RBI COMPOUNDING

Compounding of Contraventions under FEMA, 1999📢

🔵Meaning of the word ‘compound’ or ‘compounding’ not defined in the Act or in the Rules.

🔵The expression ‘Compounding’ has been explained in Law Lexicon as “arranging, coming to terms; condone for money.

🔵Section 15 of FEMA 1999 covers powers to compound contraventions and empowers the Compounding Authority to compound the contraventions.

🔵Section 13 of FEMA covers penalties in respect contraventions which are compounded

🔵The Government of India has, in consultation with the Reserve Bank placed the responsibilities of administering compounding of cases with the Reserve Bank, except under Section 3(a) of FEMA, 1999.

🔵Compounding is a voluntary process and refers to admitting a contravention, pleading guilty and seeking remedy. The application is liable to be disposed off/compounded with a period of 180 days from the date of its submission.

An application for 🔵compounding of a contravention to be submitted to the Compounding Authority either on being advised of a contravention through a memorandum or suo moto on being made or becoming aware of the contravention.

🔵Further, if Contraventions relating to any transaction under FEMA but requiring approval or permission from the Government Department concerned or any Statutory Authority as the case may be, would not be compounded UNLESS the required approval is obtained from the authorities concerned.

🔵What are the contraventions?

Contravention may be of the following👇

• Provisions of the Act
• Rules made under the Act
• Regulations
• Notifications
• Direction or order issued in exercise of the powers under the Act.

🔵Penalties-Quantum of penalty 💸-

• Compounding may be subject to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable,

or

• up to Rs 2 Lakhs where the amount is not quantifiable,

and

• where such contravention is a continuing one, further penalty which may extend to Rs 5000/-for every day after the first day during which the contravention continues.

🔵Advantages of compounding-📝

• It is a voluntary process • Compounding makes one clean of the past mistakes and look forward to the future
• After compounding, the contravener is absolved of the contravention and can concentrate on the business opportunities

• It saves time and energy One application – One hearing – One order.

• The existence of such facility provides comfort while undertaking global transactions since FEMA facilitates compounding of any contraventions which are not malafide.

I hope the article on acceptance of default i.e compounding was useful.