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67] In strict legal parlance, there is no term like spot exchange. The correct legal term being ready delivery contract , which is now 45 of 222 SKC/DSS JUDGMENT-WP-2743-14- GROUP - J.doc statutorily defined in Section 2(i) of the FCRA. This term is usually used in contradistinction to forward contract, now statutorily defined in Section 2(c) of FCRA. The FCRA entered into force in 1952 and was enacted to provide for regulation of forward trading and prohibition of options in goods and for matters connected therewith. Initially, the transactions on stock exchanges were excluded, since, the problem of regulating stock exchanges have some special features of their own which can be best treated separately.

[Emphasis supplied] 71] In furtherance of Objects and Reasons, FCRA provides for establishment and constitution of FMC, which is now substituted by Securities and Exchange Board of India (SEBI). The powers and functions of FMC have been defined. Chapter III is concerned with grant and withdrawal of recognition to recognized associations, which have to operate within the regime of FCRA. There are 48 of 222 SKC/DSS JUDGMENT-WP-2743-14- GROUP - J.doc provisions empowering the Central Government to call for returns, annual reports and direct enquiries, framing of rules, byelaws, suspension of members or prohibiting them from trading, supercede governing bodies of associations or even to suspend businesses of recognized associations. Chapter III-A is concerned with registered associations and matters connected therewith. Chapter IV of the FCRA is concerned with forward contracts and options in goods. Section 15 of FCRA declares that forward contracts in notified goods shall be illegal or void in notified cases shall be illegal or void in certain circumstances. Section 16 provides for the consequences of notification under Section 15. Section 17 empowers the Central Government to prohibit forward contracts in certain cases. Section 18 is concerned with special provisions respecting certain kinds of forward contracts and Section 19 prohibits options in goods. Chapter V of the FCRA provides for penalties and procedures.

(ii) In order to ensure delivery of commodities, the NSEL would establish designated warehouses, in which the commodities would be verified, checked and stored;

(iii) NSEL would counter guarantee performance of the contracts at the spot exchange;

(iv) NSEL would maintain a settlement guarantee fund so as to eliminate any risk to the traders at the spot exchange.

74] Since no forward trading was contemplated, in the normal course, there was no question of applicability of FCRA. However, NSEL has itself explained that since its model involved netting or setting off transactions at the end of the day, the Central Government may consider amending or deleting provisos to Section 2(i) of FCRA or to grant exemptions under Section 27 of the FCRA.

79] In terms of the amended definitions of the expressions 'ready delivery contract' in Section 2(i) of the FCRA, even a contract which complies with the main ingredients of a ready delivery contract as specified in Section 2(i) but if the performance of such contract involves realization of any sum of money, being the difference between the contract rate and the settlement rate or the clearing rate or the rate of any offsetting contract, then, such contract shall not be deemed to be a ready delivery contract. Since the module proposed by NSEL was to involve netting or setting of transactions at the end of the trading day, and in order that the transactions, as per the amended definition are not classified as 'forward contract' as per amended definitions, as matter of abundant caution, exemption from the very applicability of FCRA and consequently, the regulatory regime of FCRA, was applied for.