The Bombay High Court in the matter of Percept Finserve Pvt Ltd & Anr. versus Edelweiss Financial Services Ltd., ruled that a Share Purchase Agreement (SPA), which gives an option to the purchaser to require the seller/vendor to repurchase the shares on the occurrence of a contingency, does not constitute a ‘forward contract’ and thus, the same is enforceable.

The Bombay High Court held that merely because the contract contains a “put option” in respect of securities, the contract cannot be termed as a trade or contract in derivatives. The Court further ruled that the Arbitrator’s views that the repurchase option contained in the SPA was a forward contract and thus, illegal and unenforceable, was an incorrect view.

Thus, the Court held that the option (“put” or “call”) contemplated under the SPA was not prohibited in law.