The Supreme Court of India made an important ruling last week that has caught attention, especially for those with an interest in financial dealings.
In the case, the court decided that a husband can be held responsible for repaying his wife’s stock market debt, even when there was no written agreement, based purely on an oral contract.
This decision came after a long legal battle and raised some eyebrows over how financial matters between spouses are handled.
So, here's the story: In 1999, a husband-and-wife duo, Jatin and Heena Jatin Desai, opened stock trading accounts with stock brokers AC Chokshi. As the stock market took a downturn in 2001, Heena’s trading account suffered losses, which eventually ballooned to around ₹1.18 crore. Despite efforts by Jatin to offset some of the losses by moving credit from his account to hers, the debt kept growing.
Fast forward to when AC Chokshi tried to recover the money from the couple. They went to arbitration, but it wasn’t until the Bombay High Court stepped in that things took a turn.
The High Court decided that, since Jatin and Heena had separate accounts, it was not fair to hold the husband liable for the debt. This ruling was seen as “perverse and illegal” by the stockbroker.
However, AC Chokshi didn’t back down and moved the case to the Supreme Court, which now rules in favour of holding Jatin responsible. The court agreed that, even though the couple had separate accounts, their mutual agreement to jointly manage finances made Jatin liable for the debt.
It also pointed out that oral contracts between the couple about such financial dealings were valid.
In making its decision, the Supreme Court referred to a specific bylaw from the Bombay Stock Exchange (BSE) that allows for such agreements. It essentially opened the door for recognising informal verbal agreements between spouses, especially in matters involving joint financial dealings like stock trading.
Now, the bigger question arises: Could this ruling change the way financial agreements between married couples are interpreted in the future?
While spouses are not automatically liable for each other's debts, the ruling shows that agreements, even informal ones, can have a serious legal impact.
So, for anyone involved in shared financial activities, this ruling might just make them think twice about how they handle things, even if it's just a verbal understanding.
(By arrangement with Livemint.com)