If You have Inward remittances or outward remittances being in India please make sure you are complying the provisions of Foreign Exchange Management Act amended time to time by Reserve Bank of India .
Main Authorities which have legal ambit on the Inward Remittances and outward remittances are as follows:-
1.Enforcement Directorate.
2.Reserve Bank of India.
3. Compounding Authority.
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Main Authorities which have legal ambit on the Inward Remittances and outward remittances are as follows:-
1.Enforcement Directorate.
2.Reserve Bank of India.
3. Compounding Authority.
What is meant by contravention and compounding of contravention?
Ans. Contravention is a breach of the provisions of the Foreign Exchange Management Act (FEMA), 1999 and rules/ regulations/ notification/ orders/ directions/ circulars issued there under. Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. The Reserve Bank is empowered to compound any contraventions as defined under section 13 of FEMA, 1999 except the contravention under section 3(a)for a specified sum after offering an opportunity of personal hearing to the contravener. It is a voluntary process in which an individual or a corporate seeks compounding of an admitted contravention. It provides comfort to any person who contravenes any provisions of FEMA, 1999 [except section 3(a) of the Act] by minimizing transaction costs. Willful, malafide and fraudulent transactions are, however, viewed seriously, which will not be compounded by the Reserve Bank.
What matters, which can be compounded under FEMA 1999 as follows:-
1
|
Paragraph 9(1)(A) of
Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Delay in reporting
inward remittance for issue of shares.
|
2
|
Paragraph 9(1)(B) of
Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Delay in filing form
FC(GPR) after issue of shares.
|
3
|
Paragraph 8 of
Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Delay in issue of
shares/refund of share application money beyond 180 days, mode of receipt of
funds, etc.
|
4
|
Paragraph 5 of
Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Violation of pricing
guidelines for issue of shares.
|
5
|
Regulation 2(ii) read
with Regulation 5(1) of FEMA 20/2000-RB dated May 3, 2000
|
Issue of ineligible
instruments such as non-convertible debentures, partly paid shares, shares
with optionality clause, etc.
|
6
|
Paragraph 2 or 3 of
Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Issue of shares
without approval of RBI or FIPB respectively, wherever required.
|
7
|
Regulation 10A (b)(i)
read with paragraph 10 of Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Delay in submission of
form FC-TRS on transfer of shares from Resident to Non-Resident.
|
8
|
Regulation 10B (2)
read with paragraph 10 of Schedule I to FEMA 20/2000-RB dated May 3, 2000
|
Delay in submission of
form FC-TRS on transfer of shares from Non-Resident to Resident.
|
9
|
Regulation 4 of FEMA
20/2000-RB dated May 3, 2000
|
Taking on record
transfer of shares by investee company, in the absence of certified from
FC-TRS.
|
Sr. No.
|
FEMA Notification
|
Brief Description of Contravention
|
1
| FEMA 7/2000-RB, dated 3-5-2000 | Contraventions relating to acquisition and transfer of immovable property outside India |
2
| FEMA 21/2000-RB, dated 3-5-2000 | Contraventions relating to acquisition and transfer of immovable property in India |
3
| FEMA 22/2000-RB, dated 3-5-2000 | Contraventions relating to establishment in India of Branch office ,Liaison Office or project office |
4
| FEMA 5/2000-RB, dated 3-5-2000 | Contraventions falling under Foreign Exchange Management (Deposit) Regulations , 2000 |
Compounding application to Enforcement Directorate can be made by following ways:-
1. SUO MOTTO
2.Becoming aware of contravention.
3.Advised of contravention by memorandum of RBI or by the adjudicating officer of Enforecement Directorate.
Process of application compile a application in prescribed format to ED as compounding petition to respective ED branch Address with RS 5000 of Demand Draft in favor of Director of Directorate of Enforcement .
Compounding broadly aplly in following contraventions:-
1.Delay in reporting remittances.
2.Delay in filling FORM FCGPR after allotment withing 30 days.
3.180 days passed of inward remittances but shares not issued.
4.Any violation of pricing guidelines for issue of shares.
5.Issuing any ineligible instruments in the likes of partly paid shares,shares with optional clauses.
6.Shares issued without RBI permission.
All regional offices of RBI can compound upto RS 100 lacs matters for FEMA contraventions under FEMA 1999 laws.
Application of Compounding under the prescribed rules with respective documents ,DD, in RBI favor and respective following annexures must follow accordingly:
1. ANNEXURE 1 FDI
2. ANNEXURE 2 ECB
3.ANNEXURE 3 ODI
4.ANNEXURE 4 Branch Office/Liasion Office.
A Important NOTE:-
Compounding cannot be done against the final order passed by Adjudicating officer after adjudicating proceeding.
Application received by compounding Authority within 180 days of receipt of application must conclude the proceeding and record any document needed in the proceeding thereon within stipulated time limit.
A application of Compounding might get rejected if within 30 days contravenor is not able to produce the document required by Compounding Authority and submit the same to C.A.
If Contravenor not able to submit the penalty amount levied under compounding proceeding being directed by Compounding Authority within 15 days of order to do so under final order passed by C.A. then whole application of Compounding deemed to be canceled.
A matter which is already in adjudication process but no final order passed by the adjudication officer then the same matter can be compounded under FEMA COMPOUNDING under fema laws.
Money Laundering, National Security or Serious infringement matters referred to Enforcement Directorate under section 37 .
If Contravenor again commit the same contraventions after lapse but within 3 years from first compounding under fema then same being referred to Enforcement Directorate.
Under A.P DIR Series circular no 56 following things comes in to action:-
1. RBI examine documents ,submission's and assess amount of contravention if quantifiable can go to compounding.
2.RBI also examine following:-
a) Contravention technical/ minor in nature and whether it needs administrative cautionary.
b) Contravention serious and warrants compounding.
c)Money Laundering, National security or Serious infringement dealt by enforcement Directorate cautiously.
3.Compounding Authority checks following :-
a)Amount of gain / unfair involved in contravention.
b)Amount of loss caused to agent/agency or to exchequer.
c)Repetitive contravention or track record of same.
d)Contravenor conduct and disclosures of transactions given by him and how.
DISCLAIMER:- This article is authors personal observations and research made by him over a period of time and any Fact or matter out of it must not be taken as conclusive or exclusive facts for deciding a case by any professional and cases can vary from contravenor to contraventions involved so this is research article only.
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