TMI BlogMaster Circular on Compounding of Contraventions under FEMA, 1999X X X X Extracts X X X X X X X X Extracts X X X X ..... Category I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (B.P.Kanungo) Principal Chief General Manager INDEX General Compounding Powers Delegation of Powers Process of Compounding Scope and Manner of Compounding Issue of the Compounding Order Post-compounding Procedure Pre-requisites of Compounding Annex I. Foreign Exchange (Compounding Rules), 2000 Format of Application II. Details to be furnished for FDI,ECB,ODI,LO/BO III. ECS Mandate Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated 1. General 1.1 In terms of Section 13(1) , Chapter IV of FEMA 1999 , if any person contravenes any provision of FEMA, 1999 , or any rule, regulation, notification, direction or order issued in exercise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, no proceeding or further proceeding will be initiated or continued, as the case may be, against the contravener. 3. Delegation of Powers 3.1 As a measure of customer service and in order to facilitate the operational convenience, compounding powers were delegated to the Regional Offices of the Reserve Bank of India to compound the following contraventions of FEMA , 1999 : Sr. No. FEMA Regulation Brief Description of Contravention 1 Paragraph 9(1)(A) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in reporting inward remittance received 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, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to complete the compounding process within the time frame. 4.3 All applications for compounding whether on the advice of the Regional Office concerned or suo-moto, relating to the contraventions mentioned at paragraph 3.1 (a) and (b) above and up to the amount of contravention stated therein, may be submitted by the companies/individuals falling under the jurisdiction of the aforesaid Regional Offices directly to the Regional Office concerned, together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of Reserve Bank of India and payable at the concerned Regional Office. Applications for compounding of all other contraventions together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of Reserve Bank of India and payable at Mumbai may be submitted to: The Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, 5th floor, Amar Building, Sir P.M. Road, Fort, Mumbai- 400001. 4.4 On receipt of the application for compounding, the proceedings would be concluded and an order issued by the CA within 180 days from the date of the receipt of the application for compounding. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Foreign Exchange Management Act, 1999 read with Rule 9 of Foreign Exchange (Compounding Proceedings) Rules, 2000 . 4.9 The disposal of the compounding application is made by issue of a Compounding Order specifying the provisions of FEMA,1999 or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999 , in respect of which contravention has taken place. 4.10 Where there is sufficient cause for further investigation, the Reserve Bank may refer the matter to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999 , or to the Anti- Money Laundering Authority instituted under the Prevention of Money Laundering Act (PMLA), 2002 or to any other agencies, as deemed fit. Such applications will be disposed of by returning the application to the applicant. 5. Scope and Manner of Compounding 5.1 The CA will exercise jurisdiction in respect of the contraventions admitted to have been committed in relation to any of the provisions of the FEMA, 1999 , or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999 . 5.2 The applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the averments made in the application as well as other documents and submissions made in this context by the contravener during the personal hearings, if any. 6.3 Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16 of FEMA, 1999 as the case may be, one copy of the compounding order made under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 will be provided to the applicant (the contravener) and also to the Adjudicating Authority. 7. Post-compounding procedure 7.1 The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 is payable by way of a demand draft in favour of the Reserve Bank of India within fifteen days from the date of the order of compounding of such contravention. The demand draft has to be deposited in the manner as directed in the compounding order. 7.2 On realization of the demand draft for the sum for which contravention is compounded, a certificate in this regard shall be issued by the Reserve Bank subject to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd December 13, 2011 respectively. 8.3 Cases of contravention, such as, those having a money laundering angle, national security concern and / or involving serious infringements of the regulatory framework or where the contravener fails to pay the sum for which contravention was compounded within the specified period in terms of the compounding order, shall be referred to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999 or to the authority instituted for implementation of the Prevention of Money Laundering Act 2002, (PMLA) or to any other agencies, for necessary action , as deemed fit. 8.4 The Reserve Bank generally advises the persons concerned of their choice and option to make an application for compounding as and when such contraventions come to its notice. The facts constituting such contraventions will be brought to the notice of the Directorate of Enforcement in case no application for compounding is made within the time indicated by the Reserve Bank. Authorised Dealers may take necessary steps to ensure that checks and balances are incorporated in systems relating to dealing with and reporting of foreign exchange tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer of Reserve Bank to compound contravention - [(1) If any Person contravenes any provisions of Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of the Act .] (a) in case where the sum involved in such contravention is ten lakhs rupees or below, by the Assistant General Manager of the Reserve Bank of India; (b) in case where the sum involved in such contravention is more than rupees ten lakhs but less than rupees forty lakhs, by the Deputy General Manager of Reserve Bank of India; (c) in case where the sum involved in the contravention is rupees forty lakhs or more but less than rupees hundred lakhs by the General Manager of Reserve Bank of India; (d) in case the sum involved in such contravention is rupees one hundred lakhs or more, by the Chief General Manager of the Reserve Bank of India; Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be a first contravention. (3) Every officer of the Directorate of Enforcement specified under sub-rule (1) of this rule shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Director of Enforcement. (4) Every application for compounding any contravention under this rule shall be made in Form to the Director, Directorate of Enforcement, New Delhi, along with a fee of Rs.5000 by DD in favour of the Compounding Authority. 6. Where any contravention is compounded before the adjudication of any contravention under section 16 , no inquiry shall be held for adjudication of such contravention in relation to such contravention against the person in relation to whom the contravention is so compounded. 7. Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16 , such compounding shall be brought by the authority specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of the compounding of the contravention being given, the person in relation to whom the contravention is so compounded shall be dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declare that the particulars given above are true and correct to the best of my/our knowledge and belief and that I/We am/are willing to accept any direction/order of the Compounding Authority in connection with compounding of my/our case. Dated : (Signature of the Applicant) Name Annex-II- FDI Details to be furnished along with application for compounding of contravention relating to Foreign Direct Investment in India Name of the applicant Date of incorporation Income-tax PAN Nature of activities under taken (Please give NIC code 1987) Brief particulars about the foreign investor Details of foreign inward remittances received by Applicant Company from date of incorporation till date Table A Sl.No. Name of Remitter Total Amount (INR) Date of Receipt Reported to RBI on* Delay if any Total * date of reporting to RBI and not AD Table B Name of Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of draw down Amount in Foreign Currency Amount in INR Details of LRN Number- application and receipt Details of ECB 2 returns submitted; Period of return: Date of submission Details of Utilization of ECB in Foreign Currency and Indian Rupee Nature of contravention and reasons for the contravention All supporting documents may be submitted Annex II- ODI Details to be furnished along with application for compounding of contravention relating to Overseas Investment Name of the applicant Date of incorporation Income-tax PAN Nature of activities under taken (Please give NIC code 1987) Name of Overseas entity Date of incorporation of overseas entity Nature of activities under taken by overseas entity Nature of entity- WOS/JV Details of remittance sent- Date of remittance; Amount in FCY and in INR Details of other financial Commitment Details of UIN applied and received Date of receipt of share certificate Approval of other regulators if required Details of APRs submitted: For t ..... 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