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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 ..... 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 13(1), Chapter IV of FEMA, 1999). In terms of rule 4 of the Foreign Exchange (Compounding Proceedings) Rules, 2000, the powers to compound the contraventions have been prescribed for compounding au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 proceedings. The Compounding Order will be passed by the CA after affording the contravener and others concerned, an opportunity of being heard. 3.4 The application will be examined based on the documents and submissions made in the application, in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 contravener; (v) contravener's conduct in undertaking the transaction and disclosure of full facts in the application and submissions made during the personal hearing; and (vi) any other factor considered relevant and appropriate. 5. Issue of the Compounding Order 5.1 An opportunity fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 contraventions would not be compounded unless the required approvals are obtained from the authorities concerned. 7.3 Cases of contravention, such as, those having a money laundering angle, national security concern and / or involving serious infringements of the regulatory framework or where the contravener fails to pay the sum f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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 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 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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 of such contravention in relation to such contravention against the person in relation to whom the contravention is so compounded. 7. Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16, such compounding shall be brought by the authority specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of the compounding of the contravention being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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