The Forward Contract (Regulation) Act has been incorporated on 26th December 1952. This Act endowed with powers to regulate matters with regard to Forward Contracts and the prohibition of options in goods with such other matters related to it. This Act classifies the transaction into two different categories one is Ready Delivery Contracts and another is Forward Contracts. The first types of Contracts are those were the delivery of goods and full payment were made within eleven days and the forward contracts were not as that of the first one.
The Chapter I of this Act shall come in to force on the same date of its enforcement but other provisions may come into force on some other date as and when it has been framed and notified in the Official Gazette.
The Forward Markets Commission (FMC) is a statutory body setup under this Act through a notification in the Official Gazette. This Body functions under the administrative capacity of Ministry of Affairs, Food and public Distribution. This FMC constitutes two such people to regulate its purpose. One is Chairman appointed by the Central Government and another member or members shall be appointed part-time or full-time as prescribed by the Central Government with relevant efficiency in the field required. The term of office and other things shall be as prescribed in this Act.
This FMC regulates forward markets in commodities with some accredited associations as prescribed by the Central Government of India to sanction or withdraw by such associations. This FMC recommends several regulations for the improvement of forward markets in commodities in our Country. This FMC as and when it deem necessary shall provide all the required information to the Central Governments including periodic reports, demand, supply and prices of the commodities, etc. This Commission shall at any point of time shall inspect and ask for the particulars from the recognized associations in order to have a smooth and proper trading.
This Commission shall have all the powers of the Civil Court under Civil procedure Code, 1908 while trying a Suit. This has the power to call for any privileged person as it deem necessary and ask for the material particulars with related to the subject matter that is considered by the commission. Such privileged person also made legally bound to disclose such detailed particulars as per Section 176 of Indian Penal Code, 1860. This Act has been established to regulate the future markets in order to include some new features that are in pulse with the latest development in the commodity futures market.
In case if any association willing to get recognized to regulate and control over forward contract shall initiate with the application to the Central Government as may be prescribed. The application also contains the bye-laws and other rules and regulation that are necessary. This association shall be provided with a Certificate of registration which shall be revoked at anytime if it deems necessary. In particular it says about the procedure to be followed, its Constitution and powers of Managing. It contains the powers and duties of the office bearer of such association, etc. The Central Government after making relevant inquiry and investigation on documents disclosed shall recognize such association at public interest and trade interest by notifications in the Official Gazette.
These recognized associations shall not made limited in its members but its rules shall not be amended without the approval of the Central Government. In case if the Government feels that the recognized association is functioning beyond public interest or in violation of this Act shall be withdrawn after giving reasonable opportunity to be heard. The Central Government shall at anytime call for the periodical returns and conduct enquiry on the recognized associations as and when it deems fit.
The Central Government shall make any number of rules, bye-laws and even amend bye-laws as and when it is necessary in pursuance to this Act. The FMC has the power to suspend members of the recognized association or to prohibit him from trading if it feels that the said association acts beyond its prescribed powers. Not only that the Central Government has the power to supersede the governing body of the recognized association through the notification in the Official Gazette by specifying the reason to supersede after giving reasonable opportunity. The Central Government by notification in the Official Gazette shall disclose certain goods to be illegal under forward contracts
This Act also contains penal provisions for all offences made under this Act that is prescribed. In case of trial the Act shall be presumed until something contrary is proved. No court inferior to the Magistrate shall adjudicate the offences under this Act. In case if any act done in pursuance to this Act by the Central Government or any members in good faith shall not be questioned.
This Act shall be repealed partly. Several recommendations were made to amend and repeal this Act. One such amendment bill was formulated in the year 2010. But the bill got lapsed, so in 2014 it has been recommended to revive the Bill to assist the development of organizational capacity. It was also requested the Government to stop the trading in absurd and unreasonable manner.
by C.Srivenkatesh Prabhu