Section 29B. Transfer and vesting of undertaking of Commission

29B. Transfer and vesting of undertaking of Commission.— (1) On the date on which the Forward Contracts Act is repealed, the undertaking shall be transferred, and vest with the Securities and Exchange Board of India. (2) If there is any existing proceeding or cause of action against the Commission in relation to the undertaking on the date on which the Forward Contracts Act is repealed, such proceeding or cause of action may be continued and enforced by or against the Security Board. (3) The concessions, privileges, benefits and exemptions including any benefits and exemptions with regard to the payment of any tax, duty and cess granted to the Commission with respect to its undertaking shall be transferred to the Security Board on the date on which the Forward Contracts Act is repealed. (4) Every employee holding any office (excluding members of the Commission) under the Commission immediately before the date on which the Forward Contracts Act is repealed, will hold office in the Central Government or the Security Board, as the Central Government may notify in the Official Gazette, for the same tenure and on the same terms and conditions of service as such employee would have held such office if the Commission had not been dissolved: Provided that where the Central Government notifies that an employee of the Commission shall continue as an employee of the Central Government under the foregoing provision, the Central Government may, at the request of the Security Board, depute such employee to the Security Board, for a period not exceeding two years from the date on which the Forward Contracts Act is repealed. (5) Within six months from the date on which the Forward Contracts Act is repealed, an employee of the Commission opting not to be an employee of the Central Government or the Security Board, as the case may be, shall communicate such decision to the Central Government or Security Board, as applicable. (6) Nothing contained in any other law in force shall entitle any employee to any compensation for the loss of office due to the repeal of the Forward Contracts Act and the consequent dissolution of the Commission, and no such claim shall be entertained by any court, tribunal or other authority. (7) The members of the Commission appointed by the Central Government under section 3 of the Forward Contracts Act, shall cease to hold office from the date the Forward Contracts Act is repealed. (8) The members of the Commission shall not be entitled to any compensation for the loss of office due to the repeal of the Forward Contracts Act and the consequent dissolution of the Commission or for the premature termination of any contract of management entered into by such member with the Commission, and no such claim shall be entertained by any court, tribunal or other authority. (9) The transfer and vesting of the undertaking shall not be liable to the payment of any stamp duty under the Indian Stamp Act, 1899 (2 of 1899) or any applicable stamp duties under state laws.] STATEMENT OF OBJECTS AND REASONS Forward trading, which normally plays a useful part in tempering price fluctuations, tends in certain situations to exaggerate such fluctuations to the detriment of the interests of producers as well as consumers. Daring the war and immediately thereafter, the Central Government issued orders under Rule 81 of the Defence of India Rules, prohibiting forward trading in commodities, such as food grains, oilseeds, oil-cakes, vegetable oils, raw cotton spices, sugar and bullion. After the defence of India Act lapsed, orders in respect of food grains, edible oil-seeds and oils, raw cotton and spices were kept in force under the Essential Supplies (Temporary Powers) Act, 1946, and similar orders about cotton-seed and sugar were also issued later under this Act. It was only in the case of raw cotton that a general exemption was granted with respect to forward trading conducted under the auspices of the East India Cotton Association, Bombay. Among the States, Bombay is the only one which has adopted a comprehensive scheme for the regulation of forward trading under the Bombay Forward Contracts Control Act. That Act has been brought into force mainly to control forward trading in cotton, bullion and oil-seeds. Under the Constitution, the subject of "stock exchanges and futures markets" is included in the Union list. Consequently, the State Legislature are no longer competent to enact any fresh legislation with regard to forward markets, and unless Central Legislation on this subject is enacted, the resulting lacuna may prevent desirable action being taken, when needed. When the Central Act comes into force, the existing State Acts will cease to operate to the extent to which they are inconsistent with the Central Act. In February, 1950, a draft Bill on this subject was circulated to the State Governments, the Reserve Bank of India, Chambers of Commerce and various other interests concerned. In July, 1950, the draft Bill was referred to an Expert Committee under the Chairmanship of Shri A. D. Shroff, and was revised in the light of the Committee's recommendations. The Government of India also accepted in principle the Committee's recommendations in regard to the practical operation of this measure, though their application to individual cases would have to be decided in the light of experience and the circumstances of each case. A Bill was introduced in the Provisional Parliament on 19th December, 1950, and was referred by it to a Select Committee on 24th April, 1951. The Select Committee's Report, which was submitted on 20th August, 1951, could not be considered by the Provisional Parliament before it was prorogued and the Bill lapsed. This Bill as now introduced is largely in the form recommended by the Select Committee, but certain alterations have been made therein as a result of further consideration. The Bill provides for the regulation of forward trading and the prohibition of options in goods. Transactions on Stock Exchanges have been excluded, since the problem of regulating Stock Exchanges have some special features of its own and can best be treated separately. It is proposed to prohibit options altogether, since they are considered to be an undesirable form of speculation. The regulatory provisions of this Act will be extended by notification to different classes of goods and to different areas as and when necessary. The main principle underlying these provisions is that forward contracts should be allowed to be entered into only in accordance with the rules and bye-laws of a recognised association. The rules and by-laws will be subject to the approval of the Central Government who will also have the power to make such rules and bye-laws. Provision has been made for the appointment by the Central Government of one person as its own representative and not more than three persons to represent interests not directly represented through the membership of the association, as members of the governing body of a recognised association. The Central Government will also have the powers to order an inquiry into the affairs of a recognised association or those of any of its members, and to direct the Forward Markets Commission to inspect the accounts and other documents of the Association. In emergencies, the Central Government may have to suspend the business of a recognised association, and in certain extreme cases, to supersede the governing body of a recognised association for a period not exceeding six months, or even to withdraw recognition. It has been provided that the provisions of this Act will apply to non-transferable specific delivery contracts only in certain areas to be notified by the Central Government. In order to assist the Central Government in the administration of the Act, it is considered desirable that a commission, to be called " The Forward Markets Commission" should be established. Provision has also been Made for the establishment of an Advisory Committee to advise the Central Government on any matter concerning the operation of the Act. NEW DELHI: The 25 th July 1952. T.T.KRISHNAMACHARI.