Saturday, August 20, 2016

Compounding Under FEMA

As per the Black’s Law Dictionary, to “Compound” means “to settle a matter by a money payment, in lieu of other liability.” This meaning clearly defines the concept of Compounding as a mechanism that provides the offender an opportunity to avoid prosecution from the offence committed by him after paying off monitory payment.

Compounding of an offense in the context of law means an amicable settlement for the purpose of preventing prosecution for an offense, however, Compounding is not an inherent right but provided/delegated by the respective Act under which the offence has been committed.

BASIC CONCEPTS

1. As far as Foreign Exchange Management Act, 1999 (FEMA), the provisions of section 15, permit compounding of contraventions and empowers the Reserve Bank of India (RBI) to compound any contravention as defined under section 13 of the FEMA, except contraventions under section 3 (a) of FEMA, on an application made by the person committing such contravention.



Further, where a contravention has been compounded as above, there cannot be any further proceeding, initiating or continuing, as the case may be, in respect of the contravention so compounded.

2. The provisions of Section 13, provides that if any person contravenes any provision of FEMA, 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 involved in such contravention, where the amount is quantifiable or up to Rupees Two lakhs, where the amount is not directly 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.

3. Whereas, in exercise of the powers conferred by section 46 read with sub-section (1) of section 15 of FEMA, the Central Government had made the Foreign Exchange (Compounding Proceedings) Rules, 2000 relating to compounding contraventions under chapter IV of FEMA which were effective from 03.05.2000.

POWER TO COMPOUND

If any person contravenes any provisions of FEMA except clause (a) of Section 3 of that Act then the following authorities under RBI shall have power to entertain the Compounding application on the basis of monetary limits, which are as follows:
S. No. Monetary Limit Manager of RBI
1 Rs. Ten Lakh or less Assistant General Manager
2 more than Rs. Ten Lakh but less than Rupees Forty Lakh Deputy General Manager
3 Rs. Fourty Lakh or more but less than Rs Hundred Lakh General Manager
4 Rs. One Hundred Lakh or more Chief General Manager

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