TaxTMI 
TaxTMI 
Master 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
....he Authorised 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. Format of Undertaking IV. ECS Mandate Form 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 lakhs, wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ank of India to compound the following contraventions of FEMA , 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. 7 Regulation 10A (b)(i) read with paragraph 10 of Schedule I to FEMA 20/2000-RB dated May 3, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loor, Amar Building, Sir P.M.Road, Fort, Mumbai 400001. (As amended vide A.P. (DIR Series) Circular No. 36 dated October 16, 2014) 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 Branch Office / Liaison Office, as applicable, a copy of the Memorandum of Association and latest audited balance sheet along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc. (Annex-III)in order to complete the compounding process within the time frame. 4.3 All applications for compounding whether on the advice of the Regional Office concerned or suo-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 by the concerned entity suo moto, admitting the contravention, the same will not be considered as 'technical' or 'minor' in nature and the compounding process shall be initiated in terms of section 15 (1) of Foreign Exchange Management Act, 1999 read with Rule 9 of Foreign Exchange (Compounding Proceedings) Rules, 2000. 4.9 The disposal of the compounding application is mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Nos. 56 and 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 admitted contraventions. (as amended vide Press release no. 2012-2013/1215 dated January 18, 2013) 6.2 The Compounding Authority will pass a compounding order on the basis of the averments made in the application as well as other documents and submissions made in this context by the contravener during the personal hearings, if any. 6.3 Where the compounding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all 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. In case the application has to be returned for this reason or any other reason, the application fees of Rs. 5000/- received along with the application fees is also returned. To expedite the refund of compounding fees in such cases, it has been decided to credit the same to the applicant's account through NEFT. The applicants are advised to furnish their mandate and details of their bank account as per Annex IV along with the application in the prescribed format and other documents required to be submitted in terms of the instructions contained in AP (Dir series) Circular Nos. 56 and 57 dated June 28, 2010 and December 13, 2011 respectively. 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 fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ule (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 ten lakhs rupees or below, by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. Format of Application 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 (including Phone and Fax Number and email id) 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) Name Annex-II- FDI Details to be furnished along....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the applicant • Date of incorporation • Income-tax PAN • Nature of activities under taken (Please give NIC code - 1987) • Brief particulars about the foreign lender • Is the applicant an eligible borrower? • Is the lender eligible lender? • Is the lender an equity holder? • What is the level of his holding at the time of loan agreement? • Details of ECB • Date of Loan agreement • Amount in Foreign Currency and Indian Rupee • Rate of interest • Period of loan • Repayment particulars • Details of draw down Date of draw down Amount in Foreign Currency Amount in INR • Details of LRN Number- application and receipt • Details of ECB 2 returns submitted; Period of return: Date of submission • Details of Utilization of ECB in Foreign Currency and Indian Rupee • Nature of contravention and reasons for the contravention ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....c. and the details are given in the Annex ( * Strike out one) Signature of the authorised signatory Annex IV ELECTRONIC CLEARING SERVICE (ECS) MANDATE FORM 1. Name of the Party (Beneficiary) - 2. PAN 3. Particulars of the Bank Account - A. Name of the Bank - B. Name of the Branch - Address: Telephone No: C. Type of Account - SAVINGS / CURRENT D. Account No. - (as appearing on the cheque book issued by the Bank) E. The 9 Digit MICR Code Number - (as appearing on the cheque book issued by the Bank) F. IFSC Code - (as appearing on the cheque book issued by the Bank) 4. Checklist for Attachments: Photocopy of PAN Card Photocopy of a cancelled blank cheque 5. I/We hereby declare that the particulars given above are correct and complete. If the transaction is delayed or not effected at all for reasons of incomplete or incorrect information, I/We would not hold the user institution responsible. Signature of the Authorised Signatory (Name of the Authorised Signatory) Date : Place : Official Stamp Appendi....