SEBI Reference Alone Does Not Make Writ Petition Against Stock Broker Maintainable: Delhi High Court

The Delhi High Court on 22 July held that merely marking a representation or complaint to the Securities and Exchange Board of India (SEBI) does not make a writ petition maintainable when the dispute is essentially between an investor and a private stock broker and alternative statutory remedies are available.

A Single Bench of Dr. Justice Swarana Kanta Sharma dismissed a petition filed by Sushil Kumar Verma against SEBI and Indiabulls Securities Limited, holding that the petitioner had efficacious alternative remedies under the Rules, Bye-laws and Regulations of the Bombay Stock Exchange Limited and applicable grievance redressal mechanisms. She observed:

“this Court is of the considered opinion that the petitioner has efficacious alternative remedies available in law, including the remedies contemplated under the Rules, Bye-laws and Regulations of the Bombay Stock Exchange Limited as well as the applicable grievance redressal mechanisms.”

Verma claimed that he had purchased nine shares of Lupin Limited through Indiabulls Securities in 2006, which increased to 45 shares after a stock split. He stated that dividends were credited until 2016 but he discovered in August 2024 that the shares were no longer reflected in his Demat account when he attempted to sell them.

He alleged that the broker had unlawfully dealt with or misappropriated his shares and that SEBI failed to act despite being informed of the issue. He therefore approached the High Court seeking directions to SEBI and Indiabulls Securities to update his Demat account and initiate action against the broker for alleged violations of the SEBI Act and Rules.

SEBI and Indiabulls Securities opposed the petition, arguing that the dispute arose from a contractual relationship between the investor and the broker and could be addressed through the arbitration mechanism under the Bombay Stock Exchange Bye-laws.

The Court noted that the contract note executed between Verma and Indiabulls Securities at the time of purchase of the shares was governed by the Rules, Bye-laws and Regulations of the Bombay Stock Exchange. The agreement also provided for arbitration in Mumbai. Also, Verma had only sent emails and issued a legal notice but had not invoked the remedies available under the contract note or the applicable Rules and Bye-laws.

Further, the Bench noted that SEBI and the Bombay Stock Exchange had grievance redressal mechanisms for disputes relating to stock brokers and Demat accounts, but Verma had admittedly not approached those forums. It held:

“At this stage, the dispute is essentially between the petitioner and respondent no. 2, arising out of their contractual relationship and concerning the petitioner's shareholding and the transactions in his Demat account. The mere fact that one of the emails addressed by the petitioner to respondent no. 2 was also marked to SEBI, requesting action against it, cannot by itself confer maintainability upon the present writ petition or justify invocation of the writ jurisdiction of this Court.”

Accordingly, the High Court dismissed the writ petition as not maintainable while leaving it open for Verma to pursue remedies before the competent forum.

For Petitioner: Advocates Keshav Kr. Verma, Kunal Verma, Ashwani, Neetu Gupta and Vijender Kumar

For Respondents: Senior Advocate Pratap Venugopal, Advocates Udita Singh, Ankit Rajgarhia, Siddhant Ahirwal and Garv Aggarwal