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Master Direction- Compounding of Contraventions under FEMA, 1999 (Updated as on February 02, 2017)

FEMA - 4/2015-16 - Dated:- 1-1-2016 - RBI/FED/2015-16/1 FED Master Direction No.4/2015-16 January 1, 2016 (Updated as on February 02, 2017) (Updated as on May 26, 2016) To, All Authorised Dealer Category - I banks and Authorised banks Madam / Sir, Master Direction- Compounding of Contraventions under FEMA, 1999 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 .....

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ction. The list of underlying circulars/ notifications which form the basis of this Master Direction is furnished in the Appendix. 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, (Shekhar Bhatnagar) Chief General Manager in Charge INDEX Description General Power to compound by Reser .....

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e by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application 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 .....

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read with sub-section (1) of section 15 of the Foreign Exchange Management Act, 1999 (42 of 1999) the Central Government had made the 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) dat .....

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uch contravention is ten lakhs rupees or below, by the Assistant General Manager of the Reserve Bank of India; (b) in case where the sum 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 contr .....

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ation of Powers to Regional Offices As a measure of customer service and in order to facilitate the operational convenience, compounding 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 .....

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ceipt of funds, etc. Paragraph 5 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Violation of pricing guidelines for issue of shares. Regulation 2(ii) read with Regulation 5(1) of FEMA 20/2000-RB dated May 3, 2000 Issue of ineligible instruments such as non-convertible debentures, partly paid shares, shares with optionality clause, etc. Paragraph 2 or 3 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Issue of shares without approval of RBI or FIPB respectively, wherever required. Regulatio .....

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RS. 4. Authorisation to compound the contraventions by FED CO Cell, New Delhi 4.1 The work of three divisions of Foreign Investment Division (FID) viz. Liaison/ Branch/ Project office(LO/ BO/ PO) division, Non Resident Foreign Account Division (NRFAD) and Immovable Property (IP) Division has been transferred to FED, CO Cell, New Delhi with effect from July 15, 2014. Accordingly the officers attached to the FED, CO, Cell at New Delhi office are now authorized to compound the contraventions as und .....

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Management (Deposit) Regulations, 2000 4.2 The powers to compound the contraventions at Paragraph 3 and Paragraph 4 above have been delegated to all Regional Offices (except Kochi and Panaji) and FED, CO Cell, New Delhi respectively without any limit on the amount of contravention. Kochi and Panaji Regional offices can compound the contraventions at paragraph 3 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 .....

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For all other contraventions, applications may continue to be submitted to CEFA, Foreign Exchange Department, Reserve Bank of India, 5th floor, Amar Building, Sir P.M.Road, Fort, Mumbai 400001. 5. Application for Compounding 5.1 All applications for compounding may be submitted together with the prescribed fee of ₹ 5000/- by way of a demand draft drawn in favour of Reserve Bank of India and payable at the concerned Regional Office and by way of a demand draft drawn in favour of Reserve Ba .....

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wings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, a copy of the Memorandum of Association and latest audited balance sheet along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc. as per Annex-III in order to complete the compounding process within the time frame. 5.4 In case the application has to be returned where required approvals are not obtained from the authorities concerned or in case of incomplete application .....

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1, have also been modified to include the details of income-tax PAN and the activity as per NIC codes - 1987 in terms of A.P.(Dir Series) Circular No.20 dated August 12, 2013. The application will be treated as incomplete without these details. 5.5 The applicants are also advised to bring to the notice of the compounding authority change, if any, in the address/ contact details of the applicant during the pendency of the compounding application with Reserve Bank. 6. Pre-requisite for Compounding .....

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avention. 6.2 Contraventions relating to any transaction where proper approvals or permission from the Government or any statutory authority concerned, as the case may be, have not been obtained, such contraventions would not be compounded unless the required approvals are obtained from the concerned authorities. 6.3 Cases of contravention, such as, those having a money laundering angle, national security concerns and/or involving serious infringements of the regulatory framework or where the co .....

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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 necessary compounding procedure has to be followed or (iii) whether the issue .....

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d 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 contravener fails to submit the additional information/documents called for wi .....

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travention; 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 appropriate. 7.4 2As per provisions of section 13 of FEMA the amount i .....

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he foregoing paragraph. I. Guidance Note on Computation Matrix Type of contravention Existing Formula 1] Reporting Contraventions A) FEMA 20 Para 9(1)(A), 9(1)(B), part B of FC(GPR), FCTRS (Reg. 10) and taking on record FCTRS (Reg. 4) B) FEMA 3 Non submission of ECB statements C) FEMA 120 Non reporting/delay in reporting of acquisition/setup of subsidiaries/step down subsidiaries /changes in the shareholding pattern D) Any other reporting contraventions (except those in Row 2 below) Fixed amount .....

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2] AAC/ APR/ Share certificate delays In case of non-submission/ delayed submission of APR/ share certificates (FEMA 120) or AAC (FEMA 22) or FCGPR (B) 3or FLA Returns (FEMA 20) Rs.10000/- per AAC/APR/FCGPR (B)4/FLA Return delayed. Delayed receipt of share certificate - ₹ 10000/- per year, the total amount being subject to ceiling of 300% of the amount invested. 3] A] Allotment/Refunds Para 8 of FEMA 20/2000-RB (non-allotment of shares or allotment/ refund after the stipulated 180 days) B .....

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porate Guarantees without UIN/ without permission wherever required /open ended guarantees or any other contravention related to issue of Corporate Guarantees. Rs.500000/- + given percentage: 1st year : 0.050% 1-2 years : 0.055% 2-3 years : 0.060% 3-4 years : 0.065% 4-5 years : 0.070% >5 years : 0.075% In case the contravention includes issue of guarantees for raising loans which are invested back into India, the amount imposed may be trebled. II. The above amounts are presently subject to th .....

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s, the amount imposed will be further graded as under: a) If the shares are allotted after 180 days without the prior approval of Reserve Bank, 1.25 times the amount calculated as per table above (subject to provisos at (i) & (ii) above). b) If the shares are not allotted and the amount is refunded after 180 days with the Bank s permission: 1.50 times the amount calculated as per table above (subject to provisos at (i) & (ii) above). c) If the shares are not allotted and the amount is re .....

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be enhanced by 50%. III. For calculating amount in respect of reporting contraventions under para I.1 above, the period of contravention may be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}. The total no. of days does not exclude Sundays/holidays. 7.5 In case where adjudication has been done by the Directorate of Enforcement and an appeal has been file under section 17 or section 19 of FEMA, 1999, no contravention can be compounded in te .....

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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 being represented / accompanied by legal experts / consultants, as compounding is only for admitted contraventions. Appearing for or opting out of personal hearing does not have any bearing whatsoever on the .....

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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 complaint under sub-section (3) of section 16 of the FEMA, as the case may be. 58.6 To ensure more transparency and greater disclosure, it has been decided to host the compounding orders passed on or after June 1, .....

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days from the date of the order of compounding of such contravention. The manner in which the demand draft has to be drawn and deposited shall be indicated in the compounding order. 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 t .....

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a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order. 10. Directions to Authorised Dealers 10.1 In terms of 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 entrus .....

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