I'm not sure what you are saying here. If the seat is occupied, the brake is on, and cutter clutch is disengaged, the engine should run unless it is stopped by the master switch being in the off position. To stop the engine if the master switch is not working properly you would have to have no one on the seat, and the brake off, or no one on the seat, and the cutter clutch engaged. Try that - carefully, and stay away from the cutter, and don't get in front of or behind the mower. If it stops under those circumstances - no one on the seat and the brake off or the cutter running - but doesn't stop when you switch off the master switch, there is something wrong with the master switch or the wires attached to it.
Terminal numbers on the handbrake switch are not given on the wiring diagram. The blue wire connects to an orange wire which goes to terminal 4 (fourth clockwise, viewed from the back of the switch) on the master switch. The green wire connects to another orange wire which goes to the starter solenoid. The purpose of those wires, and that part of the switch, is to keep the starter from working unless the handbrake is on. The green and blue wires should be connected to each other when the handbrake is on. If they are not, chances are the starter will not work, unless the wiring is messed up.
The black and red wires are in the kill switch circuit. They should be connected to each other when the handbrake is off. If the handbrake is on, the engine will still run even if there is nobody on the seat, as long as the cutter clutch is disengaged.
Please come back with the results of the first set of tests: will the engine keep running with no one on the seat, and the handbrake off?
