An association which organises non-transferable specific delivery contracts without actual delivery is guilty of an offence under Section 20(1)(b) of the Forward Contracts (Regulation) Act, 1952.

Headnote:
FORWARD CONTRACTS (REGULATION) ACT, 1952 - SECTIONS 15, 18, 20, 21 - INTERPRETATION - OFFENCES UNDER - ASSOCIATION ORGANISING NON-TRANSFERABLE SPECIFIC DELIVERY CONTRACTS WITHOUT ACTUAL DELIVERY - PENALTY.
Fact of the Case:

The respondents, members of an unregistered association, were charged with various offences under the Forward Contracts (Regulation) Act, 1952. The Magistrate convicted them under Sections 21(b) and (c) of the Act, but acquitted them under Sections 20(1)(b) and (c). The Sessions Judge upheld the conviction under Sections 21(b) and (c) and altered the conviction under Section 20(1)(c) to Section 20(1)(b). The High Court acquitted all the respondents, holding that no offence was made out under any of the provisions of the Act.
Finding of the Court:

The Supreme Court held that the respondents were guilty of offences under Sections 21(b) and (c) of the Act. The Court found that the association was unregistered and that the contracts, although they appeared to be non-transferable specific delivery contracts, were not intended to be completed by delivery immediately or within a period of 11 days from the date of the contract. The Court also found that the association provided facilities for the performance of the contracts without actual delivery, which was prohibited by the proviso to Section 18(1) of the Act. The Court further held that the respondents were guilty of offences under Section 20(1)(b) of the Act, as they were members of an association which organised non-transferable specific delivery contracts without actual delivery.
Issues: Whether the respondents were guilty of offences under Sections 21(b) and (c) of the Forward Contracts (Regulation) Act, 1952. Whether the respondents were guilty of offences under Section 20(1)(b) of the Forward Contracts (Regulation) Act, 1952.
Ratio Decidendi: The Court held that the respondents were guilty of offences under Sections 21(b) and (c) of the Act because they were members of an unregistered association which provided facilities for the performance of non-transferable specific delivery contracts without actual delivery, which was prohibited by the proviso to Section 18(1) of the Act. The Court also held that the respondents were guilty of offences under Section 20(1)(b) of the Act because they were members of an association which organised non-transferable specific delivery contracts without actual delivery.
Final Decision: The Supreme Court set aside the acquittal of the respondents under Sections 21(b) and (c) of the Act and restored their conviction under those clauses as confirmed by the Sessions Judge. The Court sentenced all the respondents to a fine of Rs. 25 (or one week's simple imprisonment in default) under Section 21(b). No separate sentence under Section 21(c) was imposed on the respondents who were original accused Nos. 1-9.

Judgement

HIDAYATULLAH, J. : In this appeal by certificate under Art. 134 (1) (c) of d. Constitution the Stab of Gujarat appeals against the Judgment, March 14, 1963, of the High Court of the State acquitting the respondent of diverse offences under the Forward Contracts (Regulation) Act, 1952.Originally 31 persons were charged before the Judicial Magistrate, Ahmedabad, who acquitted 14 and convicted the rest. The present respondents, who are 11 in number (accused 1 to 9, 11 and 12), were convicted under S. 20 (l) (c) of the Act and fined Rs. 51(15 days S. I. in default). They were also convicted under S. 21 (b) of the Act but no separate sentence was imposed. Nine of them (accused 1 to 0) wee further convicted under S. 21 (c) of the Act and fined Rs. 25 (one week s S. I. default). The remaining accused were convicted under S. 21 (b). All appealed to the Court of Sessions Judge. The conviction of accused 1 to 9, 11 and 12 was maintained but convection under S. 20 (1) (b) we. substituted for that under S. 20 (1) (c). The other accused were convicted of all the charges. The High Court was then moved in revisions All the accused were acquitted of all the charges. The State Government now appeals.

2. A11 respondents are member of the Ghee and Tel Brokers Association Ltd., Ahmedabad. Nine of them ore Directors and two of these are President and Secretary of the Association. The accused, who are not before us, were brokers and servants of the Association or of the brokers. The prosecution case is this: The Association has an office where the members end brokers, used to enter into contacts for the safe and purchase of groundnut oil. These contracts were largely speculative. A large number of contracts used to be entered into but were not performed by actual delivery and payment of price. They were adjusted on a due date after the expiry of a fixed period. This period was generally from the 5th of one calendar month to the 25th of the following month and the latter was the due date. On each Saturday during the period the Association exhibited the prevailing rate and according to that rate cross transactions entered earlier were adjusted and the persons in loss deposited money representing their particular losses with the Association. On the due date all outstanding transactions were finally adjusted by cancelling sales against purchases and delivery used to be ordered in respect of the balance which had to be completed by the end of the month of the due date. During the stated period extensive trading through sales and purchases took place without any delivery. Each member could enter into as many transaction of either kind as he liked provided that each transaction was in multiple of 50 Bengali Maunds. Between March 5 and April 25, 2957 the total transactions put through totalled 4,33,600 Bengali Maunds but the actual delivery on the due date was about 5,500 Bengali Maunds only, that is to say, just over 11/2per cent. The sahre of the several operators in these deliveries was insignificant and the deals were really forward transactions in which there was no intention to take or give deliver. The prosecution, therefore, submitted that theses were forward contracts prohibited under the Act and as the Association was not recognised the offences charged were committed. The High Court having acquitted all the accused the State contends now that the acquittal recorded by the High Court is wrong and proceeds on a misapprehension of the provisions of the Act and of the facts on which charges rested.

3. To consider the submissions of the parties the relevant provisions of the Act, which has been passed, among other things, to regulate forward contracts, will have to be seen. Before we do so we may first glance at some definitions leaving out those attributes of the terms defined in which are not interested "Forward contract" under the Act means a contract which is not a ready delivery contract but a contract for future delivery [S. 2 (c)]. A "r

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