Compounding of contraventions under FEMA

The compounding of contraventions under the Foreign Exchange Management Act, 1999, (FEMA) is a voluntary process available to the citizens of India. Under section 13(1) of FEMA, an applicant can seek compounding of an admitted contravention of any provision of the act.

The law

If any person contravenes any provision of FEMA, or contravenes 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 of India (RBI), he shall, upon adjudication, be liable to a) a penalty up to three times the sum involved in such contravention where the amount is quantifiable or b) up to ₹200,000 where the amount is not quantifiable. Where the contravention is a continuing one, a further penalty may be levied. According to section 13(1) chapter IV of FEMA, this may extend to ₹5,000 for every day after the first day during which the contravention continues.

Foreign Exchange (Compounding Proceedings) Rules, 2000, published by the Government of India, empower the RBI to compound contraventions under FEMA. The provisions of section 15 of FEMA permit compounding of contraventions. They empower the compounding authority (CA) to compound any contravention as defined under section 13 of the act on an application made by the person committing such contravention, either before or after the institution of adjudication proceedings.

Shardul Thacker is a partner with Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.