Contingent securities obligation falls outside ready delivery ban where no present sale or purchase duty exists at execution

A securities agreement was treated as outside the ready delivery prohibition because no present obligation to buy or sell arose at execution. The obligation depended on a future contingency after 12 months, so it was a contingent undertaking rather than a contract for immediate or deferred performance existing at the outset. The distinction drawn was between a present contractual obligation with postponed performance and an obligation that comes into existence only when the condition occurs. On that construction, the arrangement was not void under Section 6 and remained valid and enforceable.

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Issues: Whether the agreement in question was a ready delivery contract within the Bombay Securities Contracts Control Act, 1925, so as to avoid the bar of Section 6.

Analysis: A contract falls within the statutory definition only if it is a contract for the purchase or sale of securities, no time is specified for performance, and it is to be performed immediately or within a reasonable time. The agreement here created no present obligation to purchase or sell shares at the date of execution. The defendant's obligation to buy arose only on the happening of a contingency after the lapse of 12 months, and until then there was merely a potentiality of obligation. The Court distinguished a present obligation with postponed performance from a contingent obligation that comes into existence only on fulfilment of the condition. On the true construction of the agreement, there was no contract of sale or purchase in existence when the agreement was made, and when the contingent obligation matured, performance was immediate or within a reasonable time.

Conclusion: The agreement was not void under Section 6 of the Bombay Securities Contracts Control Act, 1925, and was valid and enforceable in favour of the appellant.

Ratio Decidendi: A contingent obligation that matures only upon the happening of a future event is not a contract for purchase or sale of securities with a time specified for performance at the date of execution, and therefore does not attract the statutory prohibition on non-ready delivery contracts.

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