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Issues: Whether the compounding authority was justified in returning the application for compounding of the delayed filing of FC-TRS on the ground that the matter was suspected to involve money laundering and had been remitted for adjudication.
Analysis: The delay in filing the FC-TRS was admitted, and the applicant was already under investigation in proceedings relating to money laundering. The statutory scheme under the Foreign Exchange Management Act, 1999 and the Compounding Proceedings Rules, 2000 permits compounding of FEMA contraventions, but the proviso introduced to Rule 8(2) bars the compounding authority from proceeding where the matter is viewed as relating to serious contraventions suspected of money laundering, terror financing, or threats to sovereignty and integrity. Once the complaint had been lodged and adjudicatory proceedings were set in motion, the compounding authority lacked authority to continue with compounding and was bound to remit the case.
Conclusion: The return of the compounding application was valid and no interference was called for.
Final Conclusion: The writ petitions failed because the impugned action was consistent with the statutory limitation on compounding in cases suspected to involve money laundering.
Ratio Decidendi: Where a FEMA contravention is reasonably suspected to be connected with money laundering, the compounding authority cannot proceed with compounding and must remit the matter for adjudication in terms of the governing rules.
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