Summary

AC Chokshi Share Broker Pvt. Ltd. v. Jatin Pratap Desai & Anr. (2025 INSC 174)

Headnotes:

Arbitration – Jurisdiction: A non-signatory can be bound by an arbitration clause if there is an implied understanding or a composite transaction.
Stock Market Transactions – Liability: Oral agreements in stock trading can create joint and several liability.
Judicial Review – Section 34 & 37 of Arbitration Act: Scope of interference in arbitral awards is limited to patent illegality and jurisdictional issues.

Detailed Summary:
The dispute arose when a stockbroker sought to recover a trading loss from a client and her husband. The arbitral tribunal held them jointly liable. While the High Court ruled that the husband's liability was not covered under the arbitration clause, the Supreme Court overturned this decision. It ruled that the husband's oral commitment created a binding obligation within the arbitration framework. The Supreme Court reaffirmed that judicial review of arbitral awards should be minimal and confined to patent illegality.

Background: The dispute arose over a stock trading account where the husband (Respondent No. 1) was held jointly liable for a debit balance in his wife’s (Respondent No. 2) trading account.
Arbitral Tribunal’s Decision: Held both respondents jointly and severally liable based on an oral agreement and conduct.
High Court Decision: The Division Bench set aside the award against Respondent No. 1, holding that he was not a party to the arbitration clause.
Supreme Court’s Decision:
- Expanded Scope of Arbitration: A non-signatory can be held liable if there is evidence of joint and several liability.
- Limited Judicial Review: The High Court wrongly re-evaluated evidence, which is not permissible under Sections 34 and 37.
- Final Ruling: Restored the arbitral award, making Respondent No. 1 liable.
Key Principles Established:
- Composite Transactions: If accounts are jointly operated, implied liability can arise.
- Scope of Section 34 & 37: Courts should not interfere with factual findings unless there is perversity or lack of jurisdiction.

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