The Supreme Court last week ruled that a husband can be held
jointly and severally responsible for his wife’s stock market liabilities based
on an oral agreement. The ruling came in the case of AC Choksi Share Broker vs
Jatin Pratap Desai.
The judgment highlights that the arbitral tribunal has the
authority to exercise jurisdiction over the husband, referencing Bye-law 248(a)
of the Bombay Stock Exchange (BSE) Byelaws, 1957.
The court stated, “First, by interpreting Bye-law 248(a)
of the Bombay Stock Exchange Byelaws, 1957 that provides for arbitration
between members and non-members of the BSE, and considering the nature of
respondent no 1’s (husband) involvement qua transactions conducted in
respondent no 2’s (wife) account, we have held that an oral contract
undertaking joint and several liability falls within the scope of the
arbitration clause and the arbitral tribunal could exercise jurisdiction over
respondent no 1.”
The case stemmed from a stockbroker’s attempt to recover a
substantial debit balance in the wife’s trading account. Both the husband and
wife maintained separate trading accounts with the appellant stockbroker, who
alleged that they had agreed to operate them jointly. Following a transfer of
funds from the husband’s account to cover the wife’s trading losses, the debit
balance escalated sharply due to a market downturn. Seeking recovery, the
broker initiated arbitration, holding both accountable for the outstanding
dues.
Although the husband challenged the arbitration proceedings against
him, the tribunal ruled in favour of the broker, determining that his
involvement in the transactions justified shared liability.
The Supreme Court upheld the tribunal’s decision,
rejecting the husband’s objections and affirming its jurisdiction. As a result,
he was directed to repay Rs 1.18 crore along with 9 per cent annual interest.
“The arbitral tribunal allowed the appellant’s claim and held both respondents
to be jointly and severally liable to pay Rs 1,18,48,069/- along with interest
@ 9 per cent pa from May 1, 2001 till the date of payment. It also dismissed
the counter-claim preferred by respondent no 1,” the judgment stated.