Bombay High Court Sets Aside Arbitral Award Against Investors, Says Participation In Regulatory Proceedings Is Not “Forum Shopping”

The Bombay High Court recently set aside an arbitral decision that had rejected investors' claims against Central Depository Services (India) Limited (CDSL), on the grounds of alleged forum shopping, by declaring that involvement in regulatory proceedings does not bar independent arbitration remedies. Allowing a petition under Section 34 of the Arbitration and Conciliation Act, 1996, Justice Sandeep V. Marne on 23rd December, 2025 concluded that the arbitral panel had "egregiously erred" by abusing the forum shopping and election theory by neglecting to consider the investors' claims on its merits. The petitioners were trading members having DEMAT and trading accounts with Anugrah Stock and Broking Pvt. Ltd., a CDSL depository participant (DP) and stock broker. The petitioners had deposited money and securities as collateral to satisfy the margin requirements for trading futures and options. On the grounds of non-compliance with regulations, the NSE suspended Anugrah's trading rights in August 2020. The petitioners' stocks were thereafter liquidated by Edelweiss Custodial Services Ltd., Anugrah's clearing member, in order to recover Anugrah's margin failures. Later, the National Clearing Ltd. (NCL) ordered restoration after finding that Edelweiss had illegally sold securities of clients valued at more than ₹460 crore. One of the petitioners sought to be included as a participant in Edelweiss's appeal before the Securities Appellate Tribunal (SAT), which was dismissed by SAT subsequently in December 2023. In 2023, the petitioners filed a separate arbitration against CDSL, requesting either the return of their securities or the market value of ₹34.72 crore. On April 29, 2024, a 3-member arbitral tribunal dismissed the suit, ruling that the arbitration constituted “forum shopping” and that the petitioners had already "elected" their remedy by supporting the NCL order. The central issue before the High Court was whether one petitioner's involvement as an intervenor in SAT regulatory proceedings precluded the petitioners from pursuing arbitration against CDSL for statutory indemnity under Section 16 of the Depositories Act, 1996. Senior Advocate Mr. Karl Tamboly, appearing for the petitioners, claimed that the arbitral tribunal had "perversely accused" them of forum shopping and neglected to rule on their statutory indemnification claim. He argued that arbitration against CDSL was not the same as NCL and SAT actions, which were regulatory in nature. He contended that "merely approaching different forums cannot amount to forum shopping." The award was defended by CDSL, represented by Advocate Mr.Rohan Kadam, who claimed that seeking multiple remedies amounted to abuse of process and that the reliefs sought in arbitration and before SAT were identical, citing the decision in Union of India v. Cipla Ltd. by the Supreme Court. The arbitral tribunal's reasoning was rejected by Justice Marne, who concluded that it had misinterpreted the concept of forum shopping, ruling that the “tribunal's findings of forum shopping are so irrational that that no fair-minded person would ever record such findings”. On functional similarity, it noted that while focusing on the similarity of reliefs, the Arbitral Tribunal overlooked that individual investor claims were not decided in NCL proceedings but rather, they were regulatory in nature and additionally, the SAT had granted no relief to Petitioner No.1 but merely dismissed Edelweiss's appeal. Holding that no substantive rights can be taken away, it held, “In regulatory proceedings initiated by a regulator, the intervenor cannot claim relief as a matter of right whereas in his own substantive proceedings, he can claim relief as a matter of right. Therefore mere participation by Petitioner No.1 in the regulatory proceedings initiated by NCL would not destruct his own substantive remedy to seek return of securities”. With respect to the claim of doctrine of election, the Court applied the Supreme Court's test in Transcore, and held the petitioners never had two parallel, inconsistent remedies. It ruled that intervention in regulatory proceedings is not a legal remedy available to an investor and hence, doctrine of election is inapplicable to this case. Consequently, the Bombay High Court set aside the arbitral award dated April 29, 2024, finding it to be perverse and contrary to Law. The petitioners' right to have the arbitral tribunal decide their claims on their merits was reinstated by the court, along with a direction to the CDSL to pay 3,00,000 rupees as proceedings costs to the petitioners. Case Title: Nimish Chandulal Shah & Ors. v. Central Depository Services (India) Ltd.Case No.: Commercial Arbitration Petition No. 293 of 2024 Coram: Justice Sandeep V. Marne Judgment Pronounced On: 23 December 2025 Appearances: – For Petitioners: Mr. Karl Tamboly, Mr. Reehan Ajmerwalla, Mr. Ravinchandra Hegde, Ms. Parinaz Bharucha, Mr. Kandarp Trivedi with Ms.Janani...

Bombay High Court Sets Aside Arbitral Award Against Investors, Says Participation In Regulatory Proceedings Is Not “Forum Shopping”

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Bombay High Court Sets Aside Arbitral Award Against Investors, Says Participation In Regulatory Proceedings Is Not “Forum Shopping”

Shivani PS

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