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TMI Blog2011 (9) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... t - WRIT PETITION NO. 1777 OF 2011 - - - Dated:- 23-9-2011 - DR. D.Y. CHANDRACHUD A.A. SAYED, JJ. Mr. Aditya Chitale with Mr. Kiran Phakade for the Petitioner.. Mr. Zeob Cutlerywala i/by Udwadia and Udeshi for Respondent ORAL JUDGMENT (PER DR. D.Y. CHANDRCHUD, J.) : The Petitioner in these proceedings under Article 226 of the Constitution of India challenges an order passed by the Deputy General Manager of the Reserve Bank of India on 22 March 2011 on an application for compounding of contraventions of the provisions of the Foreign Exchange Management Act, 1999. The application for compounding was, in the present case, submitted under Section 15 on 27 September 2010. By an order dated 22 March 2011 the Deputy Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Foreign Exchange Management Act, 1999. 3. The Petitioner was called for a personal hearing. The impugned order dated 22 March 2011 contains the following reasons for not allowing the compounding application at this stage :- It is observed from the documents submitted and the admissions made by the applicant company that the equity subscription in the company was received from the NRO account of the investor and the amount (credit in the NRO A/c) represents currency and traveler s cheques encashed in India and not an inward remittance through normal banking channel and therefore, the method of investment is not in compliance with the provisions of FEMA. Further, it is observed that the company is not engaged in the business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o issued a circular on 28 June 2010 being Circular No. RBI/2009-10/56 A.P (DIR Series) Circular No. 56. . Para 3.5 of the circular provides as follows :- 3.5 The Reserve Bank shall examine the nature of contravention 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 and warrants compounding of the contravention; and c. whether the contravention, prima facie, involves moneylaundering, national and security concerns involving serious infringements of the regulatory framework. If, before disposal of the compounding application by issue of a compounding order the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccruing to the contravener from delayed compliance or compliance avoided; (iv) the repetitive nature of the contravention, the track record and/or history of non-compliance of the contravener; (v) contravener s conduct in undertaking the transaction and in disclosure of full facts in the application and submissions made during the personal hearing; and (vi) any other factor as considered relevant and appropriate. Para 7.3 of the circular specifies that cases of contravention, such as those having a money laundering angle, national security concerns and/or involving serious infringement of the regulatory framework or where the contravener fails to pay the sum for which contravention was compounded within the specified period in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India. There is no absolute right to claim a compounding of contraventions. An application for compounding in fact does postulate that a breach has taken place. It is for the Competent Authority to decide as to whether the contravention is of a technical nature or whether it is of a sensitive nature involving broader issues of national security or money laundering or a serious infringement of the regulatory framework in which case a compounding cannot be allowed. In fact, even this is not an exhaustive list of factors since the facts of each case will have to be considered by the Competent Authority when it decides whether the application for compounding should be granted. There is a public interest element in the enactment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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