Penalties under FEMA Act [ Section 13 ] - FEMA Ready Reckoner - FEMA

Penalties under FEMA In terms of section 13(1) of FEMA Act,1999 The provisions of this section 13(1 ) are applicable to every person irrespective of his nationality or residential status under the act. Section 13 deals with the contravention of FEMA as a civil offence. Adverting to the penalty proceedings, in the context of section 23(1)(a) of FERA Act, 1947 ( Section 14 of FEMA Act,1999), the M.R. Pratap v Director of enforcement 1969 Cr. lj 1582, Madras High Court has held that the proceeding under that section are civil proceeding and the nature of the proceedings was not changed by the introduction of section 23D of FERA Act,1947 ( Section 16 of FEMA Act,1999) so as to make the same criminal proceedings, notwithstanding the fact that the same are drastic in nature. Section 13(1) empowers the adjudicating Authority, upon adjudication, to impose penalty for three types of contravention under the act. First, one is the contravention of the provision of act, Second one is the contravention of any rules, regulation notification or order made under the act is also punishable. Finally contravention of any condition subject to which an authorisation issued by the Reserve Bank is also punishable in terms of section 13(1). Under this section Quantum of penalty would depend on following two factors: (i) Quantifiability of the sum involved in the contravention, penalty up to where such amount is quantifiable :- thrice the sum involved in such contravention Where such amount not quantifiable :- upto Rs. 2 lakhs (ii) Frequency of the alleged act leading to the contravention- whether one Time or continuing . in the continuing contravention, there is additional penalty over and above the main penalty. further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. Consequences of holding certain assets outside India in contravention [ Section 13(1A) to (1D) ] This is new provision of section 13 (1A) to (1D) inserted by the finance Act, 2015 and came into force vide notification no. F.NO.1/29/EM/2014 - S.O. 2454(E) - Foreign Exchange Management on 8 September 2015 Penalty and confiscation of value equivalent [ Section 13(1A) ] If any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, of the aggregate value exceeding the threshold prescribed under the proviso of section 37A(1) of FEMA Act,1999 Quantum of Penalty :- He shall be liable to a penalty up to three times the sum involved in such contravention and confiscation of the value equivalent, situated in India, the Foreign exchange, foreign security or immovable property. in addition to the penalty imposed under section 13(1A), punishable with imprisonment for a term which may extend to five years and with fine. [ Section 13(1C) ] Prosecution Section [ Section 13(1B) ] If the Adjudicating Authority, in a proceeding under sub-section (1A) deems fits may recommend for the initiation of prosecution, after recording the reasons in writing, and If the Director of Enforcement (ED) is satisfied , he may, after recording the reasons in writing, may direct prosecution by filing a Criminal Complaint against the guilty person by an officer not below the rank of Assistant Director. Complaint [ Section 13(1D) ] No court shall take cognizance of an offence only on complaint in writing by an officer not below the rank of Assistant Director. Confiscation : Section 13(2) Any Adjudicating Authority adjudging any contravention under section 13(1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf. For the purposes of this section (a) deposits in a bank, where the said property is converted into such deposits; (b) Indian currency, where the said property is converted into that currency; and (c) any other property which has resulted out of the conversion of that property. Appointment of adjudicating authorities to hold an inquiry for the purpose of adjudication under section 13 of the Foreign Exchange Management Act, 1999 [Notification no. S.O. 2128 (E) Dated May 2023 such notification superseded to notification S.O. 4990(E) dated 27.09.2018 ] Sl. No. Designation of Officers Monetary limit (1) (2) (3) (1) Special Director of Enforcement Cases involving amount exceeding rupees twenty five crores. (2) Additional Director of Enforcement Cases involving amount upto rupees twenty five crores but not less than five crores. (3) Joint Director of Enforcement Cases involving amount upto rupees twenty five crores but not less than five crores. (4) Deputy Director of Enforcement Cases involving amount upto rupees five crores and not less than two crores. (5) Assistant Director of Enforcement Cases involved of amount not exceeding rupees two crores.