Supreme Court Stays Bombay High Court Order Directing CDSL To Pay ₹86.02 Lakh To Investor

On 7 August, the Supreme Court stayed the operation of a Bombay High Court order that had upheld an arbitral award directing Central Depository Services (India) Limited (CDSL) to pay Rs. 86.02 lakh with interest to investor Daksha Narendra Bhavsar for losses arising from the transfer and pledge of her demat shares by BRH Wealth Kreators Limited.

A Division Bench comprising Justices J.B. Pardiwala and K. Vinod Chandran issued notice on CDSL's Special Leave Petition, returnable on 10 September 2026. The Court observed that it needed “to closely look into the matter,” adding that “the impugned judgment and order passed by the High Court shall remain stayed from its operation.”

The dispute arose after BRH Wealth Kreators, which acted as both Bhavsar's stockbroker and a CDSL Depository Participant, transferred her securities and later pledged them with HDFC Bank to secure its own borrowings. After BRH defaulted, HDFC invoked the pledge and sold the securities.

Bhavsar then approached the Securities Appellate Tribunal (SAT), seeking a direction to CDSL to appoint a conciliator or arbitrator to address the unauthorised transfer of her shares. SAT permitted her to initiate arbitration on 6 June 2023, following which a three-member Arbitral Tribunal was constituted.

On 30 January 2024, the Tribunal held CDSL liable under Section 16 of the Depositories Act, 1996, which provides for indemnification of investors for losses caused by the negligence of a depository or its participant. It awarded Bhavsar Rs. 86.02 lakh with 9% post-award interest, finding inadequate supervision by CDSL.

CDSL challenged the award before a Single Judge of the Bombay High Court under Section 34 of the Arbitration and Conciliation Act, 1996, which provides for limited judicial intervention against arbitral awards.

The Single Judge dismissed the challenge. CDSL then approached a Division Bench of the Bombay High Court under Section 37 of the Arbitration and Conciliation Act, 1996, which provides for an appeal against specified orders passed under Section 34.

Before the High Court, CDSL argued that its role as a depository was essentially administrative and involved record keeping, while BRH had misused the shares in its capacity as a stockbroker. CDSL also pointed out that the Securities and Exchange Board of India (SEBI) had dropped regulatory proceedings against it on 24 July 2023.

Bhavsar, on the other hand, argued that CDSL had failed to enforce SEBI mandated supervisory and early warning mechanisms and was liable to indemnify her for the negligence of its Depository Participant.

On 2 July 2026, a Division Bench comprising Justice Bharati Dangre and Justice Manjusha Deshpande dismissed CDSL's appeal and affirmed the arbitral award as well as the Single Judge's decision. It observed that CDSL had been entrusted with protecting investors but had “remained completely oblivious” to BRH's acts.

Aggrieved, CDSL approached the Supreme Court through a Special Leave Petition under Article 136 of the Constitution, which empowers the Supreme Court to grant special leave to appeal against judgments or orders of courts and tribunals.

During the proceedings, the Court took note that Solicitor General Tushar Mehta handed over a demand draft of Rs. 1.05 crore, representing the award amount with accrued interest, to Bhavsar's counsel.

The Bench issued notice returnable on 10 September 2026 and permitted dasti service, while staying the operation of the High Court judgment in the meantime, while reserving CDSL's liberty to recover the amount from BRH, subject to the final outcome of the proceedings.

Appearances for petitioner (Central Depository Services (India) Limited): Solicitor General Tushar Mehta; Senior Advocates Dr. Abhishek Manu Singhvi and Amit Sibal; Advocates Ruby Singh Ahuja, Vaibhav Singh, Radhika Indapurkar, Amit Bhandari, Akanksha Thapa, Aman Mehta, Rahil Shah, Pranav Chandhoke, Tribhuvan Narain Singh, Abhyuday Mishra, Vedant Singh Choudhary, Suditi Batra and Ramayni Sood; M/s Karanjawala & Co., AOR.

Appearances for respondent (Daksha Narendra Bhavsar): Senior Advocate Ritin Rai; Advocates Abhay Dhadiwal, Harsh Moorjani, Priyanka Chaddha, Daksh Kadian and Vidhi Karia; Bharat Bagla, AOR.