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Under Section 16 of the SCRA, the Central Government may by notification prohibit contracts in certain specified securities in a State or area, to prevent undesirable speculation. What is the legal status of a contract entered into in contravention of such a notification?
Answer & Solution
Correct answer: A.
1. Section 16 lets the CG prohibit contracts in certain securities in a particular State or area.
2. The aim is to prevent undesirable speculation in specified securities.
3. The statute states that any contract entered into in contravention of such a notification shall be illegal.
4. Illegality is the operative consequence, not mere voidability or a softer penalty.
_Source: ICSI CS Executive Paper 6 (Securities Laws and Capital Markets) — Lesson 1: Securities Contracts (Regulation) Act, 1956, pp. 4-21._
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