When a person or corporation seeks compounding of an admitted violation, it is voluntary. It is the procedure used by the state to resolve an offence committed by the contravener by imposing monetary penalties instead of proceeding with litigation. In accordance with section 15 of the Foreign Exchange Management Act 1999, the Reserve Bank is permitted to compound any contravention referred to in section 13 of FEMA 1999, except those referred to in section 3 (a) of FEMA 1999. In this article, we are going to talk about the compounding of contraventions under the FEMA.
Application for Compounding of Contraventions Under FEMA
Through a demand draft drawn in favor of the RBI and payable at the concerned regional office/CO Cell New Delhi, compounding applications can be submitted along with the prescribed fee (5000 rupees).
The application must include the contact information of the applicant as well as an authorized representative or official of the applicant who is authorized to act on the applicant’s behalf.
As soon as an order is passed by the compounding authority, the matter will be reviewed for compliance and the compounding authority will make a decision but not before giving all parties concerned the opportunity to be heard as soon as possible (not later than 180 days after the application date).
An applicant must also submit the following information and documents in addition to the application in the prescribed format
The second part of Annex II provides information on Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment, and Agents and Liaison Offices.
Assuring that nobody is investigating them, such as the Department of Energy or the Federal Bureau of Investigations (FBI).
Form of ECS mandate duly completed in Annex IV.
Check copy canceled.
If you are applying for the compounding of contraventions under FEMA 1999, please provide a copy of the MOA and the latest audited balance sheet.
Procedure of Compounding of Contraventions Under FEMA
Compound application involves the following steps:
- Examining the application is the first step;
- You can also request any other documents or information that might be relevant;
- Compounding orders are passed by determining the amount of the sum on payment upon which the contravention is compounded. These elements can be considered:
- Gains of unfair advantage resulting from contravention, if quantifiable;
- An authority/agency/exchequer loses money as a result of the violation;
- Delay in compliance or avoidance of compliance resulting in economy benefits for the contravener;
- Instances of past noncompliance by the contravener, track record, and/or history of the contravention;
- The conduct of the contravener in undertaking transaction and in disclosure of full facts in the application and submissions made in the personal hearing and other factors as deemed to be relevant and appropriate.
Compounding Order from Reserve Bank
Upon receiving the application and other documents and submissions from the contravener in the personal hearing, the Reserve Bank shall issue the order of compounding within 180 days from the date of the application.
Amount Due for Contraventions to Be Paid
As soon as the amount of the compounding order has been issued for the contravention, the amount of the compounding order must be paid by way of a demand draft in favor of the Reserve Bank of India (RBI) within 15 days of its date. There has to be an indication on the order of compounding of the method of drawing and depositing the demand draft.
What is compounding under FEMA?
Under FEMA, the Compounding of Contraventions is explained
Whenever an individual voluntarily admits that he or she has violated a provision of the Federal Emergency Management Act of 1999 or any of its rules/regulations/notifications/orders/directions or circulars issued under the Act, compounding is considered a criminal act.
Who has the power to compound any contravention made under FEMA?
A provision of the Foreign Exchange Management Act, 1999 (42 of 1999) referred to as the Foreign Exchange Management Act, 1999, allows for the compounding of contraventions. As such, section 15 of the Foreign Exchange Management Act, 1999 (42 of 1999) enables the Reserve Bank to compound any contravention as defined in section 13, with the exception of contraventions covered under section 3.
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