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Master Direction- Compounding of Contraventions under FEMA 1999

FEMA - 4/2015-16 - Dated:- 1-1-2016 - RBI/FED/2015-16/1 FED Master Direction No.4/2015-16 January 1, 2016 To, All Authorised Dealer Category - I banks and Authorised banks Madam / Sir, The provisions of section 15 of Foreign Exchange Management Act, 1999 (42 of 1999) hereinafter referred to as FEMA, 1999, permit compounding of contraventions and, as such it empowers the Reserve Bank to compound any contravention as defined under section 13 of the FEMA, 1999, except the contraventions under secti .....

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x. All AD Category - I banks and Authorised banks may bring the instructions contained in this Master Direction to the notice of their constituents. 3. The Master Direction will be updated from time to time as and when fresh instructions are issued. Yours faithfully, (B.P.Kanungo) Principal Chief General Manager INDEX Description General Power to compound by Reserve Bank Delegation of Powers to Regional Offices Authorisation to compound the contraventions by FED, CO Cell, New Delhi Application f .....

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n by the officers of the Reserve Bank as may be authorized in this behalf by the Central Government in such manner as may be prescribed. In terms of Section 13(1), if any person contravenes any provision of FEMA, 1999, or 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 involve .....

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Foreign Exchange (Compounding Proceedings) Rules, 2000 relating to compounding contraventions under chapter IV of FEMA, 1999. 1.3 In terms of the Foreign Exchange (Compounding Proceedings) Rules, 2000, effective from June 1, 2000, RBI is empowered to compound contraventions relating to Section 7, 8 and 9 and the third schedule to FEMCAT Rules. Vide GSR 609 (E) dated 13-09-2004, RBI was empowered to compound all the contraventions of FEMA 1999 except Section 3(a) with a view to providing comfort .....

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um 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 cont .....

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ng powers have been delegated to the Regional Offices of the Reserve Bank of India to compound the following contraventions of FEMA, 1999. FEMA Regulation Brief Description of Contravention 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. 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. Paragraph 8 of Schedule I to FEMA 20/2000-RB dated Ma .....

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2000 Issue of shares without approval of RBI or FIPB respectively, wherever required. 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. 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. Regulation 4 of FEMA 20/2000-RB dated May 3, 200 .....

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o the FED, CO, Cell at New Delhi office are now authorized to compound the contraventions as under: FEMA Notification Brief Description of Contravention FEMA 7/2000-RB, dated 3-5-2000 Contraventions relating to acquisition and transfer of immovable property outside India FEMA 21/2000-RB, dated 3-5-2000 Contraventions relating to acquisition and transfer of immovable property in India FEMA 22/2000-RB, dated 3-5-2000 Contraventions relating to establishment in India of Branch office, Liaison Offic .....

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s one hundred lakh (Rs.1,00,00,000/-). The contraventions of Rupees one hundred lakh (Rs.1,00,00,000/-) or more under the jurisdiction of Panaji and Kochi Regional Offices and all other contraventions of FEMA will continue to be compounded at Cell for Effective Implementation of FEMA (CEFA), Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, as hitherto. 4.3 Accordingly, applications for compounding related to the above contraventions may be submitted to the respective R .....

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able at the concerned Regional Office and by way of a demand draft drawn in favour of Reserve Bank of India and payable at Mumbai for cases submitted to the Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. 5.2 The format of the application is appended to the Foreign Exchange (Compounding Proceedings) Rules, 2000 5.3 Along with the application in the prescribed format, the applicant may also furn .....

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the authorities concerned or in case of incomplete application for any other reason, the application fees of ₹ 5000/- received along with the application will be returned by crediting the same to the applicant s account through NEFT as per the ECS mandate and details of their bank account furnished along with the application. The Annexes relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as given in A.P.(Di .....

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Reserve Bank. 6. Pre-requisite for Compounding Process 6.1 In respect of 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 the Compounding Rules, such contraventions would not be compounded and relevant provisions of the FEMA, 1999 shall apply. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously .....

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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. 6.3 Cases of contravention, such as, those having a money laundering angle, national security concerns and/or invol .....

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n, it is clarified that whenever a contravention is identified by the Reserve Bank or brought 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 necessa .....

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of Foreign Exchange (Compounding Proceedings) Rules, 2000. 7. Scope and procedure for compounding 7.1 On receipt of the application for compounding, the Reserve Bank shall examine the application based on the documents and submissions made in the application and assess whether contravention is quantifiable and, if so, the amount of contravention. 7.2 The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. In case the contrave .....

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loss caused to any authority/ agency/ exchequer as a result of the contravention; c) economic benefits accruing to the contravener from delayed compliance or compliance avoided; d) the repetitive nature of the contravention, the track record and/or history of non-compliance of the contravener; e) contravener s conduct in undertaking the transaction and in disclosure of full facts in the application and submissions made during the personal hearing; and any other factor as considered relevant and .....

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days from the date of application 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. 8.2 The time limit for this purpose would be reckoned from the date of receipt of the completed application for compounding by the Reserve Bank. 8.3 If the applicant opts for appearing for the personal hearing, the Reserve Bank would encourage the applicant to appear directly for it rather than be .....

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r any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999 in respect of which contravention has taken place along with details of the alleged contravention. 8.5 One copy of the compounding order issued under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 shall be supplied to the applicant (the contravener) and also to the Adjudicating Authority, where the compounding of any contravention is made after making of a .....

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der. 9.2 The provisions of the Rules do not confer any right to the contravener, after a compounding order is passed, to seek to withdraw the order or to hold that the compounding order is void or request review of the order passed by the Compounding Authority. 9.3 In case of failure to pay the sum compounded within the time specified in the compounding order and the Foreign Exchange (Compounding Proceedings) Rules, 2000, it shall be deemed that the contravener had never made an application for .....

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Section 11 (2) of FEMA, 1999, the Reserve Bank may, for the purpose of ensuring the compliance with the provisions of the Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorized person to furnish such information, in such manner, as it deems fit. Accordingly, RBI has entrusted to the Authorised Dealers (ADs) the responsibility of complying with the prescribed rules/ regulations for the foreign exchange transactions and reporting the same as per th .....

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