Prohibition of contracts entered into outside the coverage of stock-exchange.

These appeals arise out of suits instituted by the appellants who are a firm of Stock Brokers called the Central Brokers, for recovery of certain amounts claimed as balance due on account of secveral purchases and sales of shares effected by them on behalf of the respective defendants. The suits were contested on the ground inter alia that the contracts sued on were void as being in contravention of section 94-C of the Defence of India Rules, and that the claims based thereon were in consequence unenforceable under section 23 of the Contract Act. There were a number of other suits in which the same defence had been raised and Mack, J. directed that the question should be argued as a preliminary issue in all of them. After hearing counsel in all the suits, he held that the contracts were illegal and accordingly dismissed the suits in limini. Against this judgment the plaintiffs have preferred the above appeals and the only point that arises for consideration therein is whether the contracts sued on were void and unenforceable on the ground that they were in contravention of section 94-C of the Defence of India Rules. That section which came into force on nth September, 1943 runs as follows:-

" 94-C (1) In this Rule-

(a) "Budla" includes a contango and a backwardation and any other arrangement where by the performance of any obligation under a contract to take or give delivery of securities within a stipulated period is postponed to some future date in consideration of the payment or receipt of interest or other charges:

(b) "Contract" means a contract made or to be performed in whole or in part, in British India relating to the sale or purchase of securities;

(c) "Ready" delivery contract means a contract which must be performed by the actual delivery of, or payment for, the securities specified therein on a date not later than the seventh day (or if the seventh day happens to be a holiday, the business day next following from the date of the contract).

(d) "Securities" include stocks, shares, bonds, debentures and debenture stock and any other instrument of a like nature.

(e) "Stock Exchange" means any association, organisation or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling bussiness in buying, selling and dealing in securities.

(2) No stock Exchange shall, after the 24th September, 1943 permit or afford facilities for-

(a) the transaction of budla;

(b) the making of any contract other than a ready delivery contract; or

(c) the carrying out or settlement of any budla transaction or any contract other than a ready-delivery contract.

(3) Any Director, Manager, Secretary or other officer of a Stock Exchange who contravenes any of the provisions of this Rule shall be punishable with imprisonment for a term which may extend, to five years or with fine or with both.

(4) The Central Government, may, by order, authorise subject to such condition, if any, as it may impose, any Director, Manager, Secretary or other officer of a Stock Exchange to extend, in any particular case, for reasons to be recorded in writing the time for the performance of a "ready, delivery contract" specified in clause (c) of sub-rule (1)."

By a notification dated 4th May, 1946 "fifteenth day" was substituted for the word "seventh" in section 94-C(1)(c) and the entire section was repealed on 1st October, 1946. The position, therefore, is that transactions of the character mentioned in the section and entered into between 24th September, 1943 and 1st October, 1946 would be hit by it. As the suit contracts were concluded during this period the only point for decision is whether, otherwise, they fall within the purview of the section. The contention on behalf of the appellants is that the section prohibits only Stock Exchanges from permitting or affording facilities for Budla transactions, that the contracts entered into outside the floor of the Stock Exchange are not within the prohibition ena