1997 (3) TMI 457 - SUPREME COURT

Whether the banks can enter into buy-back arrangements in units of UTI under 1964 Scheme?

Held that:- Appeal allowed. Infringements of the instructions issued by the RBI under the Banking Regulations Act prohibiting the banks from entering into buy-back arrangements do not invalidate such contracts entered into between the banks and its customers.

The ready-forward contract is severable into two parts, namely, the ready leg and the forward leg. The ready leg of the transaction having been completed, the forward leg, which alone is illegal, has to be ignored.

With the ready leg having been performed the illegality of the forward leg contained in the agreements cannot affect the transfers which had already taken place.