Penalties under FEMA Act,1999

[RAMASWAMY Advocate]

The Foreign Exchange Management Act, applies to all Offices, Branches and agencies situated outside India either owned or controlled by a person resident in India. This Act applies to any contravention committed outside India by any person. Person is defined u/s 2 (u) of the Act.

Section 2 (v) of the Act specifies  any person who resides in India for more than one hundred and eighty days during the preceding financial year  is "person resident in India".  The section also has an exclusion clause.

Penalties under FEMA- Section 13 of the Act contemplates that any person contravenes any of the provision, rules, directions regulations, notifications, including Reserve Bank authorization etc, such person upon an adjudication liable on quantifiable  amount to a penalty up to three times sums involved in such contravention, or two lakh in case if the amount is not quantifiable, Further in the case of regular contravener, a penalty of five thousand rupees from the first day of contravention is imposable on such person..

Where any person found to have acquired any foreign exchange, securities or immovable property situated outside India  exceeding the threshold amount prescribed under section 37A of the Act, is  liable to a penalty up to three times the sum involved in contravention, and liable for confiscation of value equivalent to foreign exchange, securities, and immovable property situated in India. The Act, In addition to the penalties under section 13 (1) (A), the sub section (1-C) empowers punishment with five years imprisonment with fine.

To illustrate "Property" includes deposits in a bank, i.e.where the contravention property converted into bank deposits,Indian currency and other property.

To sum up the Act envisages that no person resident in India can acquire,own,hold,transfer or possess any foreign exchange, foreign security or any immovable property located outside India. In Contravention of the above, the FEMA would get into role of action.  The above analysis is only at glance and not exhaustive, readers may kindly look in to amendment if any on the above Act.