FUTURE CONTRACTS
A futures contract means a legally binding contract to buy or sell the
underlying securities {which would cover shares or debentures} on a
future date specified in the contract, but the one which can be settled
either by delivery of the underlying securities or in cash, i.e., by paying or
receiving cash equal to the difference between the price contracted earlier
and the price in the spot market at maturity.
OPTION CONTRACTS
An options contract is one that gives the buyer the right but not the
obligation to buy/sell the underlying securities {which would cover shares
or debentures} at the contracted price within or at the date specified in
the contract. Thus, the buyer or holder of the option purchases the right
to the option from the seller who is thus contractually bound to settle the
option when the buyer exercises the right. The option to buy or sell the
securities in future may be a teji, a mandi, a teji mandi, a galli, a put
or a put and call option. An option to buy is called call option and an
option to sell a put option.
PROHIBITION ON BUYING OF RIGHT IN SHARES/DEBENTURES
The sub section {1} of section 194 prohibits the following persons: Any director of a company, or
any of key managerial personnel of a company
from buying: in the company, or
in its holding company, or
in its subsidiary company, or
in its associate company,
{a} the following: a right to call for delivery, or
a right to make delivery,
CONTRAVENTION
This is a penal sub section {2} stating that if a director or any key
managerial personnel of the company contravenes the provisions of subsection (1), such director or key managerial personnel shall be
punishable: with imprisonment for a term which may extend to two years, {but
no minimum term has been laid down}, or
with fine which shall not be less than one lakh rupees but which
may be maximum of five lakh rupees, or
with both.
SURRENDER OF SHARES/ DEBENTURES
The last sub section {3} lays down the consequences of
contravention and provides that where a director or other key
managerial personnel acquires any securities { which only refers to
shares or debentures in sub section [1]} in contravention of subsection (1), he shall, subject to the provisions contained in subsection (2), be liable to surrender the same to the company.
Moreover the company is prohibited to register the transfer of the
securities, {which only refer to shares and debentures}, in physical
form, so acquired in the name of the director or other key
managerial personnel, in its register of members or debenture
holders. In case the shares/debentures are in dematerialised form,
the company shall inform the depository not to record such
acquisition of shares/debentures.
AMITAV GANGULY
4th August 2015