The Supreme Court has ruled that Edelweiss Custodial Services Limited cannot be made liable for ₹900 crore in client securities lost after stockbroker Anugrah Stock & Broking defaulted on its obligations. According to reports from Stock Market News, the top court held that Professional Clearing Member (PCM) Edelweiss Custodial Services cannot be forced to pay back or restore client securities worth over ₹900 crore. The ruling came in Edelweiss Custodial Services Limited v. NSE Clearing Ltd. decided on 2 September 2026. Overturning lower tribunal orders, the Supreme Court ruled that PCMs operated without direct client-level visibility under earlier regulatory rules and therefore cannot be held financially liable for defaults committed by independent stockbrokers.
The dispute began when stockbroker Anugrah Stock & Broking lured retail investors into a fixed-return scheme, taking their shares as collateral and pledging them in bulk to its PCM, Edelweiss Custodial Services. As reported by Stock Market News, this was done to fund its F&O activities. When Anugrah suffered losses in early 2020 and defaulted on its financial obligations, Edelweiss sold the pledged shares in the open market to settle the broker's dues with the stock exchange. The retail investors then complained to authorities including Sebi, NSE Clearing Ltd. (NCL), the Economic Offences Wing and the Securities Appellate Tribunal. In 2021, an NCL committee asked Edelweiss to refund over ₹900 crore worth of shares, while in 2023, even the SAT ordered Edelweiss to pay, holding that Edelweiss had failed to exercise due diligence.
The judgment mentioned that the clearing member had liquidated the shares before 30 June 2020. According to Stock Market News, a Sebi circular dated 25 February 2020 stated that all stockbrokers accept securities as collateral only via a direct 'margin pledge' created within the depository system starting 1 June 2020. The circular explicitly instructed trading members and clearing members to close all existing demat accounts tagged as 'client margin or collateral' by 30 June 2020. The 30 June 2020 deadline is crucial because, before that date, clearing members had no way of knowing who actually owned the underlying shares. Stockbrokers used to collect shares from all their clients and pool them into one account labelled 'client margin', making it impossible for clearing members to identify the underlying retail owners.
The judgment stated that the clearing member did not violate any statutory duties, as it had no direct contract with the retail clients and no mechanism to check the credit or debit balances of individual clients. As reported by Stock Market News, the court mentioned that retail clients willingly signed agreements and affidavits to join an unauthorized Ponzi scheme. The court observed that investors cannot claim innocence while willingly participating in F&O markets, noting that the broker's illegal advisory schemes and willingness of investors to seek high-risk returns ultimately led to the loss of their securities. The judgment noted that while the respondents repeatedly emphasised that 'innocent investors' had lost their life savings, it found little merit in the claim. The court stated that the affidavits of undertaking, handing over the shares to the trading member for an assured return far higher than that would be obtained from normal investments sounded the death knell for their securities in highly volatile and inherently fragile market conditions in the extremely speculative segment of F&O.
