Dabba trading is a rampant proxy market, also called bucket shop in international parlance.
In a dabba trade, unlike how you open an account with a brokerage firm, you go meet a shady operator who typically works out of crowded business areas.
In a real trade, when you place an order, it is sent to the exchange where it gets executed in case there is a counterparty to your trade. In a dabba trade, the operator makes a note of your trade in a book/register and takes the money as cash from you for the trade, this order will not go to the exchange at all and the operator being the counterparty to the trade.
So what this means is that if you make money the operator loses, and vice versa. All these transactions are handled by cash (black money). The dabba operators play is that if he has 100 clients, most lose and some win, so in net he still ends up winning. Other than the fact that it is illegal to trade on anywhere outside the exchange, even if you decide to there is a huge counterparty risk that you take. If one or two of the dabba operators client have a big winning trade, especially more because of the extreme leverages that are given (much more than what was lost by the rest), the operator is forced to shut shop and they usually dissapear with whatever money they have.
Most forex/CFD platforms that are available in India are also glorified dabba shops. They give you very fancy trading platforms, ask you to transfer money abroad to trade on whichever exchange/contract around the world that you want and with 500 to 1000 times leverage. They work exactly like a dabba trade operator, the orders are never sent to underlying exchange, they win if you lose.
Hope this helps,