CONTENTS

 

 

FORWARD CONTRACT (REGULATION) ACT, 1952.

(Act No. 74 of 1952)

CHAPTER  I

Preliminary

1.      Short title, extent and commencement.

2.   Definition

CHAPTER II

Forward Markets Commission

3.   Establishment and constitution of the Forward Markets Commission.

4.   Functions of the Commission.

4-A   Powers of the Commission.

 

CHAPTER III

Recognised Associations

5.   Applications for recognition of association.

6.      Grant of recognition to association.

7.     Withdrawal of recognition.

8.      Power of Central Government to call for periodical returns or direct inquiries to be made.

9.   Furnishing of annual reports to the Central Government by recognised association.

9-A   Power of recognised associations to make rules respecting grouping of members, restricting voting rights, etc  in special cases.

10      Power of Central Government to direct rules to be made or to make rules.

11      Power of recognised association to make bye-laws.

12      Power of Central Government to make, or amend bye-laws of recognised associations.

12-A   Application of amendment of bye-laws to existing forward contract.

12-B  Power of Commission to suspend member of recognised association or to prohibit him from trading

13      Power of Central Government to suspend governing body of recognised association.

14      Power to suspend business of recognised associations.

 

 

 

CHAPTER   III-A

Registered Associations

14-A     Certificate of registration to be obtained by all associations.

14-B     Grant or refusal of certificate of  registration.

14-C  Application of Sections 8 and 12-B to registered associations.

 

CHAPTER  IV

Forward contracts & Options in Goods

15.     Forward contracts in notified goods illegal or void in certain circumstances.

16   Consequences of notification under Sec. 15.

17.     Power to prohibit forward contracts in certain cases.

18      Special provisions respecting certain kinds of forward contract.

19   Prohibition of options in goods.

 

CHAPTER V

Penalties and Procedures

20      Penalty for contravention of certain provisions of Chapter IV.

21      Penalty for owning or keeping place used for entering into forward contracts in goods.

21A   Power of Court to order forfeiture of property.

22      Offences by companies.

22A.  Power to search and seize books of account or other documents.

23.     Certain offences to be cognizable.

24   Jurisdiction to try offence under this Act.

 

CHAPTER VI

Miscellaneous

25.     Advisory Committee.

26.     Power to delegate.

27.     Power to exempt.

27 A      Protection of action taken in good faith.

28.     Power to make rules.

29      Repeal and savings.

 

FORWARD CONTRACTS  (REGULATION)  ACT, 1952.

(Act No. 74 of 1952)

 

            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.

 

CHAPTER  I

Preliminary

1.   Short title, extent and commencement.

(1)  This Act may be called the Forward Contracts (Regulation) Act, 1952.

 

(2)   It extends to the whole of India  [1] [* * *].

 

(3)            Chapter I shall come into force at once, and the remaining provisions shall come into force on such date or dates as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act, for different States or areas, and for different goods or classes of goods.

 

2.            Definition    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 sec. 3;

(c)      “forward contract” means a contract for the delivery of goods [2][* * *]  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 (XVIII OF 1944);

 

(f)      “non-transferable specific delivery contract” means a specific delivery contract, the rights or liabilities under which or under any delivery order, railway receipt, bill of lading, warehouse receipt or any other documents 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 teji-mandi, 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 and 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;

[3] [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 bank) 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 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 (110 of 1949), a co-operative bank as defined in the Reserve Bank of India Act, 1934 (2 of 1934), the State Bank of India and any of its subsidiaries and any corresponding new bank constituted under Sec. 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 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 either case, only with reference to the quantity of goods or to the price therefor as stipulated in the contract];

 [4](j) “recognised association”  means an association to which recognition for the time being has been granted by the Central Government under Sec. 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 Sec. 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, scripts, 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 be 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 specific delivery contract which is not a non-transferable specific delivery contract  [5][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.

 

CHAPTER II

 

Forward Markets Commission

3.  Establishment and 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,  [6][but not exceeding four] members appointed by the Central Government [7][one of them being nominated by the Central Government to be the Chairman thereof; and the Chairman and the other member or members shall be either whole-time or part- time as the Central  Government may direct]:

 

 [8][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, any such 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 re-appointment.

 

(5)  The other terms and conditions of service of members of the Commission shall be such as may be prescribed.

 

4.            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;

 [9](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 of   [10][any recognised 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.

 

¹ [4 A   Powers of the Commission. -

(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 (5 of 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 document;

(c)  receiving evidence on affidavits;

(d)  requisitioning any public record or copy thereof from any office;

(e)   any other matters which may be prescribed.

 

(2)        The Commission shall have the power to require any person, subject to any privilege which may be 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 be deemed to be legally bound to furnish such information within the meaning of Sec. 176 of the Indian Penal code, 1860 (45 of 1860).

 

(3)        The Commission shall be deemed to be a civil court and when any offence described in Sections. 175, 178, 179, 180 or Sec. 228 of the Indian Penal Code, 1860 (45 of 1860), is committed in the view or presence of the Commission, the Commission may, after recording the facts constituting the offence and the statement of the accused as provided for in the Code of Criminal Procedure, 1898 (5 of 1898)[11]  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 had been forwarded to him under Section 482 of the said Code[12].

 

(4)        Any proceeding before the Commission shall be deemed to be a judicial proceeding within the meaning of Sections. 193 and 228 of the Indian Penal Code, 1860 (45 of 1860).

Explanation.-  For the purpose of enforcing the attendance of witnesses, the local limits of the Commission’s jurisdiction shall be the limits of the territory of India.]

 

CHAPTER III

 

Recognised Associations

 

5.            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 be 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 class of members, the qualifications of members, and the exclusion, suspension, expulsion and re-admission 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.

 

6    Grant of recognition to association.-

(1)  If the Central Government, after making such enquiry as may be necessary in this behalf and after obtaining such further information, if any, as it may require, is satisfied that it would be in the interest of the trade and also in the public interest to grant recognition to the association which has made an application under Sec. 5, it may grant recognition in such form and subject to such conditions as may be prescribed or specified, and shall specify in such recognition the goods or classes of goods with respect to which forward contracts may be 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 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 of 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 be published in the Gazette of India and also in the 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.

 

7.  Withdrawal of recognition. -- If the Central Government is of opinion that any recognition granted to an association under the provisions of this Act should, in the interest of the trade or in the public interest, be withdrawn, the Central  Government may, after giving a reasonable opportunity to the association to be heard in the matter, withdraw, by notification in the official Gazette, the recognition granted to the said association:

Provided that no such withdrawal shall effect the validity of any contract entered into or made before the date of the notification, and the Central Government may make such provision as it deems fit in the notification of withdrawal or in any subsequent notification similarly published for the due performance of any contract outstanding on that date.

 

 

 

 

 

8.   Power of Central Government to call for periodical returns or direct inquiries to be made. --

[13][(1)            Every recognised association and every member thereof shall furnish to the Central Government such periodical returns relating to its affairs of its members, or his affairs, as the case may be, as may be prescribed.

 

(2)            Without prejudice to the provisions contained in sub-section (1) where the Central Government considers it expedient so to do, it may by order in writing, ---

(a)  call upon a recognised association to [14][or a member thereof]  furnish in writing such information or explanation relating to its affairs or the affairs of any of its members [15][or his affairs, as the case may be] as the Central Government may require, or

(b)  appoint one or more persons to make an enquiry in relation to the affairs of such association or the affairs or any of its members and submit a report of the result of such inquiry to the Central Government within such time as may be specified in the order or, in the alternative, direct the inquiry to be made, and the report to be submitted, by the governing body of such association acting jointly with one or more representative of the Central Government; and

(c)   direct the Commission to inspect the accounts and other documents of any recognised association or of any of its members and submit its report thereon to the Central Government.

 

(3)  Where an inquiry in relation to the affairs of a recognised association or the affairs of any of its members has been undertaken under sub-section (2) -

(a)  every director, manager, secretary or other officer of such association;

(b)  every member of such association;

(c)   if the member of the association is a firm, every partner, manager, secretary or other officer of the firm; and

(d)   every other person or body of persons who has had dealings in the course of business with any of the persons mentioned in clause (a), (b) and  (c),

shall be bound to produce before the authority making the inquiry, all such books, accounts, correspondence and other documents in 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.

 

[16][(4)            Every recognised association and every member thereof shall maintain such books of accounts and other documents as the Commission may specify and the books of account and other documents so specified shall be preserved for a period not exceeding three years as the Commission may specify and shall be subject to inspection at all reasonable times by the Commission.]

 

9.            Furnishing of annual reports to the Central Government by recognised association. --

[17] [(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.

 

[18][9 A            Power of recognised association to make rules respecting grouping of members, restricting voting rights, etc  in special cases. --

 (1) A recognised association may make rules or amend any rules made by it to provide for all or any of the following matters, namely:

[19][(a)  The admission of a firm or a Hindu undivided family as a member:]

[20][(b)  the grouping of the members of the association according to functional or local interests, reservation  of seats on its governing body for members belonging to each group and appointment of members to such reserved seats---

(i)            by election exclusively by the members belonging to the group concerned,

(ii)             by election by all the members of the association,

(iii)  by election by all the members of the association from among person chosen by the members belonging to the group concerned for the purposes;

[21][(c)]  the restriction of voting rights in respect of any matter placed before the association at any meeting to those members only who, by reason of their functional or local interests, are actually interested in such matter;

[22][(d)]      the regulation of voting rights in respect of any matter placed before the association at any meeting so that each member may, be entitled to have one vote only, irrespective of his share of the paid up equity capital of the association;]

[23][ (e)]      the restriction on the rights of a member to appoint another person as his proxy to attend and vote at a meeting of the association;

[24][(f)]      the retirement at every annual general meeting of all directors or such number or proportion of their total number as may be specified in the rules;

[25][(g)]      such incidental, consequential and supplementary matters as may be necessary to give effect to any of the matters specified in [26][Clauses (a) to (f)].

 

(2)  No rules of a recognised association made or amended in relation to any matter referred to in [27][Clause (a) to (g) of] sub-section (1) shall have effect until they have been approved by the Central Government and published by that Government in the official Gazette and, in approving the rules so made or amended, the Central Government may make such modification therein as it thinks fit, and on such publication, the rules approved by the Central Government shall be deemed to have been validly made, notwithstanding anything to the contrary contained in the Companies Act, 1956.

 

(3)  Where, before the commencement of the Forward Contracts (Regulation) Act, 1952, any rules have been made or amended in relation to any matter referred to in [28][clauses (b) to (e) and (g) of] sub-section (1), the rules so made or amended shall not be deemed to be invalid or ever to have been invalid merely by reason of the fact that the rules so made or amended are repugnant to any of the provisions of the Companies Act, 1956.]

 

 

10   Power of Central Government to direct rules