TaxTMI 
TaxTMI 
Master Circular on Compounding of Contraventions under FEMA, 1999
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....orised Dealer Category - I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (B.P.Kanungo) Principal Chief General Manager INDEX General Compounding Powers Delegation of Powers Process of Compounding Scope and Manner of Compounding Issue of the Compounding Order Post-compounding Procedure Pre-requisites of Compounding Annex I. Foreign Exchange (Compounding Rules), 2000 Format of Application II. Details to be furnished for FDI,ECB,ODI,LO/BO III. ECS Mandate 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 contravent....
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...., 1999: Sr. No. FEMA Regulation Brief Description of Contravention 1 Paragraph 9(1)(A) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in reporting inward remittance received for issue of shares. 2 Paragraph 9(1)(B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in filing form FC(GPR) after issue of shares. 3 Paragraph 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in issue of shares/refund of share application money beyond 180 days, mode of receipt of funds, etc. 4 Paragraph 5 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Violation of pricing guidelines for issue of shares. 5 Regulation 2(ii) read with Regulation 5(1) of FEMA 20/2000-RB dated May 3, 2000 Issue of ineligible instruments such as non-convertible debentures, partly paid shares, shares with optionality clause, etc. 6 Paragraph 2 or 3 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Issue of shares without approval of RBI or FIPB respectively, wherever required. 3.2 The above contraventions can be compounded by all Regional Offices (except Kochi and Panaji) without any limit on the amount of contravention. Kochi and P....
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....demand draft drawn in favour of "Reserve Bank of India" and payable at Mumbai may be submitted 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. 4.4 On receipt of the application for compounding, the proceedings would be concluded and an 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. 4.5 The CA may call for any additional information, record or any other document relevant to the compounding proceedings. Such additional information/ documents are required to be submitted within the period as may be specified by the CA and the application may be rejected if such information/documents are not submitted within the prescribed time. 4.6 The application will be examined in terms of sub rule (1) of rule (4) of the Foreign Exchange (Compounding Proceedings) Rules, 2000 to assess whether the contravention is compoundable and the amount of contravention is accordingl....
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....y other agencies, as deemed fit. Such applications will be disposed of by returning the application to the applicant. 5. Scope and Manner of Compounding 5.1 The CA will exercise jurisdiction in respect of the contraventions admitted to have been committed 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. 5.2 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 ....
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...., 2000 is payable by way of a demand draft in favour of the "Reserve Bank of India" within fifteen days from the date of the order of compounding of such contravention. The demand draft has to be deposited in the manner as directed in the compounding order. 7.2 On realization of 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. 7.3 The provisions of the Rules do not confer any right on the contravener, after a compounding order is passed, to seek to withdraw the order or to hold the compounding order as void or request a review of the order passed by the CA. 7.4 In case of failure to pay the sum compounded within the time specified in the compounding order, it shall be deemed in terms of Rule 10 of the Foreign Exchange (Compounding Proceedings) Rules, 2000, that the contravener had never made an application for compounding of any contravention under these Rules. 7.5 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 prov....
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....traventions come to its notice. The facts constituting such contraventions will be brought to the notice of the Directorate of Enforcement in case no application for compounding is made within the time indicated by the Reserve Bank. Authorised Dealers may take necessary steps to ensure that checks and balances are incorporated in systems relating to dealing with and reporting of foreign exchange transactions to Reserve Bank so that contraventions of provisions of FEMA, 1999 due to the acts of omission and commission of the Authorised Dealers do not occur. In terms of Section 11(3) of FEMA, 1999, the Reserve Bank may impose on the authorized person a penalty for contravening any direction given by the Reserve Bank under this Act or failing to file any return as directed by the Reserve Bank. (as amended vide AP DIR Circular No.76 dated January 17, 2013) Annex-I Foreign Exchange (Compounding Proceedings) Rules, 2000 Notification No. G.S.R.383(E) dated 3rd May 2000 As amended vide G.S.R.443(E) dated November 2, 2002 G.S.R. 609 (E) dated September 13, 2004 and G.S.R. 613 (E) dated August 27, 2008 In exercise of the powers conferred by section 46 read with sub-....
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....f 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 -  ....
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.... 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 as and not later than 180 days from the date of application. 9. Payment of amount compounded - The 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 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 t....
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....pt Reported to RBI on* Delay if any Total * date of reporting to RBI and not AD Table B Name of Investor Date of allotment of shares Number of shares allotted Amount for which shares allotted Date of reporting to RBI* Delay if any Total * date of reporting to RBI and not AD Table C Sl. No. Name of Remitter Total Amount (INR) Date of Receipt Excess share application money Date of refund of share application money Amount in forex RBI approval letter and date Total Table D Authorised Capital Sl. No. Date Authorised Capital With effect from Date of Board meeting Date of filing with ROC ....
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....ittance sent- Date of remittance; Amount in FCY and in INR • Details of other financial Commitment • Details of UIN applied and received • Date of receipt of share certificate • Approval of other regulators if required • Details of APRs submitted: For the period ended; date of submission • Nature of contravention and reasons for the contravention • All supporting documents may be submitted Annex II - Branch Office / Liaison Office Details to be furnished along with application for compounding of contravention relating to Branch/Liaison Office in India • Name of the applicant • Date of incorporation • Income-tax PAN • Nature of activities under taken (Please give NIC code - 1987) • Date of approval for opening of Liaison Office/ Branch Office • Validity period of the approval • Income and expenditure of the LO/BO • Dates of submission of Annual activity Certificates • Nature of contravention and reasons for the contravention • All supporting documents may b....