TaxTMI 
TaxTMI 
Master Circular on Compounding of Contraventions under FEMA, 1999
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....Manner of Compounding Issue of the Compounding Order Post-compounding Procedure 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 In terms of Section 13(1) , Chapter IV of FEMA, 1999, if any person contravenes any provision of FEMA, 1999, or 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. 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 an application made by the person committing su....
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....000 dated May 3, 2000 and as amended from time to time:' a) Paragraphs 9 (1) (A) and 9 (1) (B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 - Bhopal, Bhubaneshwar, Chandigarh, Guwahati, Jaipur, Jammu, Kanpur, Kochi, Patna and Panaji for amount of contravention below Rupees One hundred lakh only (Rs. 1,00,00,000 /-). b) Paragraphs 9 (1) (A), 9 (1) (B) and 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 - Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi for amount of contravention without any limit. 4. Process of Compounding 4.1 An application for compounding of a contravention under FEMA, 1999 may be submitted to the Compounding Authority (CA) on being advised of a contravention under 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-I). 4.2 Along with the application in the prescribed format, the applicant may also furnish the details as per the enclosed Annexes (Annex-II) relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and B....
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....her the contravention is serious in nature and warrants compounding of the contravention; and c. whether the contravention, prima facie, involves money-laundering, national and security concerns involving serious infringement of the regulatory framework. However, the Reserve Bank reserves the right to classify the contraventions as stated above and neither the contravener nor others have any right to classify any contravention as technical suo moto. 4.8 It is clarified that whenever a contravention is identified by the Reserve Bank or brought to its notice by the entity involved in contravention by way of a reference other than through the prescribed application for compounding, the Bank will continue to decide (i) whether a contravention is technical and/or minor in nature and, as such, can be dealt with by way of an administrative/ cautionary advice; (ii) whether it is material and, hence, is required to be compounded for which the necessary compounding procedure has to be followed or (iii) whether the issues involved are sensitive / serious in nature and, therefore, need to be referred to the Directorate of Enforcement (DOE). However, once a compounding application is filed b....
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....e of the Compounding Order 6.1 An opportunity for personal hearing is given to the applicant for further submission of documents in person in support of the application within a specified period. The contravener or its authorized representative can choose not to appear in person or make any submissions before the CA for personal hearing The CA will proceed with the processing of the compounding application on the basis of information and documents available in the application for compounding. 6.1.1 It is clarified that appearing for a personal hearing before the compounding authority is optional and the applicant can choose not to appear for it. The applicant may enclose full information relating to the case as prescribed in AP (Dir series) Circular No. 56 and Circular No. 57 dated June 28, 2010 and December 13, 2011 respectively, with the application or thereafter and may exercise his discretion with regard to appearing for hearing. Further, if the applicant opts for appearing for the personal hearing, the Reserve Bank would encourage the applicant to appear directly for it rather than being represented / accompanied by legal experts / consultants, as compounding is only for adm....
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....ded 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. 8.2 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. 8.3 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 for which contravention was compounded within the specified period in terms of the compounding order, shall be referred to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999 or to the authority instituted for implementation of the Prevention of Money ....
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....sions 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 hundred lakhs by the General Manager of Reserve Bank of India; (d) in case....
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..... (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 s....
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.... 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 Annex-II- FDI Details to be furnished along with application for compounding of contravention relating to Foreign Direct Investment in India * Name of the applicant * Date of incorporation * Nature of activities under taken * Brief particulars about the foreign investor * Details of foreign inward remittances received by Applicant Company from date of incorporation till date Table A Sl. No. Name of Remitter Total Amount (INR) Date of Receipt Reported to RBI on* Delay if any Total * date of reporting to RBI and not AD Table B Name of Investor Date of....