Introduction
The Foreign Exchange Management Act, 1999 (FEMA) replaces the Foreign Exchange Regulation Act (FERA). FERA was introduced in 1974 to consolidate and amend the then existing law relating to foreign exchange. FERA was amended in 1993 to bring about certain changes, as a result of introduction of economic reforms and liberalization of Indian Economy. But it was soon realized that FERA had by and large outlived its utility in the changed economic scenario and therefore replaced by FEMA in 1999.
Meaning
FEMA was introduced by the Finance Minister in Lok Sabha on August 4, 1998. The Bill aims “to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market India.” It was adopted by the parliament in 1999 and is known as the Foreign Exchange Management Act, 1999. This Act extends to the whole of India and shall also apply to all branches, offices and agencies outside India owned or by a person resident in India.
Objectives and Reasons for enactment of FEMA
FEMA was enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India (Preamble). The statement of objects and reasons set the tone of the enactment of new legislation:
i. The Foreign Exchange Regulation Act, 1973, was reviewed in 1993 and several amendments were enacted as part of the ongoing process of economic liberalization relating to foreign investments and foreign trade for closer interaction with the world economy. At that stage, the central government decided that the further exchange of the Foreign Exchange Regulation Act would be undertaken in the light of subsequent developments and experience in relation to foreign trade and investment. It was subsequently felt that a better course would be to repeal the existing Foreign Exchange Regulation Act and enact a new legislation. A task force constituted for the purpose submitted its report in 1994 recommending substantial changes in the existing Act.
ii. Significant developments have been taking place since 1993 such as substantial increase in foreign exchange reserves, growth in foreign trade, rationalization of tariffs, current account convertibility, liberalization of Indian investments abroad, increased access to external borrowings by Indian corporate and participation of Foreign investors in the stock markets.
Accordingly, a bill to repeal and replace Foreign Exchange Regulation Act, 1973 was introduced Lok Sabha on 04.08.1998. On reference to the standing committee modifications and suggestions were submitted by the standing committee in its report. After incorporating modifications and suggestions of the standing committee, the central government decided to introduce the new law, the Foreign Exchange Management Bill and repeal the Foreign Exchange Regulation Act, 1973
Salient Features of FEMA
FEMA extends to whole of
Under the new law, the emphasis for determining the residential status is on the actual period of stay in
The central government may from time to time give general or special directions to the Reserve Bank and Reserve Bank shall comply with such directions. The central government may by notification make rules to carry out the provisions of the Act. The Reserve Bank may by notification make regulation to carry out the provisions of the Act and rules there under. Every rule and regulation made under the Act shall as soon as after it is made, be laid before each house of parliament. If any difficulty arises in giving effect ti the provisions of the Act, the central government may by order, do anything not inconsistent with the provisions if the Act for the purpose of removing the difficulty.
Suspension of operation of FEMA
If the central government is satisfied that circumstances have arisen rendering it necessary that any permission granted or restriction imposed by the Act should cease to be granted or imposed or if it considers necessary in public interest, the central government may by notification, suspend or relax to such extent either indefinitely or for such period as notified, the operation of all or any of the provisions of the Act.
Bar of legal proceedings
No suit, prosecution or other legal proceedings shall lie against the central government or the Reserve Bank or any officer of the government or of the Reserve Bank or any person exercising any power or discharging any functions or performing any duties under the Act for anything done in good faith or extended to be done under the Act or rule, regulation, notification, direction or order made there under.
Repeal, Savings and Cognizance of offences
With the enactment of FEMA, FERA stands repealed and appellate board constituted under FERA shall stand dissolved. No court and adjudicating officer shall take cognizance or notice of an offence or any contravention under FEMA after the expiry of two years period from 1.6.2000. However, while FERA was in force all offences committed under FERA shall continue to be governed by FERA as if FERA had not been repealed. Any appeal preferred to the Appellate Board under FERA but not disposed off before the commencement of FEMA shall stand transferred and shall be disposed off by the Appellate Tribunal constituted under FEMA. FEMA is for regulation and management of foreign exchange through authorized person and provides for penalty for contravention of the provisions. The object is for promoting orderly development and maintenance of foreign exchange market in India.
Scope
Applicability of the Act
The act extends to the whole of India. Also, it applies to all the branches, offices and agencies outside agencies outside India owned or controlled by a person resident in India and also to any contravention there under committed outside India by person to whom this act appeals. The act has come into force with effect from June 1, 2000.
Definitions: Section 2 defines certain terms used in the act.
1. Authorized person: It means an authorized dealer, money changer, offshore banking unit or any other person for the time being authorized under the Act to deal in foreign exchange and foreign securities.
2. Capital account transactions: It means a transaction which alters the assets or liabilities, including contingent liabilities, outside India or assets or liabilities in India of persons resident outside India and includes transactions referred to in sec 6.(3).
3. Currency: This expression includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers, letters of credit, bills of exchange and promissory notes, credit cards, or such other similar as may be notified by the reserve bank. Vide Notification No. FEMA15/2000/RB dated May 3,2000 , RBI has notified ‘debit card’, ‘ATM’, cards or any other instruments by whatever name called that can be used to create a financial liability, as ‘currency’.
4. Currency Notes: It means and includes cash in the form of coins and bank notes.
5. Currency Account Transactions: it means a transaction, other than a capital account transaction, and without prejudice to generality of the foregoing, such transactions include
I. Payments due in connection with foreign trade, other current businesses, services and short term banking and credit facilities in ordinary course of businesses, services and short term banking and credit facilities in the ordinary course of businesses.
II. Payments due as interest on loans and as net income from investments.
III. Remittances for living expenses of parents, spouse and children residing abroad.
IV. Expenses in connection with foreign travel, education and medical care of parents, spouse and children.
6. Export: ‘Export’ with its grammatical variations and cognate expressions, means
I. The taking out of India to a place outside India any goods,
II. Provision of services from india to any person outside India.
7. Foreign currency: It means any currency other than Indian currency.
8. Foreign Exchange: It means foreign currency and includes
I. Drafts, travelers cheques, letters of credit or bills of exchange expressed or drawn in Indian currency but payable in any foreign currency.
II. Deposits, credits and balance payments in any foreign currency.
III. Drafts, travelers cheques, letter s of credit or bills of exchange drawn by banks, institutions or persons outside India but payable in Indian currency.
9. Foreign Security: The expression means any security in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency but where redemption or any form of return such as interest or dividend is payable in Indian currency.
Import: Import with its grammatical variations and cognate expressions, means bringing into India any goods or services.
Indian currency: It means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one rupee notes issued under s.28A of Reserve Bank of India Act, 1934.
Person: ‘A person’ includes (1) an individual, (2) a Hindu undivided family, (3) a company, (4) a firm, (5) an association of persons or a body of individuals, whether incorporated or not, (6) every artificial juridical person, not falling within any of the preceding sub-clauses, and (7) any agency, office or branch owned or controlled by such persons.
Person resident in India: it means
(1) A person residing in India for more than on hundred and eighty two days during the course of the preceding financial year but does not include:
(A) A person who has gone out of India or who stays outside India, in either case- (a) for or an taking up employment outside India, or (b) for carrying on outside India a business or vacation outside India or, (c) for any other purpose, in such circumstances as would indicate his intension to stay outside India for an uncertain period.
(B) A person who has come to or stays in India, in either case, otherwise than-
(a) For or on taking up employment in India or, (b) for carrying on in India a business or vocation in India or, (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period.
(2) Any person or body corporate registered or incorporated in India,
(3) An office, branch or agency in India owned or controlled by a person resident outside India.
(4) An office, branch or agency outside India owned or controlled by a person resident in India.
Person resident outside India: It means the person who is not resident in India.
Repatriate to India: It means bringing into India the realized foreign exchange and
1) The selling of such foreign exchange to an authorized person in India in exchange for rupees, or
2) The holding of realized amount in an account with an authorized person in India to the exchange notified by the Reserve Bank.
Further it includes use of the realized amount for discharge of a debt or liability denominated in foreign exchange.
Security: The expression ‘Security’ means shares, stocks, bonds and the debentures, government securities as defined by the public debt act, 1944, saving certificates to which the government saving certificate Act, 1959 applies, deposit receipts in respect of deposit securities, and units of UNIT TRUST OF INDIA established s.3(1) of the Unit Trust of India Act, 1963 or of any mutual fund. Further, it includes certificates of title to securities. But, it does not include bills of Exchange or promissory notes other than government promissory notes or any other instrument which may be notified by the Reserve Bank as security for the purpose of this Act.
Service: It means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, medical assistance, legal assistance, child fund, real estate, transport, processing, supply of electrical and other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service
i. Free of charge; or
ii. Under a contract of personal service.
Transfer: The expression transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
Definitions of certain other terms used in FEMA Regulations are:
Non-Resident Indian(NRI): It means a person resident outside India who is a citizen of India or person of Indian origin.
Overseas Corporate Body(OCB): The expression means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least 60% by non-resident Indians. Further, the expression includes overseas trusts in which not less than 60% beneficial interest is held by non-resident Indians directly or indirectly but irrevocably.
Person of Indian Origin(PIO): It means a citizen of any country other than Bangladesh or Pakistan, if
i. He at any time held Indian passport; or
ii. He or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or citizenship Act of 1955; or
iii. The person is spouse of the Indian citizen or a person referred in (i) and (ii)
Convertible Currency/ Hard Currency: Certain currencies are freely convertible i.e., one can exchange these currencies with any other currency without any restrictions. Major among these are: Dollars, Pound Sterling, Euro, Deustsche Mark-DM, Yen, Franc, Lira etc… this is called ‘hard currency’.
REGULATIONS AND MANAGEMENT OF FOREIGN EXCHANGE (chapter II, Sec 3 to 9)
Dealings in foreign exchange (Sec 3):
Prohibition of dealings in foreign exchange. Save as otherwise provided in the act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall—
a) Deal in or transfer any foreign exchange or foreign security to any person not being an authorized person.
b) Make any payment to or for the credit of any person resident outside India in any manner
Meaning of ‘payment’. The word ‘payment’ has to be understood in its ordinary sense of meaning, namely, the action or act of paying. It covers the cases of the money which may be received by an agent whose duty is to pass on the money to others on the direction of the person who is the owner of the money.
c) Receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner.
d) Enter into any financial transaction in India as consideration for or transfer of a right to acquire any assets outside India by any person.
Holding of foreign exchange (Sec 4)
Save as otherwise provided in this act, no person resident in india shall acquire, own, hold , possess or transfer any foreign exchange , foreign exchange or any immovable property situated outside India.
Current account transaction (Sec 5)
Any person my sell or draw foreign exchange to or from an authorized person if such sale or drawl is a current account transaction. However the central government may, in public interest and in consultation, with the Reserve Bank impose such reasonable restriction for current account transaction as may be prescribed.
Capital account transaction (Sec 6)
Foreign exchange transaction through authorized person. Any person may sell or draw foreign exchange to or from an authorized person from a capital account transaction.
Specification of capital account transaction and limit :
The Reserve Bank may in consultation with the central government specify-
a) Any class or classes of capital account transactions which are permissible.
b) The limit upto which foreign exchange may be admissible for such transaction.
Prohibition of certain transactions
The reserve bank may by regulations, prohibit, restrict or regulate the following
a) Transfer or Issue of any foreign security by a person resident in India
b) Transfer or Issue of any security by a person resident outside India
c) Transfer or Issue of any security or foreign security by any branch, office or agency in India of a person resident outside India.
d) Any borrowing or lending in foreign exchange in whatever form or by whatever name called
e) Any borrowing or lending in Rupees in whatever form or by whatever name called between person resident in India and a person resident outside India
f) Deposits between persons resident in India and persons resident outside India
g) Export , Import or holding of currency or currency notes
h) Transfer of immovable property outside India, other than a lease not exceeding 5 years by a person resident in India.
i) Acquisition or Transfer of immovable property in India other than lease not exceeding 5 years by a person resident in India
j) Giving of guarantee or surety in respect of any debt, obligation or liability incurred::
I) By a person resident in India and owed to a person resident outside India
II) By a person resident outside India
Holding by a person resident outside India:
A person resident outside India may hold, own , transfer or invest in Indian currency, securities ,or any immovable property situated in India if such currency, security, property was acquired , held or owned by such person when he was resident in India or inherited from a person who was resident in India. [Sec. 6(5)]
Holding by a person resident in India:
A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immoveable property situated outside India if such currency, security, property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. [Sec 6(4)]
Prohibition of establishment in India of a branch, office or other place of business by a person resident outside India
The Reserve Bank may, by regulation, prohibit, restrict, or regulate establishment in India of a branch, office or other place of business by a person resident outside India, for carrying on any activity relating to such branch, office or other place of business[Sec 6(6)]
Export of goods and services (sec7)
Furnishing of declaration. Every exporter of goods shall
a) Furnish to the Reserve Bank or to such other authority a declaration in such form and in such manner as may be specified containing:
i) True and correct material particulars, include representing the full export value, or
ii) If the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in a market outside India.
Declaration to be true.
Every declaration made under sec.7 must be a true declaration and not the declaration which is known to the maker to be untrue or which the maker has reason to believe to be false or untrue in any material.
Full export value of the goods:
It means nothing more than the whole of the price agreed between the parties and therefore, if the declaration of the value is less than that has agreed, it will amount to under-invoicing of the goods.
b)furnish to the Reserve Bank such other information as may be required by the Reserve Bank for the purpose of ensuring the realization of the export proceeds by such exporter[ Sec7(1) ]
Ensuring of receipt of value of goods:
RBI may , for the purpose of ensuring that the full export value of the goods or such reduced value of the goods as the Reserve Bank determines, having regard to the prevailing market conditions, is received without any delay, direct any exporter to comply with such requirements as it deems fit [Sec.7(2)]
Exporter of services to furnish declaration to Reserve Bank.
Every exporter of services shall furnish to the Reserve Bank. Every exporter of services shall furnish to the Reserve Bank or to such other authorities a declaration in such form and in such manner as may be specified, containing the true and correct material particulars in relation to payment for such services[Sec.7(3)]
Realization and repatriation of foreign exchange (Sec 8)
Where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such as manner as may be specified by the Reserve Bank.
Exemption from realization and repatriation in certain cases (Sec 9)
The provisions of Sec 4(dealing with holding of foreign exchange, etc”) and Sec 8(dealing with “realization and repatriation of foreign exchange”)shall not apply to the following namely ;
a) Possession of foreign currency or foreign coins by any person upto such limit as the Reserve Bank may specify
b) Foreign currency account held operated by such person or class of persons and the limit upto which the reserve bank may specify
c) Foreign exchange acquired or received before the 8th day of July,1947 or any income arising or accruing there on which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank
d) Foreign exchange held by a person resident in India upto such limit as the Reserve Bank may specify, if such foreign exchange was acquired by way of gift or inheritance from a person referred to in Clause (c), including any income arising there from;
e) Foreign exchange acquired from employment, business, trade, vocation, services, honorarium, gifts, inheritance or any legitimate means up to such limit as the Reserve Bank may specify; and
f) Such other receipts in foreign exchange as the Reserve Bank may specify
Authorized Person
Granting of authorization on application
The Reserve Bank may, on an application made to it in this behalf, authorize any person to be known as authorized person to deal in foreign exchange or in foreign securities, as an authorized dealer, money changer or off-shore banking unit. For such authorization application will have to be made to the Reserve Bank. The authorization shall be in writing and shall be subject to the conditions laid down therein.
Revocation of authorization
An authorization may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that-
a) it is in public interest so to do
b) the authorized person-
1) has failed to comply with the conditions subject to which the authorization was granted or
2) has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made there under.
Compliance with conditions
An authorized person shall in all his dealings in foreign exchange or foreign security comply with general or special directions or orders of the Reserve Bank. Further, except with the previous permissions of the Reserve Bank, he shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of his authorization.
Declaration
An authorized person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made there under.
Contravention
Any person, other than an authorized person, who has acquired or purchased foreign exchange for any purpose mentioned in the declaration made by him to authorized person does not use it for such purpose or does not surrender it to authorized person within the specified period or uses the foreign exchange so acquired or purchased for any other purpose for which purchase or acquisition of foreign exchange is not permissible, shall be deemed to have committed contravention of the provisions of the Act for the purpose.
Reserve Banks powers to issue directions
Directions to authorized persons
The Reserve Bank may, for the purpose of securing compliance with the provisions of this Act, give to the authorized person any direction in regard to making of payment or the doing or desisting from doing any Act relating to foreign exchange or foreign security.
Direction to an authorized person to furnish information
The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act, direct any authorized person to furnish such information.
Penalty for contravention
Where any authorized person contravenes any direction given by the Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank may impose on the authorized person a penalty which may extend to Rs 10,000. In the case of continuing contravention, the Reserve Bank may impose an additional penalty which may extend to Rs 2000, for every day during which such contravention continues. However, before imposing the penalty, the Reserve Bank shall give reasonable opportunity of being heard to the authorized person.
Power of Reserve Bank to inspect authorized person
Inspection
The Reserve bank may, at any time, cause an inspection to be made, of the business of any authorized person as may appear to it to be necessary or expedient for the purpose of –
a) Verifying the correctness of any statement, information or particulars furnished to the Reserve bank.
b) Obtaining any information or particulars which such authorized person has failed to furnish on being called upon to do so.
c) Securing compliance with the provisions of this Act or of any rules, regulations, directions or orders made there under.
The inspection shall be made by any officer of the Reserve Bank specially authorized in writing by the Reserve Bank in this behalf.
Production of books, accounts and documents
It shall be the duty of every authorized person to produce to any officer making an inspection, such books, accounts and other documents in his custody or power and to furnish any statement or information relating to the affairs of such person, as the said officer may require within such time and in such manner as the said officer may direct. Where the authorized person is a company or a firm, this duty is cast upon every director, partner or other officer of such company or firms, as the case may be.
CONTRAVENTION AND PENALTIES ( Chapter IV, Secs 13 to 15)
Penalties(Sec. 13)
Contravention. The following contraventions by any person are liable to a penalty, i.e., contravention of-
a) Any provision of this act, or
b) Any rule, regulation, notification, direction or order issued in exercise of the powers under this act, or
c) Any condition subject to which an authorization is issued by the Reserve Bank.
The penalty shall be levied upon adjudication(i.e., after hearing and determining judicially by the Adjudicating Authority).
Amount of penalty: where the amount is quantifiable, the penalty can be up to thrice the sum involved in the contravention. Where the amount is not quantifiable, the penalty may be upto Rs. 2,00,000. Where contravention is a continuing one, further penalty which may extend to Rs. 5000 may be levied for every day after the first day during which the contravention continues.
Confiscation- further penalty: The Adjudicating Authority adjudging any contravention referred to above may, if he thinks fit, direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the central government.
“Property”, in respect of which contravention has taken place, shall include-
a) Deposits in a bank, where the said property is converted into such deposits,
b) Indian currency, where the said property is converted into that currency, and
c) Any other property which has resulted out of the conversion of that property.
Enforcement of the orders of Adjudicating Authority
Civil imprisonment: If a person fails to make full payment of the penalty imposed on him within a period of 90 days from the date on which the notice for payment of such penalty is served on him, he shall be liable to civil imprisonment.
Notice, No order for the arrest and detention in civil prison of a defaulter shall be made unless the adjudicating authority has issued and served a notice upon the defaulter. The notice shall call upon him to appear before the Adjudicating Authority on the date specified in the notice. It shall call upon him to show cause why he should not be committed to the civil prison, unless the adjudicating authority, is satisfied.
a) That the defaulter, with the object or effect of obstructing the recovery of penalty, has after the issue of notice by the Adjudicating Authority, dishonestly transferred, concealed or removed any part of his property, or,
b) That the defaulter has, or has had since the issuing of notice by the Adjudicating Authority, the means to pay the arrears and refuses or neglects or has refused or neglected to pay the same.
Warrant for arrest: A warrant for the arrest of the defaulter may be issued by the Adjudicating Authority if he is satisfied, by affidavit or otherwise that with the object or effect of delaying the execution of the certificate, the defaulter is likely to abscond or leave the local limits of its jurisdiction.[sec, 14.(3)]. The Adjudicating Authority may also issue a warrant for the arrest of the defaulter, where appearance is not made pursuant to a notice issued and served[sec, 14(4)]. A warrant of arrest issued by the Adjudicating Authority may also be executed by any other Adjudicating Authority within whose jurisdiction the defaulter may for the time being be found[sec, 14(5)].
A person arrested in pursuance of a warrant of arrest shall be brought before the Adjudicating Authority issuing the warrant as soon as practicable and in every event within 24hours of his arrest. If the defaulter pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officer arresting him, such officer shall at once release him.
Opportunity of showing cause: When a defaulter appears before the Adjudicating Authority pursuant to a notice to show cause or is brought before the Adjudicating Authority, he shall give the defaulter an opportunity of showing cause why he should not be committed to the civil prison[sec 14 (7)].
Release of defaulter: Pending the conclusion of inquiry, the Adjudicating Authority may, in his discretion, order the defaulter to be detained in the custody of such officer as the Adjudicating Authority may think fit. He may also release him on defaulter’s furnishing the security to the satisfaction of the Adjudicating Authority for his appearance as and when required[sec. 14(8)].
Order on conclusion of inquiry: upon the conclusion of the inquiry, the Adjudicating Authority may make an order for the detention of the defaulter in the civil prison. Then he may be arrested if he is not already arrested but the defaulter will get an opportunity of satisfying the arrears.
Release of defaulter: when the Adjudicating Authority does not make an order of detention referred to above, he shall, if the defaulter is under arrest, direct his release.
Every person detained in the civil prison in execution of the certificate may be so detained-
a) Where the certificate is for a demand of an amount exceeding Rs. 1 crore, up to 3 years, and
b) In any other case, up to 6 months
However he shall be released from such detention on the amount mentioned in the warrant for his detention being paid to the officer-in-charge of the civil prison. A defaulter released from detention shall not, merely by reason of his release, be discharged from his liability for the arrears. But he shall not be liable to be arrested under the certificate in execution of which he was detained in the civil prison.
Execution of detention order: A detention order may be executed at any place in
Power to compound contravention (Sec 15)
Any contravention under Sec. 13 may, on an application made by the person committing such contravention, be compounded within 180 days from the date of receipt of application by the Director of Enforcement and officers of the Reserve Bank as may be authorized in this behalf by the Central Government[ Sec 15 (1)]. Where a contravention has been compounded, no proceeding shall be initiated or continued against the person committing such contravention in respect of the contravention so compounded [sec 15(2)].
Adjudicating Authority (Sec. 16)
Appointment. For the purpose of adjudication, the Central Government may appoint officers of the Central Government as the Adjudicating Authorities. The appointment shall be made by an order published in the official Gazette, for holding an enquiry in the manner prescribed after giving the person alleged to have committed contravention, against whom a complaint has been made (referred to as the said person) a reasonable opportunity of being heard for the purpose of imposing any penalty, if levied, it may direct the said person to furnish a bond or guarantee for such amount [Sec. 16(1)]
Jurisdiction. The Central Government shall, while appointing the Adjudicating Authorities, also specify in the order published in the official Gazette their respective jurisdiction [Sec. 16(2)].
Procedure of inquiry. The Adjudicating Authority shall hold an enquiry only upon a complaint in writing made by an officer authorized by a general or special order by the Central Government [Sec. 16(3)]. The said person may appear either or person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the Adjudicating Authority [Sec. 16(4)]
Powers of Adjudicating Authority. The Adjudicating Authority shall have the same powers a civil court which are conferred on the Appellate tribunal under sec. 28(2) and-
a) All proceedings before I shall be deemed to be judicial proceedings within the meanings of secs. 193 and 228 of the Indian Penal Code, 1860;
b) Shall be deemed to be a civil court for the purposes of Secs. 345 and 346 of the code of Criminal Procedure, 1973.
Appeal to Special Director (Appeals) (Sec. 17)
Appointment. The central government shall, by notification, appoint one or more Special Directors (Appeals) to hear appeals against the orders of the Adjudicating Authorities. It should also specify in the said notification the matter and places in relation to which the Director (Appeals) may exercise jurisdiction [Sec. 17(1)].
Appeal. Any person aggrieved by an order made by the Adjudicating Authority (being an Assistant Director of Enforcement or a Deputy Director of Enforcement) may prefer an appeal to the special Director (Appeals) [Sec. 17(2)]. The appeal shall be filed within 45 days from the date on which the copy of the order made by the Adjudicating Authority is received [Sec. 17(3)].
On receipt of an appeal, the Special Director (Appeals) may pass such order thereon as h thinks fit confirming, modifying or setting aside the order appealed against. But before he passes any such order he shall give the parties to the appeal an opportunity of being heard [Sec. 17 (4)]. The opportunity of being heard is an offshoot of the requirement of compliance of the principles of natural justice.
Again, the order refusing the permission must be supported by valid reasons. If the order of refusal does not give any reason or contains reasons which are not valid or the reasons have no rational nexus to the object, or the reasons are colored by policy or expediency, the applicant will be entitled for the judicial relief [ Appejay Pvt. Ltd. V. Union of India,(1979) 49 Comp. Cas. 602 (call.)].
Copy of the order to be sent to the parties and the Adjudicating Authority. The Special Director (Appeals) shall send a copy of every order made by him to the parties to appeal and to the concerned Adjudicating Authority [Sec. 17(5)].
Establishment of Appellate Tribunal (Sec. 18)
The Central Government shall, by notification, establish an Appellate Tribunal to be known as the Appellate Tribunal for the Foreign Exchange to hear appeals against the orders of the adjudicating authorities and the Special Director (Appeals) under this Act.
Appeal to Appellate Tribunal (Sec. 19)
The Central Government or any person aggrieved by an order made by an Adjudicating Authority or the Special Director (Appeals) may prefer an appeal to the Appellate Tribunal. The person appealing against the order of the Adjudicating Authority or the Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government. Where in any particular case, the Appellate tribunal is of a opinion that the deposit of such penalty would cause undue hardship to such person, it may dispense with such deposit [Sec. 19(1)].
Appeal to b filed within 45 days. Every appeal under Sec. 19(1) shall be filed within a period of 45 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 or by the Central Government. However, the Appellate Tribunal may entertain an appeal after the expiry of the said period of 45 days if it is satisfied that there was sufficient cause for not filing it within that period [Sec. 19(2)].
Orders by the Appellate Tribunal. On receipt of an appeal under Sec. 19(1), the Appellate Tribunal may, after giving the parties to the appeal an opportunities of being heard, pass such orders thereon as it think fit, confirming, modifying and setting aside the order appealed against [Sec. 19(3)]. It 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) [Sec.19 (4)].
Expeditious Disposal of Appeal. The appeal filed before the Appellate Tribunal under Sec. 19 (1) shall be dealt with by it as expeditiously as possible and endeavor shall be made by it to dispose of the appeal finally within 180 days from the date of receipt of the appeal. Where the appeal could not be disposed of within the period of 180 days, the Appellate Tribunal shall record its reasons in writing for not disposing of the appeal within the said period [Sec. 19 (5)].
Requisition of records of the proceedings. The Appellate Tribunal may, for the purpose of the examining the legality, propriety or corrections of any order made by the Adjudicating Authority under Sec. 16, call for the records of such proceedings and make such order in the case as it thinks fit. The record may be called for by the Appellate Tribunal on its own motion or otherwise [Sec. 19(6)].
Composition of Appellate Tribunal (Sec. 20)
Composition. The Appellate Tribunal shall consist of a Chairperson and such number of Members as the Central Government may deem fit [Sec. 20(1)].
Jurisdiction.
a) The jurisdiction of the Appellate Tribunal may be exercised by Benches thereof.
b) A Bench may be constituted by the Chairperson with one or more Members as the chairperson may deem fit.
c) The benches of the Appellate Tribunal shall ordinarily sit at New Delhi. These may also sit at such other places as the Central Government may, in consultation with the chairperson, notify.
d) The Central Government shall notify the areas in relation to which each bench of the appellate tribunal may exercise jurisdiction [Sec. 20(2)].
Transfer of the Members. The Chairperson may transfer a Member from one Bench to another Bench [Sec. 20(3)].
Qualifications for appointment (Sec. 21)
Qualification of Chairperson and member. A person shall not be qualified for appointment as the Chairperson or a Member unless he-
a) In the case of Chairperson, is or has been, or is qualified to be, a judge of a High Court, and
b) In the case of the Member, is or has been, or is qualified to be, a District Judge [Sec.21 (1)].
Qualification of Special Director (Appeals). A person shall not be qualified for appointment as a Special Director (Appeals) unless he-
a) Has been a member of the Indian Legal Service and has held a post in Grade I of that service, or
b) Has been a Member of the Indian Revenue Service and has held a post equivalent to a Joint Secretary to the Government of India [Sec. 21(2)].
Term of office, Conditions of service, vacancies, etc. (Sec. 22 to 25)
Term of Office (Sec.22). The Chairperson and every other Member shall hold office as such for a term of 5 years from the date on which he enters upon his office. Further the chairperson or other member shall not hold office as such after he has attained-
a) In the case of the Chairperson, the age of 65 years;
b) In the case of any other Member, the age of 62 years.
Terms and Conditions of Service (Sec.23). The salary and allowances payable to and the other terms and conditions of service of Chairpersons, other Member and the Special Director (Appeals) shall be such as may be prescribed. Further, these terms and conditions shall not be varied to his disadvantage after appointment.
Vacancies (Sec. 24). If any vacancy occurs in the office of the Chairperson or a Member, the Central Government shall appoint another person to fill the vacancy. Thereafter, the proceedings may be continued before the Appellate tribunal from the stage at which the vacancy is filled.
Right of appellate to take assistance (Sec.32)
Assistance of a legal practitioner or a chartered accountant. A person preferring an appeal to the Appellate tribunal or the special Director (Appeals) may either appear in person or take the assistance of a legal practitioner or a chartered accountant of his choice to present his case before the Appellate tribunal or the Special Director (Appeals), as the case may be [Sec. 32(1)].
Authorization by Central Government. The Central Government may authorize one or more legal practitioners or chartered accountants or any of its officers to act as presenting officers. The person so authorized may present the case with respect to any appeal before the Appellate Tribunal or the Special Director (Appeals) [Sec. 32 (2)].
Appeal to High Court (Sec. 35)
Any person aggrieved by any decision or order of the Appellate tribunal may file an appeal to the High Court within 60 days from the date of communication of the decision or order of the Appellate tribunal on any question of law arising out of such order. The High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within 60 days, allow it to be filed within a further period not exceeding 60 days.
In Sec. 35, “High Court” means-
a) The High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain: and
b) 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 personally works for gain.
DIRECTORATE OF ENFORCEMENT ( Chapter VI, Secs, 36 to 38)
Directorate of Enforcement (Sec.36)
Establishment: The Central Government shall establish a Directorate of Enforcement with a Director and such other officers or class of officers as it thinks fit, for the purposes of this Act[ Sec. 36(1)]. These officers shall be called Officers of Enforcement. The Central Government may authorize the Director of Enforcement or an Additional Director of Enforcement or Special Director of Enforcement or a Deputy Director of Enforcement to appoint officers of Enforcement below the rank of an Assistant Director of Enforcement [Sec. 36 (2)].
Exercise of powers and discharge of duties: Subject to such conditions and limitations as the Central Government may impose an Officer of Enforcement may exercise the powers and discharge the duties conferred or imposed on him under this act. [Sec. 36 (3)].
Power of search, seizure, etc. (Sec. 37)
Investigation: The Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred in Sec.13[ Sec. 37(1)]. The Central Government may also, by notification, authorize any officer or class of officers in the Central Government, State Government or the Reserve Bank, not below the rank of an Under Secretary to the Government of India, to investigate any contravention referred to in sec. 13 [Sec. 37 (2)].
Exercise of powers: The officers referred toin Sec. 37(1) shall exercise the like powers which are continued on income-tax authorities under the Income Tax Act, 1961 and shall exercise the like powers, subject to limitations laid down under that Act[ Sec. 37(3)].
MISCELLANEOUS (Chapter VII, Secs. 39 to49)
Presumption as to documents in certain cases(Sec. 39)
In legal proceedings under this Act, documents are tendered as evidence. Any such document-
(i) May be produced or furnished by any person or may have been seized from the custody of control of any person under laws; or
(ii)May have been received from any place outside
Power of Central Government to give directions
For the purposes of this Act, the Central Government may, from time to time, give to the Reserve Bank such general or special directions as it thinks fit .The Reserve Bank shall, in the discharge of its functions under this Act, comply with any such directions.
Contravention by companies
A person committing contravention of any of the provisions of this Act or any rule, direction or order made there under may be a company. In such case, every person who, at the contravention was committed, was in charge of, and was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention took place without his knowledge or that he exercised due to diligence to prevent such contravention.
Bar of legal proceedings
No suit, prosecution or other legal proceeding shall lie against the central Government or the Reserve Bank or any officer of the Central Government or of the Reserve Bank or any other person exercising any power or discharging any functions or performing any duties under this Act for anything in good faith done or intended to be done under this act or any rule, regulation, notification, direction or order made thereunder.
Rules and regulations to be laid before Parliament
Every Rule and Regulation made under this Act shall be laid, as soon as may be after, it is made, before each House of Parliament, while it is in session for a total period of 30 days may be comprised in one session or in two or more successive sessions. If both Houses agree in making any modification in the Rule or Regulation, the Rule and Regulation shall have effect only in such modified form. If both Houses agree that Rule or Regulation should not be made, the Rule or Regulation shall thereafter be of no effect. However, any such modification or annulment shall be without prejudice to the validity of anything previously done under that Rule or Regulation.
Bibliography:
· Business Law for Mangers by P. Saravanavel & S. Sumathi
· Business Law by S.S Gulshan
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