In a case that has sent shockwaves through the Indian stock market community, the Bombay High Court has delivered a landmark judgment favoring an individual trader over a major brokerage firm. The court ruled that a trader is entitled to keep a staggering ₹1.75 crore profit earned in just 20 minutes, even though the trades were made possible by a massive technical glitch in the broker's system.
The Midnight Miracle: From ₹3,100 to ₹40 Crore Margin
The incident dates back to July 26, 2022. Gajanan Rajguru, a retail trader using Kotak Securities, discovered an anomaly in his trading account. Despite having an actual balance of only ₹3,175, a technical glitch in the Kotak Securities system erroneously reflected a trading margin of approximately ₹40 crore.
Seizing the opportunity, Rajguru executed high-volume Futures and Options (F&O) trades worth nearly ₹94.81 crore. Within a narrow window of 20 minutes—before the broker could identify and fix the glitch—the trades turned in his favor, netting a net profit of ₹1.75 crore.
The Legal Battle: "Unjust Enrichment" vs. "Trading Skill"
Once the error was detected, Kotak Securities reversed the profit entry and sought to recover the money. The broker argued that the profit constituted "unjust enrichment," claiming the trader had exploited a system error to trade with money that wasn't his.
The matter first went to an Arbitral Tribunal, which ruled in favor of the trader. Kotak Securities then challenged this in the Bombay High Court.
Why the Bombay High Court Sided with the Trader
Justice Maneesh Pitale (or Justice Marne, depending on specific court filings) dismissed the broker's petition. The court’s reasoning provides a fascinating insight into how digital trading laws are evolving in India:
Margin is an Opportunity, Not a Guarantee: The court observed that while the glitch provided the margin (the ability to trade), it did not automatically generate the profit.
Market Risk was Borne by the Trader: The trader had to use his own judgment and skill to pick the right contracts. Had the market moved in the opposite direction, the trader would have faced massive losses.
Broker’s Own Systems Validated the Trade: The court noted that Kotak Securities’ system issued contract notes, deducted levies, and even charged interest on the used margin. By doing so, the broker technically "validated" the trades at the time of execution.
No Direct Theft: Since the money wasn't directly credited to his bank account but was used as a lever for market-linked activity, it didn't fall under the traditional definition of "unjust enrichment."
