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FORWARD CONTRACTS (REGULATION) ACT, 1952
74 of 1952
26th December, 1952
STATEMENTS OF OBJECTS AND REASONS "Forward trading, which normally plays a useful part in tempering price fluctuations, tends in certain situations to exaggerate such fluctuation to the detriment of the interests of producers as well as consumers.
An Act to provide for the regulation of certain matters relating to forward contracts, the prohibition of options in goods and for matters connected therewith. BE it enacted by Parliament as follows:-
SECTION 01: SHORT TITLE, EXTENT AND COMMENCEMENT
(1) This Act may he called The Forward Contracts (Regulation) Act, 1952.
(2) It extends2to the whole of India,3[* * * * * *]
(3) Chapter 1 shall come into force at once, and the remaining provisions shall come into force on such date or dales as the Central Government may by notification in the Official Gazette, appoint.4and different dales may he appointed for different provisions of this Act. for different Stales or areas and for different goods or classes of goods.
SECTION 02: DEFINITIONS
- In this Act, unless the context otherwise requires,-
(a) "association" means any body of individuals, whether incorporated or not, constituted for the purpose of regulating and controlling the business of the sale or purchase of any goods,
(b)"Commission" means the Forward Markets Commission established under section 3-:
(c)"forward contract" means a contract for the delivery of goods 5[* * * *] and which is not a ready delivery contract
(d) "goods" means every kind of movable property other than actionable claims, money and securities;
(e) "Government security" means a Government security as defined in the Public Debt Act, 1944-;
(f) "non-transferable specific delivery contract" means a specific delivery) contract, the right-s or liabilities under which or under any delivery order, railway receipt, hill of lading, warehouse receipt or any oilier document of title relating thereto are not transferable;
(g) "option in goods" means an agreement, by whatever name called, for the purchase or sale of a right to buy or sell, or a right to buy and sell, goods in future, and includes a teji, a mandi, a tejimandi, a galli, a put, a call or a put and call in goods;
(h) "prescribed" means prescribed by rules made under this Act;
(i) "ready (delivery contract" means a contract which provides for the delivery of goods land the payment of a price therefor, either immediately or within such period not exceeding eleven days after the date of the contract and subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in respect of any goods, the period under such contract not being capable of extension by the mutual consent of the parties thereto or otherwise;6 [Provided that where any such contract is performed either wholly or in part,-
(1) by tendering of the documents 'of title to the goods covered by the contract by any party thereto (not being a commission agent or a hank) who has acquired ownership of the said documents by purchase, exchange or otherwise, to any other person (including a commission agent but not including a bank); or
(2) by the realisation of any sum of money, being the difference between the contract rate and the settlement rate or clearing rate or the rate of any offsetting contract; or
(3) by any other means whatsoever, and as a result of which the actual tendering of the goods covered by the contract or the payment of the full price therefor is dispensed with, then, such contract shall not be deemed to be a ready delivery contract.
Explanation.- For the purpose of this clause,- (i) "bank" includes any banking company as defined in the Banking Regulation Act, 1949, a co-operative bank as defined in the Reserve Bank of India Act, 1934, the Slate Bank ol' India and any of its subsidiaries and any corresponding new bank reconstituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970-; (ii) "commission agent" means a person who, in the ordinary course of business, makes contract for the sale or purchase of goods for others for a remuneration (whether known as commission or otherwise) which is determined in the contract itself or determinable from the terms of the contract, in cither case. only with reference to the quantity of goods or to the price therefor as stipulated in the contract
c[(J) "recognised association" means an association to which recognition for the lime being has been granted by the Central Government under Section 6-in respect of goods or classes of goods specified in such recognition;
(jj) "registered association" means an association to which for the time being a certificate of registration has been granted by the commission under section 14-B-.]
(k) "rules'' with reference to the rules relating in general to the constitution and management of an association, includes in the case of an incorporated association its memorandum and articles of association;
(l) "securities" includes shares, scrips, stocks, bonds, debentures, debenture-stocks or other marketable securities of a like nature in or of any incorporated company or other body corporate and also Government securities;
(m) "specific delivery contract" means a forward contract which provides for the actual delivery of specific qualities or types of goods during a specified future period at a price fixed thereby or to he fixed in the manner thereby agreed and in which the names of both the buyer and the seller are mentioned;
(n) "transferable specific delivery contract" means a specific delivery contract which is not a nontransferable specific delivery contract, and which is subject to such conditions relating to its transferability as the Central Government may, by notification in the Official Gazette specify in this behalf
(i) "Forward contracts are of three kinds futures contacts transferable specific delivery contracts and non-transferable specific delivery contracts. It will he seen from clause 2 (c) read with clause 18 (now Sections 2 (c) and18-that the scheme of regulation embodied ill this Bill applies to all the three types of contracts Transferable specific delivery contracts are included within the purview of this Bill. because in many trades such types of contracts can also he used as futures contracts for all practical purposes, (lovernmeiil will have the power, however, under Clause 27 (Section 27-) to exempt transferable specific delivery contracts, when their inclusion is likely to cause unnecessary hardship or inconvenience to the trade concerned. In regard to non-transferable specific delivery contracts. The regulatory provisions of the Bill will he made applicable only in such areas and only in respect of such goods or class of goods as are notified by the Central Government. Sub-clause (2) of cl. 18 (now Section 18(3)-, however, empowers the Central Government to extend the application of the regulatory provisions to non-transferable specific delivery contracts in any area to which they do not apply."-
S.O.K. (ii) Clause 3 (b) (Sections,2-cl (n).- This clause enables the Central Government to impose conditions regarding the transferability of specific delivery contracts. e of the objects of conferring this power on the Central Government is to limit the number of transfers in the case of such contracts.- S.O.R.
SECTION 03: ESTABLISHMENT
9and constitution of the Forward Markets Commission
(1) The Central Government may, by notification in the Official Gazette establish a Commission to be called the Forward Markets Commission for the purpose of exercising such functions and discharging such duties as may be assigned to the Commission by or under this Act.
(2) The Commission shall consist of not less than two,10[but not exceeding four] members appointed by the Central Government11[one of them being nominated by the Central Government to be the Chairman thereof; and the Chairman and the oilier member or members shall be either whole-time or part-time as the Central Government may direct]12[Provided that the members to be so appointed shall be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to commerce or commodity markets, or in administration or who have special knowledge or practical experience in any matter, which renders them suitable for appointment on the Commission.
(3) No person shall be qualified for appointment as, or for continuing to be, a member of the Commission if he has, directly or indirectly, financial or other interest as is likely to affect prejudicially his functions as a member of the Commission and every member shall, whenever required by the Central Government so to do, furnish to it such information as it may require for the purpose of securing compliance with the provisions of this sub-section.
(4) No member of the Commission shall hold office for a period of more than three years from the date of his appointment, and a member relinquishing his office on the expiry of his term shall be eligible for reappointment.
(5) The other terms and conditions of service of members of the Commission shall he such as may be prescribed.
SECTION 04: FUNCTIONS OF THE COMMISSION
The functions of the Commission shall be-
(a) to advise the Central Government in respect of the recognition of, or the withdrawal of recognition from, any association or in respect of any other matter arising out of the administration of this Act:
13[(b)to keep forward markets under observation and to take such action in relation to them as it may consider necessary, in exercise of the powers assigned to it by or under this Act;]
(c) to collect and whenever the Commission thinks it necessary publish information regarding the trading conditions in respect of goods to which any of the provisions of this Act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government periodical reports on the operation of this Act and on the working of forward markets relating to such goods;
(d) to make recommendations generally with a view to improving the organisation and working of forward markets;
(e) to undertake the inspection of the accounts and other documents of14[any recognized association or registered association or any member of such association] whenever it considers it necessary; and
(f) to perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed.
Clause (v).- "the Commission will be enabled to undertake the inspection of accounts of a recognized association whenever it thinks fit. without having to wait for a direction from the Central government ill this behalf." -S.C.R.
SECTION 04A: POWERS OF THE COMMISSION
15[ (1) The Commission shall in the performance of its functions, have all the powers of a Civil Court under the Code of Civil Procedure, 1908-. while trying a suit in respect of the following matters, namely :-
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of any documents;
(c) receiving evidence on affidavits;
(d) requisitioning any public record or copy thereof from any office;
(e) any in alter which may be prescribed
(2) The Commission shall have the power to require any person, subject to any privilege which may he claimed by that person under any law for the time being in force. to furnish information on such points or matters as, in the opinion of the Commission, may be useful for, or relevant to, any matter under the consideration of the Commission and any person so required shall he deemed to be legally bound to furnish such information within the meaning of section 176 of the Indian Penal Code.-
(3) The Commission shall be deemed to he a Civil Court and when any offence described in section 175-,section 178-,section 179-,section 180-orsection 228 of the Indian Pencil Code-is committed in the view or presence of the Commission, the Commission may. alter recording the contacts constituting (lie offence and the statement of the accused as provided for in the Code of Criminal Procedure, 1898-, forward the case to a Magistrate having jurisdiction to try the same and the Magistrate to whom any such case is forwarded shall proceed to hear the complaint against the accused as if the case has been forwarded to him under section 482-of the said Code.
(4) Any proceeding before the Commission shall be deemed to be a judicial proceeding within the meaning of sections 193-and228 of the Indian Penal Code-.
SECTION 05: APPLICATION FOR RECOGNITION OF ASSOCIATIONS
(1) Any association concerned with the regulation and control of forward contracts which is desirous of being recognised for the purposes of this Act may make an application in the prescribed manner to the Central Government.
(2) Every application made under sub-section (1) shall contain such particulars as may be prescribed and shall he accompanied by a copy of the bye-laws for the regulation and control of forward contracts and also a copy of the rules relating in general to the constitution of the association, and in particular, to-
(a) the governing body of such association, its constitution and powers of management and the manner in which its business is to be transacted:
(b) the powers and duties of the office-bearers of the association;
(c) the admission into the association of various classes of members, the qualifications of members, and the exclusion, suspension, expulsion and readmission of members therefrom or therein to;
(d) the procedure for registration of partnerships as members of the association and the nomination and appointment of authorised representatives and clerks.
SECTION 06: GRANT OF RECOGNITION ASSOCIATION
(1) If the Central Government after making such inquiry as may he necessary in this behalf and after obtaining such further information if any as it may require, is satisfied that it would he in the interest of die trade and also in the public interest to grant recognition to the association which has made an application under Section 5-, it may grant recognition to the association in such term and subject to such conditions as may he prescribed or specified, and shall specify in such recognition the goods or classes of goods with respect to which forward contracts may he entered into between members of such association or through or with any such member.
(2) Before granting recognition under sub-section (1), the Central Government may, by order direct,-
(a)that there shall be no limitation on the number of members of the association or that there shall be such limitation on the number of members as may be specified:
(b)that the association shall provide for the appointment by the Central Government of a person, whether a member of the association or not, as its representative on, and of not more than three persons representing interests not directly represented through membership of the association as member or members of, the governing body (it such association, and may require the association to incorporate in its rules any such direction and the conditions, if any. accompanying it.
(3) No rules of a recognised association shall be amended except with the approval of the Central Government.
(4) Every grant of recognition" under this section shall he published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognised association is situated and such recognition shall have effect as from the date of its publication in the Gazette of India.
SECTION 07: WITHDRAWAL OF RECOGNITION
If the Central Government is of opinion that any recognition grained to an association under the provisions of this Act should in the interest of the trade or in the public interest, he withdrawn, the Central Government may. alter giving a reasonable opportunity to die association to be heard in the matter withdraw, by notification in die Official Gazette, the recognition granted to the .said association : Provided that no such withdrawal shall affect the validity of any contract entered into or made before the date of the notification. and die Central Government may make such provision as it deems lit in de notification of withdrawal or in any subsequent notification similarly published for die due performance of any contracts outstanding on dial date.
SECTION 08: POWER OF CENTRAL GOVERNMENT TO VAIL FOR PERIODICAL RETURNS OR DIRECT INQUIRIES TO HE MADE
(1) Every recognised association and every member thereof shall furnish to die Central Government such periodical returns relating to its affairs, or the affairs of its members, as die case may be as may be prescribed.
(2) Without prejudice to the provisions contained in sub-section (1), where die Central Government considers it expedient so to do, it may by order in writing,-
(a) call upon a recognised association or a member thereof to furnish in writing such miormalion or explanation relating to its affairs or die affairs of any of its members for his affairs, as die case may be as the Central Government may require, or
(b) appoint one or more persons to make an inquiry in relation to die affairs of such association or die affairs of any of its members and submit a report of die result of such inquiry to die Central Government within such time as may he specified in die order or. in die alternative, direct die inquiry to he made and die report to he submitted, by die governing body of such association acting jointly with one or more representatives of the Central Government.
(c) direct die Commission to inspect the accounts and older documents of any recognized association or of any of its members and submit its report thereon to die Central Government
(3) Where an inquiry in relation to die affairs of a recognised association or die affairs of any of its members has been undertaken under sub-section (2)-
(a) every director, manager, secretary or odder officer of such association,
(b) every member of such association,
(c) if die member of die association is a firm, every partner, manager, secretary or odier officer of die firm, and
(d) every other person or body of persons who has dealings in the course of business with any of the persons mentioned in clauses (a), (b) and (c), shall be bound to produce before the authority making the inquiry, all, such hooks, accounts, correspondence and other documents his custody or power relating to, or having a bearing on the subject-matter of, such inquiry and also to furnish, the authority with any such statement or information relating thereto as may be required of him within such time as may be specified.
(4)Every recognised association and every member thereof shall maintain such books of account and other documents as the Commission may specify and the books of account and oilier documents so specified shall be preserved for such period (not exceeding three years as the Commission may specify and, shall be subject to inspection at all reasonable times by the Commission.)
SECTION 09: FURNISHING OF ANNUAL REPORTE TO THE CENTRAL GOVERNMENT BY RECOGNISED ASSOCIATIONS
(1)Every recognised association shall furnish to the Commission three copies of its annual report.]
(2) Such annual report shall contain such particulars as may be prescribed,
SECTION 9A: POWER OF RECOGNISED ASSOCIATION TO MAKE RULES RESPECTING GROUPING OF MEMBERS, RESTRICTING VOTING RIGHTS, ETC., IN SPECIAL CASES
SECTION 10: POWER OF CENTRAL GOVERNMENT TO DIRECT RULES TO BE MADE OR TO MAKE RULES
(1) Whenever the Central Government considers it expedient so to do, it may, by order in writing, direct any recognised association to make any rules or to amend any rules made by the recognized association within such period as it may specify in this behalf
(2) If any recognised association, against whom an order is issued by .the Central Government under sub-section (1). -fails or neglects to comply with such order within the specified period, the Central Government may make the rules or amend the rules made by the recognised association, as the case may he, either in the form specified in the order or with such modification thereof as the Central Government may think fit.
21(3)Where in pursuance of sub-section (2), any rules have been made or amended. the rules so made or amended shall be published in the Gazette of India, and shall, thereupon, have effect notwithstanding anything to .the contrary contained in the Companies Act. or any oilier law for the time being in force as if they had been made or amended by the recognised association concerned.
SECTION 11: POWER OF RECOGNISED ASSOCIATION TO MAKE BYE-LAWS
Amending Act 62 of I960. Clauses II and 15 - The amendments will enable a recognised association to take certain transactions entered into in contravention of its bye-laws illegal, such as, kerb-trading.- S.O.R. (Gaz. of India, 18-11-1960. Pi. II, Section 2. Ext" page 727.
SECTION 12: POWER OF CENTRAL (GOVERNMENT TO MAKEOR AMEND BYE-LAWS OF RECOGNISED ASSOCIATIONS
(1) The Central Government may, either on a request in writing received by it in this behalf from the governing body of a recognised association, or it in its opinion it is expedient so to do, make bye-laws for all or any of the matters specified in section 11-or amend any bye-laws made by such association under that section.
(2) Where,, in pursuance of this section, any bye-laws have been made or amended, the bye-laws so made or amended shall be published in the Gazette of India '[and shall there upeft have effect)
(3) Notwithstanding anything contained in this section, where the governing body of a recognized association objects to any bye-laws made or amended under this section by the Central Government on its own motion, it may, within six months of the publication thereof under subsection (2), apply to the Central Government for a revision thereof. and the Central Government may, after giving a reasonable opportunity to the governing body of the association to be heard ' in the matter, revise the bye laws so made or amended, and where any bye-laws so 'made or amended are revised as a result of any action taken under this sub-section the bye-laws so revised shall be published and shall become effective as provided in ' sub-section (2).
(4) The making or the amendment or revision of any bye-laws under this section shall in air cases be25[subject to such conditions as to previous publication, as may be prescribed.] Provided that the Central Government may, in the interest of the trade or in the public interest, by order in writing, dispense with the condition of previous publication
SECTION 12A: APPLICATION OF AMENDMENT OF BYE-LAWS TO EXISTING FORWARD CONTRACTS
Any amendment of a bye-law under Section II other than amendment made in pursuance of clause (a) or clause (aa) of sub-section (3) of that section or under section 12 also apply to all forward contracts entered into before the date of its approval by the Central Government or before the date of its publication in the Gazette of India, as the case may be, and remaining to be performed on or 'after the said date.
SECTION 12B: POWER OF COMMISSION TO SUSPEND MEMBER OF RECOGNISED ASSOCIATION OR TO PROHIBIT HIM FROM TRADING
(1) If, in the interest of .trade or in the public interest like- Commission considers it necessary to suspend a member from his membership of- any recognised association or to prohibit such member from enlerina into any forward contract for the sale or purchase in his own name or through another member of a recognised association of any goods or dais of goods, then, notwithstanding anything contained in any law for the time being in force or in die rules or bye-laws of a recognised association, the Commission may, after giving an opportunity of being heard, by order suspend his membership of any association or prohibit him from entering into any such contract.
(2) An order under sub-section (1) shall specify the period for which the suspension or prohibition is to have effect and such period may he extended from time to time but so as not to exceed three years in the aggregate.
(3) No order made under sub-section (1) in respect of any member of a recognised association shall affect the validity of any forward contract entered into or made by with or through such member on or before the date of such order and remaining to he performed on or alter the said dale: but the Commission may make such provision as it deems fit in such order or in any subsequent order for the closing out of any such forward contract
SECTION 13: POWER OF CENTRAL GOVERNMENT TO SUPERSEDE SOVERNING BODY OF RECOGNISEDASSOCIATION
(1) Without prejudice to any oilier powers vested in the Central Government under this Act. Where UK- Central Government is of opinion that the Governing body of any recognised association should he superseded, then, notwithstanding anything contained in this Act or in any other law for the lime being in force, the Central Government may, alter giving a reasonable opportunity to the governing body of the recognised association concerned to show cause why it should not be superseded, by notification in tile Official Gazette, declare the governing body of such association to be superseded for such period not exceeding six months as may he specified in the notification, and may appoint any person or persons to exercise and perform, all the powers and duties of the governing body, and where more persons than one are appointed may appoint one of such persons to he UK- chairman and another of such persons to he the vice-chairman.
(2) On the publication of a notification in the Official Gazette under sub-section (1), the following consequences shall ensue, namely:__
(a) the members of the governing body which has been superseded shall, as from the date of the notification of super session cease to hold office as such members,
(b) the person or persons appointed under sub-section (1) may exercise and perform all the powers and duties of the governing body which has been superseded;
(c) all such property of the recognised association as the person or persons appointed under sub -section (1) may, by order in writing, specify in this behalf as being necessary for the purpose of enabling him or them to carry out the purposes of this Act. shall vest in such person or persons.
(3) Notwithstanding anything to the contrary contained in any law or the rules or bye-laws of the association whose governing body is superseded under sub-section of the person or persons appointed under that sub-section shall hold office for such period as may he specified in the notification published under that sub-section, and die Central Government may, from time to time, by like notification vary such period.
(4) On the determination of the period of office of any person or persons appointed under this section die recognised association shall forthwith reconstitute a governing body in accordance with its rules: Provided that until a governing body is so reconstituted, the person or persons appointed under sub-section. (1) shall, notwithstanding anything contained in sub-section (1), continue to exercise and perform their powers and duties.
(5) On the reconstitution of a governing body under sub-section (4), all the property of the recognised association which has vested in , or was in the possession of, the person or persons appointed under sub-section (1) shall vest or revest, as the case may be, in the governing body so reconstituted.
SECTION 14: POWER TO SUSPEND BUSINESS OF RECOGNISED ASSOCIATION
If in the interest of the trade or in the public interest the Central Government considers it expedient so to do, it may, by notification in the Official Gazette, direct a recognised association to suspend such of its business for such period not exceeding seven days and subject to such conditions as may be specified in the notification, and may, if, in the opinion of the Central Government, the interest of the trade or the public interest so requires, by like notification, extend the said period from time to time: Provided that where the period of suspension is likely to exceed one month, no notification extending the suspension beyond such period shall be issued, unless the governing body of the recognised association has been given an opportunity of being heard in the matter.
SECTION 14A: CERTIFICATE OF REGISTRATION TO BE OBTAINED BY ALL ASSOCIATIONS
(1) No association concerned with regulation and control of business relating to forward contracts shall, after the commencement of the Forward Contracts (Regulation) Amendment Act 1960 (hereinafter referred to as such commencement) carry on such business except under, and in accordance with, the conditions of a certificate of registration granted under this Act by the Commission.
(2) Every association referred to in sub-section (1) which is in existence at such commencement, before the expiry of six months from such commencement, and every association referred to in sub-section which is not in existence at such commencement, before commencing such business, shall make an application for a certificate of registration to the Commission in such form and containing such particulars as may be prescribed: Provided that the Commission may in its discretion extend from time to time the period of six months aforesaid up to one year in the aggregate.
(3) Nothing in this section shall be deemed.
(a) to prohibit an association in existence at such commencement from carrying on its business until the disposal of the application made by it under sub -section (2); or
(b) to require a recognised association in existence at such commencement to make an application under sub - section (2); and every such association shall, as soon as may he after such commencement, be granted free of cost by the Commission a certificate of registration.
SECTION 14B: GRANT OR REFUSAL OF CERTIFICATE OF REGISTRATION
- On receipt of an application under section 14-A-, the Commission, after making such inquiry as it considers necessary in this behalf, may by order in writing grant a certificate of registration or refuse to grant it: Provided that before refusing to grant such certificate, the association shall be given an opportunity of being heard in the matter.
SECTION 14C: APPLICATION OF SECTION II 12-B TO REGISTERED ASSOCIATION
The provisions of section 8-and12-B-shall apply in relation to a registered association as they apply in relation to a recognised association with the substitution of-
(i) references to the registered association, for references to the recognised association; and
(ii) the words 'two years' for the words 'three years' in sub-section (2) of section 12-B-.]
SECTION 15: FORWARD CONTRACTS IN NOTIFIED GOODS ILLEGAL OR VOID IN CERTAINCIRCUMSTANCES
(2) Any forward contract in goods entered into in pursuance of sub-section (1) which is in contravention of any of the bye-laws specified in this behalf under clause (a) of sub- section
(3) of section 11-shall be void- (i) as rights of any member of the recognized association who has entered into contract in contravention of any such bye-law, and also (ii) as respects the rights of any other person who has knowingly participated in the transaction entailing such contravention.
(3) Nothing in sub-section (2) shall affect the right of any person other than a member of the recognised association to enforce any such contract or to recover any sum under or in respect of such contract: Provided that such person had no knowledge that such transaction was in contravention of any of the bye-laws specified under clause (a) of sub-section (3) of section 11-.
(3A) Any forward contract in goods entered into in pursuance of sub-section (1), which at the date of the contract is in contravention of any of the bye-laws specified in this behalf under clause (aa) of sub-section (3) of section 11-shall be illegal.]
(4) No member of a recognised association shall, in respect of any goods specified in the notification under sub-section (1), enter into any contract on his own account with any person other than a member of the recognised association, unless he has secured the consent or authority of such person and discloses in the note, memorandum or agreement of sale or purchase that he has bought or sold the goods, as the case may be, on his own account : Provided that where the member has secured the consent or authority of such person otherwise than in writing he shall secure a written confirmation by such person of such consent or authority within three days from the date of such contract : Provided further that&nbs
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