PRESENTATION ON CONTRAVENTION AND PENALTIES UNDER FEMA , 1999. By: ARVIND SALVI. 2015 Slide 1
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 of 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. Slide 2
FEMA : Architecture & Mechanism Passed by the Parliament – the Legislature Current Account by the Act – FEMA Government Rules – Current A/C AP Dir Circulars Notifications to APs Regulations- Capital A/C Notified in the All procefural aspect Gazette – by the of Forex transactions Executive by the RBI. [ Master Circulars for Capital Account by guidance . ] the RBI 3 Slide 3
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. 4 Slide 4
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] . 5 Slide 5
Legal Position : Section 13 – Contravention of Act Rules, Regulations, Notifications, Directions or Orders Slide 6
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. Slide 7
Methods to deal with contraventions... Compounding ; Adjudication ; Appeals ; FERA contraventions : Sun set clause; Contraventions by Authorised Persons . Slide 8
Compounding of Contravention What does it mean ? 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.. Slide 9
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. Slide 10
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. Slide 11
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. Slide 12
Detection of contravention Voluntary disclosure; Information from Ads; Analysis of data; Market Intelligence; RBI’s inspections; Others – Media reporting / complaints. Slide 13
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. Slide 14
Examination by RBI contd.. The compounding application is disposed of on 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 . Slide 15
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 or continued. Absolutely transparent. Slide 16
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- out 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. Slide 17
QUESTIONS?? Slide 18
THANK YOU Slide 19
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