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THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (ACT NO:42 OF 1956) An Act to prevent undesirable transactions in securities by regulating the business of dealing therein, [*]¹by providing for certain other matters connected therewith. Be it enacted by Parliament in the Seventh Year of the Republic of India as follows: PRELIMINARY** Short title, extent and commencement 1. (1) This Act may be called the Securities Contracts (Regulation) Act, 1956. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette appoint.² Definitions 2. In this Act, unless the context otherwise requires,- (a) "contract" means a contract for or relating to the purchase or sale of securities; (aa) "derivative" includes - a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security; a contract which derives its value from the prices, or index or prices, of underlying securities;³ (b) "Government security" means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944); (c) "member" means a member of a recognised stock exchange; (d) "option in securities" means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities; (e) "prescribed" means prescribed by rules made under this Act; (f) "recognised stock exchange" means a stock exchange which is for the time being recognised by the Central Government under section 4; (g) "rules", with reference to the rules relating in general to the constitution and management of a stock exchange, includes, in the case of a stock exchange which is an incorporated association, its memorandum and articles of association; (ga) "Securities Appellate Tribunal" means a Securities Appellate Tribunal established under sub-section (1) of section 15K of the Securities and Exchange Board of India Act, 1992.⁴ (h) "Securities" include- (i ) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ia)derivative; (ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;⁵ (ii) Government securities; (iia) such other instruments as may be declared by the Central Government to be securities; and ⁶ (iii) rights or interests in securities; [(i) spot delivery contract means a contract which provides for,- (a) actual delivery of securities and the payment of a price therefor either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality; (b) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository;]⁷ (j) "stock exchange" means any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. 2A. Words and expressions used herein and not defined in this Act but defined in the Companies Act, 1956 or the Securities and Exchange Board of India Act, 1992 or the Depositories Act, 1996 shall have the same meanings respectively assigned to them in those Acts.⁸ ¹ The words �by prohibiting options and� omitted by the Securities Laws (Amendment)Act, 1995, w.e.f. 25-3-1995. ² The Act came into force on 20 February, 1957 vide Notification No.SRO 528, dated 6 February, 1957 published in Gazette of India, Extraordinary, Part II, section 3 page 549, dated 16 February, 1957. ³ Inserted by Securities Laws ( Second Amendment ) Act,1999 vide Gazette notification dated December 16, 1999. ⁴ Ibid ⁵ Ibid 6 Substituted for "(ii) Government Securities; and" by the Securities and Exchange Board of India Act, 1992, w.e.f. 30-1-1992. ⁷ Substituted for the following: (i) "spot delivery contract" means a contract which provides for the actual delivery of securities and the payment of a price therefor either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality;" by the Depositories Act, 1996 (22 of 1996), w.e.f. 12-8- 1996. ⁸supra n.3

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