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1993 (12) TMI 178
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....e ground that the transaction, being a ready forward transaction, is illegal. In this case and in a number of other cases which were all placed on board on December 7, 1993, an identical question arises, i.e., whether the transactions are illegal as they are ready forward transactions. Of course, in many matters it is denied that the transactions are ready forward transactions. However, at this stage, the court is not considering the facts of each matter. The question of law as to whether, if a transaction is a ready forward transaction it would be illegal, would affect a lot of parties. Therefore, in this matter, when this question was being argued, the court has heard all other parties who wanted to make submissions on this legal question. It is clarified and understood by all that at this stage the court is not going into the facts of each matter including these two matters. At this stage, the court is only considering the question of law. For the purposes of this order and for the sake of convenience, the parties to these two matters will be referred to in their capacity in Miscellaneous Petition No. 23 of 1993. On behalf of the petitioners, Mr. Tulzapurkar has argued. Su....
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....me value; and (4) the transaction must be entered into on the same day. Mr. Setalvad on behalf of the custodian has submitted that he agrees that the first three ingredients must be there. He, however, submits that it is not absolutely necessary that the first leg and the second leg must both be entered into on the same day. It must be mentioned that recently in Criminal Application No. 1 of 1992, this court had occasion to consider what is a ready forward transaction. This court has held as follows: "On page 48 of the notes of evidence, PW-3 states that a ready forward transaction is one where there is a purchase with a pre-arranged sale at a future date or a sale with a pre-arranged purchase at a future date. He states that normally the term 'effective yield' would be used in connection with ready forward transactions, because a ready forward transaction is a funding transaction. On pages 94 and 95 of the notes of evidence, DW-1 explains that a ready forward transaction can be either a sale or a purchase transaction. He states that when the SLR securities with the bank are much in excess of the actual requirement and the bank does not want to keep them in the portfolio, the....
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....on the Banking Regulation Act, 1949 (hereinafter for the sake of convenience referred to as "the said Banking Act"). At this stage it might be convenient to set out certain relevant sections of the said Act. Sections 2(h), 2(i), 13, 16, 17, 18(1), 22A(b) and 23(1)(b ) read as follows: "2. In this Act, unless the context otherwise requires,-... (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; (ii)Government securities; and (iii)rights or interests in securities;" "2(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; 13. If the Central Government is satisfied, having regard to the nature of the value of transactions in secu....
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....rwise requires,-... (b) 'security' means security of a company, being a security listed on a recognised stock exchange but not being a security which is not fully paid up or on which the company has a lien; 23.(1) Any person who- (b) enters into any contract in contravention of any of the provisions contained in section 13 or section 16; or". The parties have also referred to the other sections in order to show the scheme of the said Act. However, in my view, it is not necessary to reproduce all the sections. Mr. Setalvad has submitted that the definition of the word "securities" under section 2(h) is an inclusive definition. He submitted that the definition is of very wide import. He has pointed out that on November 29, 1957, the Central Government has notified Greater Bombay as being one of the States or areas to which section 13 of the said Act would apply. This position is not denied by anybody. He has submitted that with effect from November 30, 1957, no person could enter into any contract in securities in Greater Bombay otherwise than between members of a recognised stock exchange or through or with a member of the stock exchange. He has submitted that in most....
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....or (2) contracts for cash or hand delivery, or (3) contracts for special delivery in any security as are permissible under the Act and the Rules, bye-laws and regulations of recognised stock exchanges. He submits that by reason of this notification, no person can enter into any ready forward transaction. He submits that a contravention of this provision attracts penal liabilities under section 23 of the said Act. He submits that even a contravention of the provisions of section 13 would also entail a penal liability under section 23 of the said Act. He submits that under these circumstances ready forward transactions are illegal and, therefore, void. He submits that they being illegal and void, no rights can be created in the securities in favour of any of the third parties and that the notified parties continue to have right, title and interest in these securities. He submitted that as the notified parties continue to have right, title and interest in these securities, all these securities stand attached. So far as the said Banking Act is concerned, Mr. Setalvad submitted that the said Banking Act applies to all banking companies. He submitted that under section 5(c), a "bankin....
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....ry activity is hedged in by and subjected to the control of the Reserve Bank of India and its orders or directives issued periodically, a contravention of which is also made punishable under the provisions of the Banking Regulation Act. It is, therefore, evident that if a banking company has to carry on the business of banking, it has to carry out the mandates and directions of the Reserve Bank of India issued by it periodically, as enjoined by the statute." He also relied upon the authority in the case of Bank of India v. Karnam Ranga Rao, AIR 1986 Kar 242; [1988] 64 Comp. Cas. 477 (Kar). In this case, the bank had charged compound interest on an agricultural loan. This was contrary to a circular issued by the Reserve Bank of India. The court held that the bank was bound to follow the directives or circulars issued by the Reserve Bank and that any interest charged by the bank in excess of the prescribed limit would be illegal and void. Mr. Setalvad also relied upon the authority in the case of Gowda (D.S.) v. Corporation Bank, AIR 1983 Kar 143; [1985] 57 Comp. Cas. 49 (Kar). In this case, it has been held that the directives issued by the Reserve Bank have statutory force an....
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....gment, was whether an agreement to sell shares of a private limited company was illegal and void by virtue of the provisions of the said Act. In this judgment, it has been laid down that by reason of the definition of the term "securities" under section 2(h), the Act would only apply to securities which are marketable. It is held that essentially "marketable" means something which can be offered for sale in a market. It is held that goods become marketable when there is a market or a place where the goods of the type in question can be readily sold. It is held that word "marketable" thus implies a certain ease or facility in selling. It is held that if the definition of the word "securities" is read along with the definition of "stock exchanges", it becomes clear that the purpose of the Act is to control securities which are normally dealt in on the stock exchange, i.e., shares of a public limited company. It is held that construed in this sense the definition of the word "securities" would exclude from its purview shares which are not marketable, such as shares of a private limited company. This is because such shares are by their nature not freely transferable in the market. Thei....
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....imate and useful function in their own sphere and, secondly, that the function needs to be properly regulated. A consideration of the functions of a stock exchange is perhaps the most suitable starting point for the formulation of an approach to the problem of regulation. The legitimate function of a stock exchange is to provide, consistently with the larger public interest, a forum and a service which are so organised, in the interests of both buyers and sellers, as to ensure the smooth and continual marketing of shares..." It is submitted that this also clearly shows that the said Act is only to prevent speculation in shares listed on the stock exchanges. It is submitted that the provisions of the said Act provide the stock exchange as a machinery for regulating dealings in securities. It is submitted that sections 21 and 22 give powers to compel listings, so that if transactions in securities of any public or Government company are to be governed, then that company can be forced to list its shares/securities. It is submitted that though sections 13, 16, and various other provisions of the said Act merely talk of "securities", it necessarily means "securities which are list....
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....ction has to be between members of a recognised stock exchange or through a member or with a member of a recognised stock exchange. The Division Bench held that the definition of the word "securities" was an inclusive one. The Division Bench then held as follows (at pages 711, 713): "...A reading of the inclusive part of the definition shows that the Legislature has enumerated different kinds of securities and by way of a residuary clause used the words 'or other marketable securities of a like nature'. The use of these words was clearly intended to mean that the earlier categories of securities had to be marketable and any other securities of 'like nature', that is to say, like those which were categorised or enumerated earlier were also to be marketable before they could be held to fall within the definition of 'securities'. ....in our view, the words plainly read are incapable of any other meaning except that the Legislature made the definition of 'securities' an inclusive one having regard to the object with which the Regulation Act was enacted, namely, to control transactions which were carried on in a market, that is, the stock exchange. The securities referred to in th....
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....the term "capable", in my view, would clearly include securities which are not just listed but also securities of public companies which are capable of being listed on a recognised stock exchanges. These authorities, therefore, if anything, are against the proposition canvassed by Mr. Tulzapurkar. However, it must be admitted that the question which is before this court was not before either the single judge or before the Division Bench. The question before those courts was whether the shares of a private limited company could be included within the definition of the term "security". It is in the context of that question, that all the above observations have been made. Neither court was considering the question which is before this court. In my view, therefore, neither of these authorities have dealt with this question and neither of these two authorities can be said to be an authority for either side so far as the present question is concerned. Mr. Tulzapurkar has also relied on an ad interim order dated December 5, 6, 1991, on a draft notice of motion in a suit bearing Suit Lodging No. 3874 of 1991 which order is reported as Brooke Bond India Ltd. v. U.B. Ltd. [1992] 2 BCR ....
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....eatest respect to the learned Members of the Company Law Board, there is total fallacy in this reasoning. The provisions of sections 172 to 179 of the Indian Contract Act appear to have been overlooked. If, as held by the Company Law Board, there was only a pledge, it is settled law that in cases of pledge, title continues in the pledgor. The only right, which the pledgee would have, would be on nonpayment to sell after due notice to the pledgor. In cases of pledge, a pledgee has no right to lodge the shares for registration in his own name and no title has passed to the pledgee. This even though share certificates along with blank transfer forms may have been deposited as and by way of pledge. With the greatest respect to the learned Members this basic and well established position in law has been overlooked by them. Further, whilst dealing with the provisions of the said Act, the learned Members have specifically dealt with section 17 of the said Act. As is set out hereinafter, section 17, in most cases will not apply to listed securities. The learned Members have failed to appreciate this. The learned Members held that shares of a public limited company, not listed in the stock ....
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.... ease or facility of selling and/or which have a high degree of liquidity and/or are capable of being sold in a market, i.e., stock exchange, are included. That this definition includes securities which are not listed by a stock exchange is clear from section 17. If section 17 is read, it is clear that it applies to areas where section 13 could not apply. This because in the whole of India, so far as the court is aware, there are only 21 recognised stock exchanges. Thus, in areas where there are no stock exchanges and where there can be no listed securities, the Government can regulate by means of licensed dealers. The licensed dealers would have to follow the regulations laid down by the Government in their licences and the provisions of the said Act. Also the object of the Act, as seen from the preamble, is "to prevent undesirable transactions in securities by regulating the business of dealing therein". It is settled law that there can be two methods of regulation; (1) by making something compulsory; and (2) by laying down certain disadvantages if the provisions are not complied with. An example of the latter would be section 69 of the Partnership Act. This did not make registra....
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....tion 17 is looked at, it is clear that section 17 talks of licensing of dealers. The licensing of dealers must necessarily be in areas where there are no stock exchanges. Now in areas where there are licensed dealers which list, of which stock exchanges, are they supposed to follow. If the interpretation of Mr. Tulzapurkar is to be accepted, then there would be utter confusion. None of the licensed dealers would know which securities they are supposed to deal in otherwise than by way of a spot delivery contract. However, that is not all. Section 22A of the said Act puts the matter beyond any controversy. Section 22A provides for free transferability of shares. It lays down certain conditions on which a company can refuse to register transfers. So far as free transferability is concerned, section 22A, sub-clauses (a) and ( b), read as follows: "22A. Free transferability and registration of transfers of listed securities of companies.- (1) In this section, unless the context otherwise requires,- (a)'company' means a company whose securities are listed on a recognised stock exchange; (b)'security' means security of a company, being a security listed on a recognised stock e....
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....Comp. Cas. 367 (Cal) and East Indian Produce Ltd. v. Naresh Acharya Bhaduri [1988] 64 Comp. Cas. 259 (Cal). In both these cases, the argument that the said Act applies only to listed securities has been rejected and it is held that the said Act applies to transactions in shares of public limited companies even though the same be not listed. I am in agreement with what is stated therein. It must also be mentioned that in most of the matters before this court, the ready forward transactions, if any, are in bonds of public companies and public undertakings. Of course in some cases there are transactions in shares of public limited companies also. The bonds of public companies and undertakings, till recently, would have been issued under the Capital Issues (Control) Act and the guidelines issued thereunder. The court has before it the guidelines for floatation of public sector bonds as issued in 1986. Guidelines 10 and 11 read as follows: "10. Listing of bonds.-The bonds shall be listed on the stock exchanges. 11. Mode of transfer ability.--The bonds can be transferred by endorsement and delivery." Thus, it is a condition of issue of these bonds that they should be listed o....
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....as the right to only caution banking companies. He submits that there is a difference between the "directions and orders" issued by the Reserve Bank under sections 21 and 35A of the said Banking Act and a "caution" issued by the Reserve Bank of India under section 36(A). He submits that under sub-clause (4) of section 46 a penalty is provided only if the "directions and orders" of the Reserve Bank are not complied with. Mr. Ganesh has supported Mr. Tulzapurkar and submitted that since a penalty is provided under section 46 these are penal provisions which must be strictly and narrowly considered. He submits that under the provisions of section 36, the Reserve Bank may also issue guidelines. He submits that there is no compulsion on any of the banks to follow the guidelines laid down by the Reserve Bank, these are mere guidelines. In support of their contention, various circulars of the Reserve Bank of India were shown to the court. Based on the various circulars shown to the court, it was submitted that when the Reserve Bank intends to issue binding "directions or orders" it always says that the "directions and/or orders" are under section 21 and/or 35A. It is submitted that, in....
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.... that the buy-back deals are to be confined to the Government and other private securities and the repurchase date should be fixed after a minimum of 30 days. The words "confine" and "should" are words which indicate the binding nature. These indicate that these are not mere advices but that these are to be complied with. In my view, a reading of these two circulars makes it clear that notwithstanding the use of the word "guideline", these circulars have a binding effect. The mere fact that the Reserve Bank has not stated in these circulars that these are issued under sections 21 and/or 35A and/ or 36A cannot detract from this position. Even presuming these circulars are issued under section 36A, even then the Reserve Bank of India has power to prohibit and that is exactly what it has done. The mere fact that in some other circular the Reserve Bank has stated that those circulars are under section 21 or 35 and in these circulars it is not so stated does not detract from the binding nature of these circulars. As stated by the Supreme Court in the case of Municipal Corporation v. Ben Hiraben Manilal, AIR 1983 SC 537, it is settled law that the exercise of a power, if there is indeed ....
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....at for these reasons, the third party can always assert the rights under the contract. In support of his submissions, Mr. Tulzapurkar relied upon the cases of Raman and Raman Ltd. v. State of Madras, AIR 1959 SC 694; Abdulla Rowther (R.) v. State Transport Appellate Tribunal, AIR 1959 SC 896; Bank of Maharashtra v. United Construction Co., AIR 1985 Bom 432; [1986] 60 Comp. Cas. 163; Regina v. St. Aloysius Higher Elementary School, AIR 1971 SC 1920; Raghupathy ( J.R.) v. State of A.P., AIR 1988 SC 1681; Nidhi Kumar v. State of Maharashtra, AIR 1990 Bom 390 and Banarsi Das v. Cane Commissioner, AIR 1963 SC 1417. In my view, it is not at all necessary to decide this question. This argument of Mr. Tulzapurkar overlooks one very fundamental point. Mr. Tulzapurkar's argument proceeds on the footing that the third person is an innocent party who could have otherwise entered into a ready forward transaction. Even presuming the circulars of the Reserve Bank did not bind third parties, even then the third party could never have entered into a ready forward transaction by reason of the provisions of the said Act. So far as a banker is concerned, the transaction would be illegal not only un....
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....ansferred in the first leg would no longer be properties belonging to a notified party and could not stand attached. I am unable to accept the submission of Mr. Tulzapurkar. As has been set out in Halsbury, volume 12, para 1470, when a single transaction is carried into effect by several instruments, they are treated as one instrument and they must all be read together for purposes of ascertaining the intention of the parties. This is so whether the instruments are actually contemporaneous or executed within a short interval of each other. In the case of Chattanatha Karayalar ( S.) v. Central Bank of India Ltd. [1965] 35 Comp. Cas. 610, the Supreme Court has held that if a transaction is contained in more documents than one, between the same parties, they must be read and interpreted together and have the same legal effect for all purposes as if they were one document. The submission of Mr. Tulzapurkar overlooks what is a ready forward transaction. A ready forward transaction is not a simple transaction of purchase or sale. It is a transaction of purchase or sale with a firm commitment to repurchase or resell. As seen earlier, it must be between the same parties in respect of....
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....The court held that this contract was prohibited under the Bombay Gambling Act, The court held that the contract also provided for a lawful contest of a game of skill between the two persons, the prize being the gate money. The court held, to that extent, the contract was lawful and could be enforced. Mr. Tulzapurkar also relied upon the authority in the case of Saundatti Municipality v. Shripadbhatt, AIR 1933 Bom 132. In this case, it has been held that where a part of the consideration is unlawful then the general rule is that when you cannot sever the illegal from the legal part of a contract the contract is altogether void. Mr. Tulzapurkar submitted that this shows that if it can be severed, then to the extent that the part of the contract is legal, it must be enforced. In my view this authority shows that when you cannot sever the illegal from the legal, the contract is altogether void. Mr. Tulzapurkar next relied upon the authority in the case of Bhagwat v. Anandarao, AIR 1925 Nagpur 302, wherein also it has been held that where there are legal and illegal objects and the legal and illegal transactions cannot be separated, the whole transaction is void. It is held that ....
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....be accepted. Even presuming that the court were to try to sever the ready part (first leg) from the forward part (second leg) the fact would still remain that in all matters before this court, the transactions are not between members of the stock exchange or by or through the members of the stock exchange. Therefore, even if the first leg is to be taken as a separate leg, it would still be illegal under the provisions of section 13 of the said Act. Mr. Tulzapurkar, however, submitted that it would not be illegal, because in that case it would be a "spot delivery contract". What this argument overlooks is that the contract remains one composite contract. In effect what Mr. Tulzapurkar wants the court to do is to convert a ready forward transaction into two spot delivery contracts. This cannot be done. The court cannot convert it into a spot delivery contract as is sought to be submitted. The court has to take it as it stands, i.e., a ready forward transaction and see whether any portion would be legal. This clearly shows that what is sought to be submitted is not just a severance of a part but a rewriting of the entire contract. This can never be done. It will thus have to be hel....
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....ed are "no transfer can be made". He submitted that neither under the said Act nor under the said Banking Act nor under the provisions of the Special Court Act is there any provision by which "transfers" once made can be avoided. He submitted that once a transfer has taken place, the third party becomes the owner of the property. He submitted that once the third party had become the owner of the property, the notified person no longer had any right, title or interest in that property. He submitted that in that case such a property would not stand attached under the provisions of the Special Court Act. He submitted that in all these matters, the parties have not come to court asking for specific performance of illegal contracts. He submitted that as and by way of caution and out of respect for the court, the parties have merely come to the court for a declaration that they have already become owners of the property. He submitted that this is to obviate any difficulties in future and to get a clear interpretation from the court. Mr. Doctor relied upon the authority in the case of Sajan Singh v. Sardara Ali [1960] AC 167. In this case, the maxim ex turpi causa non oritur actio was ....
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....immovable property has been executed and registered, the transaction "passes out of the domain of a mere contract into one of conveyance". He submitted that thereafter section 24 of the Contract Act no longer applies. Mr. Setalvad in his usual fair manner admitted that if a transfer has already taken place, prior to the date of notification, then the concerned property would no longer be property belonging to the notified person. Mr. Setalvad admitted that in such a case the concerned property would not stand attached.' Mr. Setalvad very fairly and, in my view, correctly stated that in such a case, i.e., where a transfer of ownership has taken place prior to the date of notification, the only remedy would be for the custodian to move under section 4 of the Special Court Act provided he has a right and the facts justify his so moving. Based upon the above Mr. Doctor further submitted that in cases where blank transfer forms along with share certificates have been handed over to a transferee, then in law that amounts to a transfer of property. He submitted that in such cases the transferee gets a right, title and interest in those shares. In support of his case, Mr. Doctor h....
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....re kept as security towards repayment of a debt. If they are merely kept as security, then again by such deposit no right is created in favour of the creditor. It is only after the agreed time of repayment is over that the security can be enforced and it is only at that stage that the creditor gets a right to fill in his name in the transfer forms and get his name transposed in the records of the company. If before this date the debtor is notified, then the shares/securities stand validly attached and the creditor can then only claim under section 11 of the Special Court Act. There may also be cases where the parties agree that certain shares be sold and out of the proceeds of those shares, a pre-existing debt be paid. The process of sale of shares may take place by the debtor or the creditor. If a sale is to be by the creditor, then blank transfer forms along with share certificates may be given to the creditor to sell the shares/securities and to pay himself out of the proceeds thereof. In such cases also no right, title or interest in the shares will be created in favour of the creditor. Thus in such a case, if on sale an excess amount is realised, then the excess must be handed....
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....or relied upon the authorities in the cases of Globe Financiers Pvt Ltd. v. Official Liquidator [1970] 40 Comp. Cas. 1161 (Delhi); Shiam Lal J. Diwan v. Official Liquidators of U.P. Oil Mills Co. Ltd. [1933] 3 Comp. Cas. 365; AIR 1933 All 789; B. Mehta and Co. v. Puranmal Bubna: Official Liquidator v. Puranmal Bubna [1979] 49 Comp. Cas. 98; Dr. Sailendra Nath Sinha v. Jasoda Dulal Adhikari [1963] 33 Comp. Cas. 1181 (Cal) and Mapleback, In re: Ex parte, Caldecott [1876] 4 Ch 150. Mr. Tulzapurkar relied upon the case of Belvoir Finance Co. Ltd. v. Stapleton [1970] 3 All ER 664 (CA) in support of his submission. Mr. Tulzapurkar also relied upon the authorities of Mapleback, In re [1876] 4 Ch 150 in support of the proposition that if a party to an illegal contract could not have recovered, then even a trustee in bankruptcy, of the property of such a party, could not recover. It should be noted that the above judgments and the principle laid down by Mulla are based on the principle that a person who is a party to an illegal contract cannot himself seek to recover and that the loss must lie where it falls, i.e., that the court will not assist a party to an illegal contract. Such a pri....
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....ory attachment was provided for. The Legislature was well aware that every single transaction would have to be enquired into. The whole purpose and object of the Act is to channel the enquiry into one forum so that one court can have before it the entire picture. It is, therefore, provided that it would be only the Special Court which can pass directions in respect of the property which stand attached. It is, therefore, provided that it would be the Special Court which would then distribute the property in the manner laid down under section 11(2). It is, therefore, provided, under section 13, that the provisions of the Act would prevail over all contracts, other Acts, decrees of courts, etc. It must also be remembered that most of the public moneys which were siphoned off into private pockets came from financial institutions and/or banks. If it was left to the financial institutions and/or banks to adopt legal proceedings for recovery of their dues, the reality of the situation would have been that it would have taken unduly long time. The claims of all these parties would not have been agitated or decided upon for a number of years because of the legal delays. The Special Court....
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....Custodian v. Infrastructure Leasing and Financial Services Ltd.) and 22nd July, 1993, in Miscellaneous Application No. 96 of 1992 (Bank of Baroda v. Fairgrowth Financial Services Ltd., Custodian and Rinki Industrial Oils Ltd. [1994] 80 Comp. Cas. 789) is very relevant and appropriate. Those orders bind all parties. Thus to accept the arguments that the loss must be allowed to stand where it lies would be to defeat the very purpose and object of the Special Court Act. It would mean permitting, by mode of illegal contracts, the notified parties to transfer public monies and/or properties acquired from them into the hands of third persons. Accepting such an argument would be to give effect to and permit such illegal transfer of public monies. To repeat, these are not cases where the custodian is seeking to recover anything or make a claim for anything or to put himself in a better position than a notified party. These are cases wherein there are statutory attachments and a statutory provision for distribution of property by the court. It is this court which has to recover the properties for the purposes of effective distribution under section 11(2) of the Act. One of the main objec....
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....stances, even if the court directs the various parties to return the securities, the court must at the same time direct restitution and order the custodian to pay out of the accounts of the notified parties the consideration which had been paid by the various parties for these securities. Mr. Sancheti relied upon the authorities in the cases of Ramagya Prasad Gupta v. Murli Prasad, AIR 1974 SC 1320, and Waman Shrinivas Kini's case, AIR 1959 SC 689, in support of this submission. Mr. Setalvad has submitted that, as the transactions are illegal and void from their inception, section 65 of the Contract Act would not apply. He submitted that the properties, i.e., shares and/or securities, continue to be property belonging to the notified parties. He submitted that they stand attached and there would be no question of restitution under section 65 of the Contract Act. In support of his submission, he had relied upon authorities in the cases of Kuju Collieries Ltd. v. Jharkhand Mines Ltd., AIR 1974 SC 1892 and Bhaskarrao Jageshwarrao Buty v. Saru Jadhaorao Tumble, AIR 1978 Bom 322. In my view, whether or not a party was aware, at the time that he entered into the contract, that i....