TMI BlogMaster Circular on Compounding of Contraventions under FEMA, 1999.X X X X Extracts X X X X X X X X Extracts X X X X ..... General 3 Compounding Powers 3 Delegation of Powers 4 Process of Compounding 4 Scope and Manner of Compounding 6 Issue of the Compounding Order 7 Post-compounding Procedure 7 Pre-requisites of Compounding 8 Annex Foreign Exchange (Compounding Rules), 2000 Format of Application Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated 1 General 1.1 If any person contravenes any provision of FEMA, 1999, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where the amount is quantifiable or up to Rupees Two lakh, where the amount is not quantifiable and where the contravention is a continuing one, further penalty which may extend to Rupees Five thousand for every day after the first day during which the contravention continues (Section 13(1), Chapter IV of FEMA, 1999). In term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contraventions of FEMA involving (i) delay in reporting of inward remittance, (ii) delay in filing of form FC-GPR after allotment of shares and (iii) delay in issue of shares beyond 180 days (viz. paragraphs 9(1)(A), 9(1)(B) and 8, respectively, of the Schedule I to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated 3rd May 2000 and as amended from time to time: a) Paragraphs 9 (1) (A) and 9 (1) (B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 - Bhopal, Bhubaneshwar, Chandigarh, Guwahati, Jaipur, Jammu, Kanpur, Kochi, Patna and Panaji for amount of contravention below Rupees One hundred lakh only (Rs. 1,00,00,000 /-). b) Paragraphs 9 (1) (A), 9 (1) (B) and 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 - Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi for amount of contravention without any limit. 4. Process of Compounding 4.1 An application for compounding of a contravention under FEMA, 1999 may be submitted to the Compounding Authority (CA) on being advised of a contravention under FEMA, 1999, either thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the Foreign Exchange (Compounding Proceedings) Rules, 2000 and assess whether the contravention is compoundable and if so, the amount of contravention is accordingly quantified. 4.6 The nature of contravention is ascertained keeping in view, inter alia, the following indicative points : a. whether the contravention is technical and / or minor in nature and needs only an administrative cautionary advice; b. whether the contravention is serious in nature and warrants compounding of the contravention; and c. whether the contravention, prima facie, involves money-laundering, national and security concerns involving serious infringement of the regulatory framework. However, the Reserve Bank reserves the right to classify the contraventions as stated above and neither the contravener nor others have any right to classify any contravention as technical suo moto. 4.7 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. 4.8 The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pounding Order 6.1 An opportunity for personal hearing is given to the applicant for further submission of documents in person in support of the application within a specified period. If the contravener or its authorized representative fails to appear in person or make any submissions before the CA for personal hearing, the CA may proceed with the processing of the compounding application on the basis of information and documents available in the application for compounding. 6.2 The Compounding Authority will pass a compounding order on 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 spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments 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. Annex-I Foreign Exchange (Compounding Proceedings) Rules, 2000 Notification No. G.S.R.383(E) dated 3rd May 2000 As amended vide G.S.R.443(E) dated November 2, 2002 G.S.R. 609 (E) dated September 13, 2004 and G.S.R. 613 (E) dated August 27, 2008 In exercise of the powers conferred by section 46 read with sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntravention 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 these rules. Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Governor of the Reserve Bank of India. (4) Every application for compounding any contravention under this rule shall be made in Form to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai along with a fee of Rs. 5000/- by Demand Draft in favour of compounding authority. 5. The Power of Enforcement Directorate to compound contraventions 2[(1) If any Person contravenes prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 discharged. 8. Procedure for Compounding - (1) The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. (2) The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible as and not later than 180 days from the date of application. 9. Payment of amount compounded - 3The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of rule 8, shall be paid by demand draft in favour of the Compounding Authority within fifteen days from the date of the order of compounding of such contravention. 10. In case a person fails to pay the sum compounded in accordance with the rule 9 within the time specified in that rule, he shall be deemed to have neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total * date of reporting to RBI and not AD Table B Name of Investor Date of allotment of shares Number of shares allotted Amount for which shares allotted Date of reporting to RBI* Delay if any Total Table C In case there is excess share application money Sl. No. Name of Remitter Total Amount (INR) Date of Receipt Excess share application money Date of refund of share application money Amount in forex RBI approval letter and date Total Table D Authorised Capital Sl. No. Date Authorised Capital With effect from Date of Board meeting Date of filing with ROC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Office / Liaison Office Details to be furnished along with application for compounding of contravention relating to Branch/Liaison Office in India Name of the applicant Date of incorporation Date of approval for opening of Liaison Office/ Branch Office Validity period of the approval Nature of activities under taken income and expenditure of the LO/BO Dates of submission of Annual activity Certificates Nature of contravention and reasons for the contravention All supporting documents may be submitted Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated in the Master Circular Compounding of contraventions of FEMA, 1999 Rules Sl No Rules No. Date 1 Foreign Exchange (Compounding Proceedings) Rules, 2000 May 3, 2000 2 Foreign Exchange (Compounding Proceedings) Rules, 2002 (Amendment) November 2, 2002 3 Foreign Exchange (Compounding Proceedings) Rules, 2004 (Amendment) September 13,2004 4 Foreign Exchange (Compounding Proceedings) Rules, 2004 (Amendment) August 27, 2008 A.P.(DIR Series) C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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