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FAQ's on - Compounding of Contraventions under FEMA 1999 (As on March 27 2015)

Dated:- 31-3-2015 - Q.1. 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 e .....

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ed by the Reserve Bank. Q.2. Who can apply for compounding? Ans. Any person who contravenes any provision of the FEMA, 1999 [except section 3(a)] 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, can apply for compounding to the Reserve Bank. Applications seeking compounding of contraventions under section 3(a) of FEMA, 1999 may be subm .....

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? Ans. The form given in the Annex to the A.P.(DIR Series) Circular No. 56 dated June 28, 2010 issued by the Reserve Bank of India, can be used for applying for compounding. The same can also be downloaded from the Reserve Bank s website by clicking on the link i.e.http://www.rbi.org.in/Scripts/BS_ApCircularsDisplay.aspx. Further the documents as mentioned in A.P.(DIR) circular nos. 57 and 20 dated December 13, 2011 and August 12, 2013 respectively should also be submitted along with the applica .....

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so furnish the details as per the Annexes- relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, (attached to the A.P. (DIR Series) Circular No. 57 dated December 13, 2011 and A.P. (DIR Series) Circular No. 20 dated August 12, 2013 ) along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc., a copy of the Memorandum of Association and latest audited balance sh .....

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ttance 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 .....

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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- .....

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5, 2014. Accordingly the officers attached to the FED, CO, Cell at New Delhi office are now authorized to compound the contraventions as under: 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 a .....

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out any limit on the amount of contravention. Kochi and Panaji Regional offices can compound the above contraventions for amount of contravention below Rupees one hundred lakh (Rs.1,00,00,000/-). The contraventions of Rupees one hundred lakh (Rs.1,00,00,000/-) and above under the jurisdiction of Panaji and Kochi Regional Offices and all other contraventions of FEMA will be compounded at Cell for Effective Implementation of FEMA (CEFA), Mumbai, as hitherto. Accordingly, applications for compoundi .....

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he Regional Office where the application is being submitted and at Mumbai if the application is submitted at CEFA, Mumbai. Q.8. Can an application for compounding be sent to the Reserve Bank pending fulfillment of certain obligations? Ans. No. All requisite approvals should be obtained and compliances should be completed before seeking compounding of contravention. Compounding can be done only after rectifying the records by way of obtaining post-facto approvals or unwinding the transactions in .....

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e applicant. On the admission of applications, the Reserve Bank will examine and decide if the contravention is technical, material or sensitive in nature. If technical, the applicant will be issued a cautionary advice. If the contravention is material, it will be compounded by imposing a penalty after giving an opportunity to the contravener to appear before the compounding authority for a personal hearing. If the contravention is sensitive in nature requiring further investigations, the same w .....

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as technical and/ or minor or serious would be decided by the Reserve Bank on the merits of the case. The application will be disposed of keeping in view the procedure notified in this regard. Persons who have contravened the provisions of FEMA should not take upon themselves suo moto, or on the basis of external advice to decide whether a particular contravention is technical or minor in nature and, hence, no compounding application need be submitted to the Reserve Bank. If such applications fo .....

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to its notice by the entity involved in contravention by way of a reference other than through the prescribed application for compounding, the Bank will continue to decide (i) whether a contravention is technical and/or minor in nature and, as such, can be dealt with by way of an administrative/ cautionary advice; (ii) whether it is material and, hence, is required to be compounded for which the necessary compounding procedure has to be followed or (iii) whether the issues involved are sensitive .....

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r the personal hearing? Ans. It is not mandatory to attend the personal hearing. In case a person opts not to attend the personal hearing he may indicate his preference in writing. The application would be disposed of on the basis of documents submitted to the Compounding Authority. It may be noted that appearing for or opting out of the personal hearing does not have any bearing whatsoever on the amount of penalty involved in the compounding order. Q.14. Can the applicant authorise another pers .....

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s the compounding is only for admitted contraventions. Q.15. How is the compounding process brought to the conclusion? Ans. The Compounding Authority passes an order indicating details of the contravention and the provisions of FEMA, 1999 that have been contravened. The sum payable for compounding the contravention is indicated in the compounding order. The contravention is compounded by payment of the penalty imposed. Q.16. When should the amount indicated in the order be paid? Ans. The amount .....

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