Husband Held Liable for Wife’s Stock Market Debt In Landmark Supreme Court Ruling

In a historic ruling, the Supreme Court (SC) ruled, in the case AC Choksi Share Broker vs. Jatin Pratap Desai, that a husband can be held jointly and severally liable for his wife's stock market debts on the basis of an oral contract. 

The Court stated that the arbitral tribunal had jurisdiction over the husband under Bye-law 248 (a) of Bombay Stock Exchange (BSE) Byelaws,1957. According to the legal website Bar and Bench, the husband contested the charge brought against him.

The tribunal ruled that the husband could be liable for the debit balance owed by the wife on the oral contract that they had set out in order to share responsibility for whatever commissions could accrue from transactions made through the wife's account. The stockbroker sought to recover the debit balance from the wife's trading account.

Though the man and wife had separate accounts with the stockbroker, they agreed to jointly operate them as a common account. After transferring a large amount of money from the husband's account to cover the wife's losses, the husband's debit balance grew tremendously following the crash. The stockbroker took the matter to arbitration to recover the debit on both parties.

The husband raised an appeal against arbitration, arguing it was wrongly preferred against him. However, the arbitral tribunal ruled the stock broker would still win and that both the husband and the wife were liable jointly. The Supreme Court, siding with the arbitrators, dismissed the husband's contention and confirmed the jurisdiction of the tribunal. The husband must repay Rs 1,18,48,069 with nine per cent annual interest. 

While ordinarily, a spouse is not automatically liable for debts owed by the other, in cases where an agreement is clear to manage, or share financial activities, such as trading, the court can hold both spouses liable.