FEMA requires observation of its provisions in letter and spirit and if any contravention may land in penalties on the erring company and individuals. There are various conditions and stipulations in case of FDI , ODI , investment by individuals in foreign shares , purchase of assets in foreign countries , extending guarantees , availing ECBs , supplier's credit . In this column , I will discuss all intricacies and complications involving the interpretation of FEMA Act provisions in detail.
Any person aggrieved by the order passed by the Deputy director , additional director , special director , Special Director with Deputy Legal Adviser, Director of Enforcement may appeal to Special Director ( Appeals).
Such appeal should be filed within 45 days from the date on which the copy of the order is made by the Adjudicating Authority . Appeal should be verified by the appellant in a proper manner and should accompany with the requisite fees.
The special director (appeals) has power to condone the delay beyond 45 days to file an appeal if he believes that there was enough cause for not filing the appeal within the due date.
The special director after receiving the appeal may give an opportunity to be heard and shall pass such an order thereby confirming or setting aside or modifying the earlier order passed by the authorities against which the present appeal lies. The Special Director (Appeals ) will have the powers analogues to that of civil court which are conferred n the Appellate Tribunal.
Appeals to Appellate Tribunal
If any party aggrieved by the order passed by the Special Director (Appeals ) can apply to Appellate Tribunal. However , any penalty levied by the enforcing authority or Special Director (Appeals ) should be deposited by the aggrieved party before applying to the Appellate Tribunal. However , an aggrieved party may apply to the Appellate Tribunal to waive the payment penalty and he Appellate Tribunal may dispense with such deposit subject to such conditions as i may deem fit to impose so as to safeguard the realisation of penalty.
Every appeal to Appellate Tribunal shall be filed within a period of forty-five days from the date on which a copy of the order made by the Adjudicating Authority or the Special Director (Appeals) is received by the aggrieved person. Appeal should be verified by the appellant in a proper manner and should accompany with the requisite fees. On receipt of an appeal , the Appellate Tribunal may, after giving the parties to the appeal ,an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Adjudicating Authority or the Special Director (Appeals).
Appeal to High Court
Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any quest on of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. Explanation.-In this section "High Court" means –
1.the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and
2.where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personal works for gain.
According to RBI , persons charged with violation of the Foreign Exchange Management Act should apply for compounding, which is paying a sum to get relief from punitive action under the act, at the earliest. Thus , the onus under FEMA is on the persons concerned and should, in their own interest submit their applications for compounding of contravention under FEMA to the Reserve Bank at the earliest opportunity.
Persons who have contravened provisions of FEMA should not take upon themselves, suo motto or on the basis of external advice, to decide whether a particular contravention is of a technical or minor in nature and, hence, no compounding application need be submitted to the RBI. According to RBI , a decision on the exact pattern of treating contraventions under FEMA would be based on the merit of each individual case.
The following is the procedure for compounding of offenses under FEMA:
1.An application under prescribed format either through suo motto or through a memorandum with a fee of Rs 5000/= by way of demand draft in favor of compounding authority.
If the contravention is Rs 5 lacs or below , then application for compounding of offense shall be made to the Deputy director of the Directorate of Enforcement.
If contravention is more than Rs 5 lacs but less than Rs 10 lacs , then application has to be made to Additional Director of the Directorate of Enforcement .
If it is more than Rs 10 lacs but less than Rs 50 lacs , then to Special Director of the Directorate of Enforcement .
If it is more than Rs 50 lacs but less than Rs 1 Crore , then application is to be made to Special Director with Deputy Legal Adviser of the Directorate of Enforcement .
If the sum involved is more than Rs 1 Crore or more , then application is to be made to Director of the Enforcement with Special Director of the Enforcement Directorate of the Directorate of Enforcement .
7.The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings.
8.Where additional information/document is called for, such additional information/ document shall be submitted within 30 days or such additional period as may be given by the Compounding Authority from the date of the said letter.
9. The Compounding Authority shall provide an opportunity of being heard to all the concerned.9a.The application will be disposed by RBI within 180 on receipt of application.
10.RBI will evaluate whether there is any contravention and if so , the quantum of contravention.
11.In case , contravention is minor or technical in nature , RBI will issue only administrative cautionary advice or caution or warning only.
12.Contravention will be considered serious by RBI if there is any money-laundering , security or national issues thereby involving grave violations of FEMA regulations.
13.The Compounding Authority (CA) will issue final order of fine amount if he finds if there is any contravention.
14.The fine amount so levied will have to remitted to RBI within 15 days of passing order by the CA by way of demand draft.
15.Finally, a compounding certificate will be issued by RBI after receipt of the fine by RBI.
16.If a company commits same type of contravention within 3 years of first contravention, then no compounding will be available and relevant provisions of FEMA, 1999 will be applicable.
17.If second contravention is committed by a company after the lapse of first contravention (same type), then it will be construed as a first contravention by RBI.
18.If a company fails to get approval or permissions from any statutory authorities or governments, then such contravention will not be compounded by RBI till the required approvals are obtained from the relevant authorities.