By: ARVIND SALVI. 2015 Slide 1 Foreign Exchange Management Act, - - PowerPoint PPT Presentation

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PRESENTATION ON CONTRAVENTION AND PENALTIES UNDER FEMA , 1999. By: ARVIND SALVI. 2015

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Foreign Exchange Management Act, 1999

 FEMA came into force with effect from June 1, 2000.  The objective of facilitating external trade and payments for

promoting the orderly development and maintenance of foreign exchange market in India.

 There is a paradigm shift from objective under FERA viz.

controlling /conversation of foreign exchange for utilisation

• f economic development of the country.

 With this shift in objective in mind there was also a shift in

dealing with the issue relating to penal provisions.

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FEMA : Architecture & Mechanism

Act – FEMA Notifications Rules – Current A/C Regulations- Capital A/C AP Dir Circulars to APs

Passed by the Parliament – the Legislature Notified in the Gazette – by the Executive Current Account by the Government Capital Account by the RBI All procefural aspect

• f Forex transactions

by the RBI. [ Master Circulars for guidance . ]

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Compliance under FEMA..

• Compliance means, compliance of the

provisions of FEMA 1999, any rule, regulation, notification, direction or order issued in exercise of the powers under this Act.

• Three stages of compliance :-
• Before undertaking the transaction;
• While undertaking the transaction; and
• After undertaking the transaction.

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Penal provisions….

 Governed by Chapter IV viz. Contravention and

penalties.

• Sec 13: Penalties.
• Sec 14: Enforcement of the order of the

Adjudication Authority.

• Sec 15:Powers to Compound contravention

RBI / DoE [A.P(Dir ) No. 56/2010)].

• Sec 49: Sunset clause [ FERA violations] .

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Legal Position :

 Section 13 – Contravention of

 Act  Rules,  Regulations,  Notifications,  Directions or  Orders

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Penalties – (prescribed under Sec.13)

 Up to thrice the sum involved in such contravention where such amount is quantifiable.  Or up to two lakh rupees where the amount is not quantifiable.  And where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.

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Methods to deal with contraventions...

 Compounding ;  Adjudication ;  Appeals ;  FERA contraventions : Sun set clause;  Contraventions by Authorised Persons .

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Compounding of Contravention

Settle an offence committed by the contravener through imposition of a monetary penalty without going in for litigation after the contravener acknowledges voluntarily having committed the contravention..

What does it mean ?

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Legal position contd..

 Powers to compound (Section 15) - any

contravention under Section 13 may, on application made by the person committing such contravention, be compounded within 180 days from the date of application by –

 Directorate of Enforcement.  Reserve Bank of India.

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Powers to compound….

RESERVE BANK :

 Sec.3 – Dealing in Foreign Exchange  Sec.4 – Holding of foreign currency  Sec.5 – Current account transactions  Sec.6 – Capital account transactions  Sec.7 – Export of goods and services  Sec.8 – Realisation and repatriation of FE  Sec.9 – Exemption from realisation & repatriation  Sec.10.6 – Mis-utilisation of FE

DIRECTORATE OF ENFORCEMENT :

 Sec.3(a) i.e Hawala transactions.

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NOT COMPOUNDABLE..

 If an appeal under Sec. 17 or 19 of FEMA filed;  The contravention is not quantifiable;  A contravention has been finally adjudicated

and disposed off by the Adjudication Authority;

 Contraventions related to any transaction

without proper approval or permission form the concerned Govt. or any Statutory Authority : the requisite approval not obtained;

 A contravention, prima facie, involves money

laundering, security, etc., & needs investigation.

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Detection of contravention

 Voluntary disclosure;  Information from Ads;  Analysis of data;  Market Intelligence;  RBI’s inspections;  Others – Media reporting / complaints.

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Compounding Process -

 Receipt of application;  Receipt of fees;  Examination by RBI;  Calling for additional documents, if required;  Opportunity of personal hearing;  Passing of Compounding Order;  Payment of penalty; and  Issuance of Certificate for payment of penalty.

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Examination by RBI contd..

The compounding application is disposed of

• n merits , upon consideration of records

and submissions made by the applicant in the application as well as during the personal hearing and at the absolute discretion of the Compounding Authority.

Compounding Authority acts under the

supervision of the Governor of the RBI.

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Benefits -

 Comforts to citizens and corporate community.  Mandatory personal hearing .  Minimum transaction cost.  Time-bound disposal (180 days).  Simple and hassle-free procedure.  No proceedings or further proceedings initiated

• r continued.

 Absolutely transparent.

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COMMON CONTRAVENTIONS..

 ECB : - Draw down without LRN;

• allowing draw down under auto route from

unrecognised lender, to ineligible borrower, for non-permitted end uses.

 ODI : - Second & subsequent remittances with-

• ut obtaining UIN form RBI to JV/WOS;
• Non-submission of APR, copy of share

certificate to Ads.

 FDI : - Delay/non-filing of Inflow, FC-GPR, FC-

TRS or other reporting returns to RBI.

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QUESTIONS??

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THANK YOU