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CS Executive · Capital Market and Securities Laws · Securities Contracts (Regulation) Act, 1956

A recognised stock exchange's bye-laws made under section 9 contain a rule on margin requirements. The exchange wants a contract entered into in breach of that rule to be void. What does section 9(3) allow?

Under section 9(3)(a), the bye-laws may specify which bye-laws, if contravened, make a contract entered into otherwise than in accordance with them void under section 14(1). Voidness is not automatic for every breach, and member penalties are dealt with separately in section 9(3)(b).

  1. ABye-laws may specify which bye-laws, if contravened, make a contract entered into otherwise than per the bye-laws void under section 14(1)Correct
  2. BEvery contravention of any bye-law automatically makes the contract void
  3. COnly the Central Government may declare such a contract void
  4. DContravention can lead only to a fine, never to voidness

Explanation

Section 9(3)(a) lets the bye-laws specify the bye-laws whose contravention makes a contract entered into otherwise than in accordance with them void under section 14(1). Voidness is therefore selective, not automatic for every bye-law. Section 9(3)(b) deals separately with penalties such as fine, expulsion and suspension, so the claim that only fines apply is wrong.

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