Attention of Authorised dealers
is invited to the Foreign Exchange (Compounding Proceedings) Rules, 2000 published
by the Government of India vide G.S. R.No. 383 (E) dated 3rd May
2000 as amended vide G.S.R. No. 443 (E) dated 2nd November 2002 (copy
enclosed). In terms of these rules Reserve Bank was empowered to compound contravention
under the provisions of following sections of FEMA, 1999.
- Section 7 (Export of goods and services),
- Section 8 (Realisation and repatriation of foreign
exchange),
- Section 9 (Exemption from realisation and repatriation
of foreign exchange in certain cases),
- Third Schedule to the Foreign Exchange Management
(Current Account Transactions) Rules, 2000.
The provisions of Section 15 of
FEMA, 1999 permit compounding of contraventions and empower the Compounding
Authority to compound any contravention as defined under Section 13 of the Act
on application made by the person committing such contravention either before
or after the institution of Adjudication Proceedings.
2. With a view to provide
comfort to the citizens and corporate community by minimizing transaction costs,
while taking severe view of willful, malafide and fraudulent transactions,
it has been decided to put in place the procedures for compounding of contravention
under FEMA. The Government of India has, therefore, in consultation with Reserve
Bank placed the responsibilities of administering compounding of cases with
the Reserve Bank, except under Section 3 (a) of FEMA.
3. Accordingly, the Government
has notified amendment to the Foreign Exchange (Compounding Proceedings) Rules,
2000 vide G.S.R. No. 609 (E) dated September 13, 2004. A copy of the said rules
is given in Annex -I. As a result of the amendment, the
compounding powers of Reserve Bank and Directorate of Enforcement respectively,
have been modified as under:
- Reserve Bank has been empowered to compound
the contraventions of all the Sections of FEMA 1999 except clause (a) of Section
3 of the Act ibid.
- Directorate of Enforcement would continue to
exercise powers of compounding under clause (a) of Section 3 of FEMA (dealing
essentially with Hawala transactions).
4. For effective implementation
of compounding process under FEMA, the Reserve Bank has framed the procedures
for compounding of contravention as detailed in the Annex -II.
Once a contravention has been compounded by the Compounding Authority, no proceeding
or further proceeding will be initiated or continued, as the case may be, against
the contravener.
Annex-I
[A.P.(DIR Series) Circular No.31
dated February 1, 2005]
Foreign Exchange (Compounding Proceedings)
Rules 2000
Notification No. G.S.R.383(E) dated
3rd May 2000
As amended vide
G.S.R. No.443(E) dated 2nd
November 2002 and
G.S.R. No. 609 (E) dated September
13, 2004
In exercise of the powers conferred
by section 46 read with sub-section (1) of section 15 of the Foreign Exchange
Management Act, 1999 (42 of 1999) the Central Government hereby makes the following
rules relating to compounding contraventions under chapter IV of the said Act,
namely:-
1. Short title and commencement
–
(1) These rules may be called the
Foreign Exchange (Compounding Proceedings) Rules 2000.
(2) They shall come into force
on the 1st day of June, 2000.
2. Definitions
- In these rules, unless the context otherwise requires -
(a) 'Act' means the
Foreign Exchange Management Act, 1999 (42 of 1999);
(b) 'authorised officer'
means an officer authorised under sub-rule (1) of rule 3;
(c) 'applicant' means
a person who makes an application under section 15 (1) of the Act to the compounding
authority;
(d) 'Compounding Order'
means an order issued under sub-section (1) of Section 15 of the Act;
(e) 'Form' means
a form appended to these rules;
(f) 'section' means
a section 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 five 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 five lakhs
but less than rupees twenty lakhs, by the Deputy General Manager of Reserve
Bank of India ;
(c) in case
where the sum involved in the contravention is rupees twenty lakhs or more but
less than rupees fifty lakhs by the General Manager of Reserve Bank of India;
(d) in case
the sum involved in such contravention is rupees fifty 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 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
specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall exercise
the powers to compound any contravention subject to the direction, control and
supervision of the Governor of the Reserve Bank of India.
(4) Every application
for compounding any contravention under this rule shall be made in Form to the
Reserve Bank of India, Exchange Control Department, Central Office, Mumbai along
with a fee of Rs. 5000/- by Demand Draft in favour of compounding authority.
5. The Power of Enforcement
Directorate to compound contraventions -
2[(1)
If any Person contravenes provisions of Section 3(a) of Foreign Exchange Management
Act. ]
1 Substituted as under - vide GSR 609
(E) dated September 13, 2004
2 Substituted as under - vide GSR 609
(E) dated September 13, 2004:
(a) in case
where the sum involved in such contravention is five lakhs rupees or below,
by the Deputy Director of the Directorate of Enforcement;
(b) in case
where the sum involved in such contravention is more than rupees five lakhs
but less than rupees ten lakhs, by the Additional Director of the Directorate
of Enforcement;
(c) in case
where the sum involved in the contravention is rupees ten lakhs or more but
less than fifty lakhs rupees by the Special Director of the Directorate of Enforcement;
(d) in case
where the sum involved in the contravention is rupees fifty lakhs or more but
less than one crore rupees by Special Director with Deputy Legal Adviser of
the Directorate of Enforcement;
(e) in case
the sum involved in such contravention is one crore rupees or more, by the Director
of Enforcement with Special Director of the Enforcement Directorate.
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 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 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 given, the
person in relation to whom the contravention is so compounded shall be discharged.
8. Procedure for Compounding
-
(1) The Compounding
Authority may call for any information, record or any other documents relevant
to the compounding proceedings.
(2) The Compounding
Authority shall pass an order of compounding after affording an opportunity
of being heard to all the concerned as expeditiously as possible and not later
than 180 days from the date of application.
9. Payment of amount
compounded -
3The sum for which the contravention
is compounded as specified in the order of compounding under sub-rule (2) of
rule 8, shall be paid by demand draft of in favour of the Compounding Authority
within fifteen days from the date of the order of compounding of such contravention.
10. In case a person
fails to pay the sum compounded in accordance with the rule 9 within the time
specified in that rule, he shall be deemed to have never made an application
for compounding of any contravention under these rules and the provisions of
the Act for contravention shall apply to him.
11. No contravention
shall be compounded if an appeal has been filed under section 17 or section
19 of the Act.
12. Contents of the
order of the Compounding Authority -
(1) Every order shall
specify the provisions of the Act or of the rules, directions, requisitions
or orders made thereunder in respect of which contravention has taken place
along with details of the alleged contravention.
(2) Every such order
shall be dated and signed by the Compounding Authority under his seal.
13. Copy of the order
- One copy of the order made under rule 8(2) shall be supplied to the applicant
and the Adjudicating Authority as the case may be.
3 Substituted as under - vide GSR 443
(E) dated 2nd November 2002:
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
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)
Annex-II
[A.P.(DIR Series) Circular No.31
dated February 1, 2005]
Compounding Process
- Foreign Exchange (Compounding Proceedings) Rules
2000 as amended from time to time would be the basic framework for the Compounding
process. As per sub-rule (3) of Rule 4 of the Rules the compounding process
would be subject to the direction, control and supervision of the Governor
of the Reserve Bank of India.
- Once the application for compounding any contravention
committed under FEMA 1999 (i.e. w.e.f. June 1, 2000) is received by the Compounding
Authority (CA), the proceedings would be initiated by the CA. In accordance
with the rules the process would be concluded by the CA within 180 days. This
time limit would be reckoned from the date of the receipt of the application
for Compounding to the date of issue of compounding order. The Compounding
Authority may call for any information, record or any other documents relevant
to the compounding proceedings and will hold the proceedings.
- Where additional information/document is called
for, such additional information/ document shall be submitted within 30 days
or such additional period as may be given by the Compounding Authority from
the date of the said letter. In case, the contravener fails to submit the
additional information/ documents called for within the specified period ,
the application for compounding will be liable for rejection.
- The Compounding Authority shall consider the
application and take an appropriate decision in the matter.
The Compounding Authority shall pass an
order of compounding after affording the contravener and other concerned an
opportunity of being heard.
The compounding order shall specify the
provisions of the Act or of the rules, directions, requisitions or orders
made there under in respect of which contravention has taken place along with
details of the alleged contravention.
- The contravener would have to pay the sum specified
for compounding within fifteen days from the date of the order of compounding
of such contravention. In case a person fails to pay the sum within the time
specified therein, it would be construed that the entity had not made an application
for compounding of the said contravention.
- Application for compounding any contravention
may be filed with the CA, including those which are under adjudication process
and have not been disposed off. No contravention would be compounded which
has been finally adjudicated and disposed off by the Adjudicating Authority.
- Cases of contravention having a money-laundering,
national and security concern involving serious infringements of the regulatory
framework including cases where application for compounding has not been filed
within the stipulated period in the memorandum issued by the Reserve Bank
may be referred to Directorate of Enforcement for further investigation and
necessary action under Section 37 of the Act or to the Anti Money Laundering
Authority instituted under Prevention of Money Laundering Act, 2002 or to
any other agencies as deemed fit.
- As mentioned in sub rule (2) of Rule 4, 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 may be referred to Directorate of Enforcement under
Section 37 of the Act.
- Contraventions related to any transaction without
proper approval or permission from the concerned Government or any Statutory
Authority as the case may be under the relevant laws/regulations as envisaged
under FEMA, would not be compounded unless the required approval is obtained
from the concerned authorities.