TaxTMI 
TaxTMI 
Master Circular on Compounding of Contraventions under FEMA, 1999
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....ive 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, where the amount is not quantifiable and where the contravention is a continuing one, further penalty which may extend....
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.... 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, 2000 Delay in submission of form FC-TRS on transfer of shares from Resident to Non-Resident. 8 Regulation 10B (2) read with paragraph 10 of Schedule I to FEMA 20/2000-RB dated....
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....999 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-moto, relating to the contraventions mentioned at paragraph 3.1 and 3.2 above and up to the amount of contravention stated therein, may be submitted by the companies/individuals falling under the jurisdiction of the aforesaid Regional Of....
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....ference 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 made by issue of a compounding Order specifying the provisions of FEMA,1999 or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999, in respect of which contravention has taken place. 4.10 Where ....
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....ant 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 of any contravention is made after making of a complaint under sub-section (3) of section 16 of FEMA, 1999 as the case may be, one copy of the compounding order made under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 will be provided to....
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....ed 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 ₹ 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 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....
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....39;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 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....
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....tion 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 ₹ 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 i....
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....ng 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 with application for compounding of contravention relating to Foreign Direct Investment in India * Name of the applicant * Date of incorporation * Income-tax PAN * Nature of activities under taken (Please give NIC code - 1987 / 2008) * 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 ....
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....- 1987) * Name of Overseas entity * Date of incorporation of overseas entity * Nature of activities under taken by overseas entity * Nature of entity- WOS/JV * Details of remittance 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 be submit....