Arbitrator accepted this position and held that Sharekhan had violated the 2020 circular by allowing trades without updating KYC. The Appellate Arbitral Tribunal upheld this view.

Sharekhan argued before the High Court that the circular had no connection with brokerage rates or the validity of the underlying contract and that the arbitrators had improperly revived an expired AMC scheme.

The High Court agreed with Sharekhan and held that the circular concerning treatment of inactive accounts could not relieve Shah of her contractual obligation to pay standard brokerage after eight years of non payment of AMC charges. It held that failure to update KYC may invite disciplinary action but cannot extinguish a client's liability under a valid contract.

The court said the arbitral authorities had ignored the AMC form and had adopted an approach that effectively rewrote the contract, noting that “the learned Sole Arbitrator and the Appellate Arbitral Tribunal have adopted non judicious approach by using the NSE circular providing for classification of inactive accounts and for seeking fresh KYC documents for freeing up the respondent from contractual obligations under the 2007 agreement executed by her.”

Calling the awards “egregiously perverse and unsustainable,” the court set them aside and allowed Sharekhan's petition.

Case Title: Sharekhan Limited vs Darshini Shah

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