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TMI BlogMaster Circular on Compounding of Contraventions under FEMA, 1999.X X X X Extracts X X X X X X X X Extracts X X X X ..... traventions under FEMA, 1999 INDEX 1. General 2. Compounding Powers 3. Process of Compounding 4. Scope and Manner of Compounding 5. Issue of the Compounding Order 6. Post-compounding Procedure 7. Pre-requisites of Compounding Annex Foreign Exchange (Compounding Rules), 2000 Format of Application Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated 1 General 1.1 If any person contravenes any provision of FEMA, 1999 , 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, 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 lakh, where the amount is not 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 ( Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FEMA, 1999 , either through a memorandum or suo moto on being made or on becoming aware of the contravention . The format of the application is appended to the Foreign Exchange (Compounding Proceedings) Rules, 2000 (Annex). 3.2 The application for compounding any contravention in prescribed form together with a copy of the memorandum, wherever applicable, with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of Reserve Bank of India and payable at Mumbai may be submitted with relevant facts and supporting documents to: The Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, 5th floor, Amar Building, Sir P.M. Road, Fort, Mumbai- 400001. 3.3 On receipt of the application for compounding, the proceedings would be concluded and order issued by the CA within 180 days from the date of the receipt of the application for compounding. The time limit for this purpose would be reckoned from the date of receipt of the completed application for compounding by the Reserve Bank. The CA may call for any information, record or any other documents relevant to the compounding proceedings and will hold the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted in relation to any of the provisions of the FEMA, 1999 , or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999 . 4.2 The CA will form an opinion on the basis of the application, together with the documents submitted and on the basis of submissions made during the personal hearing on the nature of the contravention. 4.3 The application for compounding will be disposed of on merits, upon consideration of the records and submissions and at the absolute discretion of the CA. The following factors, which are only indicative, may be taken into consideration for the purpose of passing the Compounding Order and for arriving at the quantum of sum on payment of which contravention shall be compounded: (i) the amount of gain of unfair advantage, wherever quantifiable, made as a result of the contravention; (ii) the amount of loss caused to any authority / agency / exchequer as a result of the contravention; (iii) economic benefits accruing 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 contrave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the demand draft for the sum for which contravention is compounded, a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order. 6.5 In respect of the contraventions of FEMA, 1999 (as defined in section 13 of the FEMA, 1999 ), which are not compounded by the Compounding Authority, other relevant provisions of FEMA, 1999 , shall apply. 7. Pre-requisites for compounding process 7.1 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. Such contravention would be dealt with under relevant provisions of the FEMA, 1999 for contravention. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. 7.2 Contraventions relating to any transaction where proper approvals or permission from the Government or statutory authority concerned, as the case may be, have not been obtained, such contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Act; (g) all other words and expressions used in these rules and not defined but defined in the Act, shall have the meaning respectively assigned to them in the Act. 3. (1) 'Compounding Authority' means the persons authorised by the Central Government under sub-section (1) of section 15 of the Act, namely; (a) an officer of the Enforcement Directorate not below the rank of Deputy Director or Deputy Legal Adviser (DLA). (b) An officer of the Reserve Bank of India not below the rank of the Assistant General Manager. 4. Power of Reserve Bank to compound contravention - 1 [(1) If any Person contravenes any provisions of Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of the Act.] (a) in case where the sum involved in such 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 hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to 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 these rules. Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer of the Directorate of Enforcement specified under sub-rule (1) of this rule shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Director of Enforcement. (4) Every application for compounding any contravention under this rule shall be made in Form to the Director, Directorate of Enforcement, New Delhi, along with a fee of Rs.5000 by DD in favour of the Compounding Authority. 6. Where any contravention is compounded before the adjudication of any contravention under section 16 , no inquiry shall be held for adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application Form (See Rule 4 or 5) (To be filled in duplicate and shall be accompanied by certified copy of the Memorandum issued) 1. Name of the applicant (in BLOCK LETTERS) 2. Full address of the applicant (including Phone and Fax Number and email id) 3. Whether the applicant is resident in India or resident outside India [Please refer to Section 2(v) of the Act] 4. Name of the Adjudicating Authority before whom the case is pending 5. Nature of the contravention [according to sub-section (1) of Section 13 ] 6. Brief facts of the case 7. Details of fee for application of compounding 8. Any other information relevant to the case I/We declare that the particulars given above are true and correct to the best of my/our knowledge and belief and that I/We am/are willing to accept any direction/order of the Compounding Authority in connection with compounding of my/our case. Dated : (Signature of the Applicant) Name Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated in the Master Circular Compounding of contraventions of FEMA, 1999 Rules Sl No Rules No. Date 1 Foreign Exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X
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