SCRA, 1956 – An Act to Prevent the Undesirable Transactions in Securities (With Insights from the Gorwala Committee Report)

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Post world war II, a boom in share prices put stock exchanges in the spotlight of attention. As India adopted its Constitution in 1950, stock exchanges became the subject of the Central Government. Simultaneously, a bill for the regulation of forward contracts was introduced in Parliament but the same did not cover trading in securities. In this background, in order to assist the government in formulating legislation for the regulation of stock exchanges and of contracts in securities, the Government of India appointed a committee headed by Mr. A D. Gorwala in 1951. The committee was mandated to submit a revised draft bill with proposals to regulate stock exchanges. The Committee submitted its report and draft bill in July 1951. The summary and recommendations of the committee were presented in Parliament on October 6, 1951. Acting on these recommendations, the Securities Contracts (Regulation) Bill was introduced in Parliament on December 24, 1954. Thereafter, the Securities Contracts (Regulation) Act was passed in 1956, with the accompanying Securities Contracts (Regulation) Rules enforced in 1957, for the regulation of stock exchanges. The report devoted one chapter to the constitution of the Stock Exchange Commission for exercising functions and discharge duties assigned under the proposed Act, namely, SCRA. This suggestion was upheld by many subsequent committees in their reports until the formation of Securities and Exchange Board of India (SEBI) in 1988.

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