The Bombay High Court has upheld an arbitral award directing Central Depository Services (India) Limited to pay investor Daksha Bhavsar ₹86.02 lakh with 9 percent annual interest in the BRH Wealth Kreators securities fraud case. Dismissing CDSL’s appeal, the court held that a depository cannot evade liability when an investor suffers losses due to the negligence or misconduct of its depository participant.
Depository’s Duty Goes Beyond Record-Keeping
Affirming the January 2024 arbitral award and the December 2025 order of a single judge, the division bench observed that a depository’s role is not limited to maintaining electronic records. The court said depositories have statutory responsibilities relating to investor protection, risk management and surveillance of suspicious securities transactions.
The dispute arose after BRH Wealth Kreators, a CDSL depository participant, was accused of misusing securities belonging to thousands of clients. Daksha Bhavsar had opened a demat account with BRH in 2018 and executed a Power of Attorney in its favour.
Shares Transferred and Pledged
According to court records, during July and August 2019, BRH allegedly transferred shares from Bhavsar’s demat account to its own trading and clearing accounts without her specific authorisation. The securities were later pledged as collateral to obtain bank loans.
After BRH defaulted on its repayment obligations, the bank sold the pledged shares, causing substantial financial losses to the investor. The matter was referred to arbitration, where a three-member tribunal found that CDSL had failed to effectively supervise its depository participant and awarded compensation to Bhavsar.
Court Rejects CDSL’s Defence
CDSL argued that its role was limited to maintaining electronic records and acting on valid instructions. It also submitted that once the shares were transferred into BRH’s account, it could not be held responsible for later transactions, and that the investor had received SMS alerts but did not object in time.
The High Court rejected these arguments, holding that SEBI’s regulatory framework requires depositories to maintain an effective early warning mechanism for suspicious movement of client securities. The court said the sudden transfer of a large number of shares from an otherwise dormant account, followed by pledging, was the type of activity that should have triggered alerts. It clarified that CDSL may separately recover the amount from BRH through appropriate legal proceedings, while directing that no coercive recovery steps be taken against CDSL for six weeks.
