The Ministry of Finance commissioned a report in 1951 to comprehensively study the framework for regulating stock exchanges across the country. The committee, chaired by A. D. Gorwala of the Indian Civil Service and comprised K. R. P. Shroff; B. N. Chaturvedi; V. S. Krishnaswamy; Pranlal Devkaran Nanjee; L. S. Vaidyanathan; P. D. Himatsinghka; Jagmohandas J. Kapadia; G. P. Kapadia; and P. S. Nadkarni (Secretary) as members. It was tasked with examining draft proposals and recommending legislation to govern stock exchanges and securities contracts. This initiative was prompted by concerns over the functioning of stock exchanges and futures markets in India as well as the need for uniform, nationwide regulation. The committee recognized that while stock exchanges serve a legitimate economic function by providing a market for buying and selling shares, they require proper regulation to ensure their smooth operation and protect the public interest.

The report emphasized the need for both external and internal regulation of stock exchanges. External regulation would involve government control, including the power to amend exchange rules and bylaws, nominate representatives to governing bodies, and intervene during emergencies. Internal regulation would be achieved through well-defined exchange bylaws and their strict enforcement. The committee recommended establishing a stock exchange commission to oversee exchange operations and advise the central government on them. They also proposed organizing stock exchanges as regional monopolies to ensure unitary control and maintain high operational standards. A central focus was on managing speculation, which the committee acknowledged as necessary for market liquidity but requiring careful control to prevent unhealthy practices. It suggested that all transactions, except spot contracts, should be conducted through recognized exchanges and fall under regulatory purview.

The report recommended requiring public companies to list their securities on recognized stock exchanges to ensure all trades involving these securities fall under regulatory oversight. It also proposed limiting the validity of blank transfers to six months. A blank transfer, where a shareholder signs a transfer form without specifying the transferee, allows shares to be transferred at a later date; restricting its validity aimed to prevent misuse and encourage timely registration of ownership. Furthermore, the report emphasized linking the right to receive dividends to proper registration of shares, promoting accurate shareholder records and accountability. The committee also highlighted the need for strictly enforcing regulations and bylaws by exchanges’ governing authorities, establishing clearing houses for transparent settlement of contracts, and implementing periodic settlements to limit speculative positions. The report stressed the importance of enforcing rules without fear or favor, recognizing that while having a sound code is crucial, its observance is equally important for the effective functioning of stock exchanges. Overall, the Gorwala Report laid the foundation for comprehensive stock market regulation in India, balancing the need for market efficiency with investor protection and public interest.

The Gorwala Report addressed issues such as the lack of regulatory oversight, speculative practices, and inadequate share registration. It recommended mandatory listing of public company securities, stricter controls on speculative transactions, and linking dividend rights to proper registration. These measures formed the basis for the Securities Contracts (Regulation) Act of 1956, ensuring structured and accountable stock exchange operations.