1975 (3) TMI 141 - SC - Indian Laws

Summary

Issues Involved:

1. Correct construction of Section 14A of the Forward Contracts (Regulation) Act, 1952.
2. Validity of condition No. (ii) in the certificate of registration granted under Section 14B of the Act.
3. Authority of the Forward Markets Commission to impose conditions on the certificate of registration.

Issue-wise Detailed Analysis:

1. Correct Construction of Section 14A of the Forward Contracts (Regulation) Act, 1952:

The controversy in this case centers around the interpretation of Section 14A of the Forward Contracts (Regulation) Act, 1952. Section 14A(1) states that no association concerned with the regulation and control of business relating to forward contracts shall carry on such business except under, and in accordance with, the conditions of a certificate of registration granted by the Commission. The High Court interpreted this to mean that the conditions which the Commission could attach to the certificate of registration were those related to the manner and method of carrying on the business of forward contracts. However, the Supreme Court found this interpretation fallacious, stating that there is no limitation in the language of Section 14A regarding the nature of conditions that can be imposed. The Court emphasized that the power of the Commission is plenary as regards the nature of conditions it can attach for regulating and controlling the business of forward contracts.

2. Validity of Condition No. (ii) in the Certificate of Registration Granted Under Section 14B of the Act:

Condition No. (ii) specified in the certificate of registration granted to respondent No. 1 under Section 14B of the Act stated that the company shall not commence trading in non-transferable specific delivery contracts in any commodity without obtaining the prior approval of the Forward Markets Commission in writing. The High Court quashed this condition, reasoning that it did not relate to the manner or method of carrying on the business and that no power to impose such a condition could be implied as it would be repugnant to the powers of the Central Government under Sections 15 to 18 of the Act. However, the Supreme Court disagreed, holding that the specification of commodities in which business can be carried on is indeed a condition concerned with the regulation and control of the business relating to forward contracts. The Court concluded that Rule 7A, which authorizes the incorporation of such conditions in the certificate of registration, is intra vires the rule-making power.

3. Authority of the Forward Markets Commission to Impose Conditions on the Certificate of Registration:

The Supreme Court upheld the authority of the Forward Markets Commission to impose conditions on the certificate of registration, emphasizing the Commission's role in supervising and regulating the business of forward contracts. The Court stated that the conditions imposed by the Commission, including the specification of commodities in which business can be carried on, are integral to the regulation and control of the business. The Court highlighted that Sections 15 to 18 of the Act, which authorize the Central Government to impose general restrictions on forward contracts, do not conflict with the Commission's power to impose specific conditions on particular associations. The Court applied the rule of harmonious construction to ensure the co-existence of these powers.

Conclusion:

The Supreme Court set aside the order of the High Court and allowed the appeal, holding that the impugned condition No. (ii) in the certificate of registration was valid and justified. The Court acknowledged the assistance rendered by Shri Bishamber Lal, Advocate, as amicus curiae, and allowed the appeal without any order as to costs.