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Who Is the Compounding Authority Under Rule of Foreign Exchange Rules 2000

The compounding authority is a person who has the power to compound the contravention but this differs from one case to another, now learn more about the same

Under Sub-section of Section 15 of the Act, ‘Compounding Authority’ is known as the persons authorised by the central government as an administrator of the Directorate of Enforcement (DOE) not less than the position of deputy director or deputy legal adviser

  • ‘Act’ is known as the Foreign Exchange Management Act, 1999 (42 of 1999)
  • ‘Authorised officer’ is called as an officer authorised under sub-rule (1) of rule 3
  •  ‘Applicant’ represents someone who settles together an application under Section 15 (1) of the Act to the compounding authority.

Power of Reserve Bank to Compound Contraventions

  1. If  someone contravenes any regulations provided under the Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of that Act, the person is subjected to compounding
  • In the case where the sum pertained to in such contravention is ₹10 lakhs or below, it is compounded by the assistant general manager of the Reserve Bank of India (RBI)
  • in the case where the sum pertained to in serious contravention is more than ₹10 lakhs but less than ₹40 lakhs, it is compounded by the deputy general manager of RBI
  • In the case where the sum pertained to in the contravention is ₹40 lakhs or additional but less than ₹1 crore,  ₹100 lakhs the compounding authority is  the general manager of RBI
  •  In case the sum implicated in such contravention is ₹100 lakhs or more, by the chief general manager of the RBI
  1. Is included in Sub-section (1) shall correlate to a contravention perpetrated by anyone within 3 years from the date on which a related contravention dedicated by the compound application under these regulations
  2. All the administrators restricted under Sub-rule (1) of rule 4 of the RBI shall practice the strengths to compound any contravention patient to the guidance, supervision, and management of the governor of the RBI
  3. Every petition for compounding any contravention under this regulation shall be made in form to the RBI, exchange control department, central office, Mumbai along with a fee of ₹5,000 by DD in favor of compounding permission.
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Power of Enforcement Directorate to Compound Contraventions

  1. If anyone has the requirements contravenes in Section 3(a) of the Foreign Exchange Management Act (FEMA). You should know different types of contravention are compounded by different authorities.
  • If the total amount due to contravention is around ₹5 lakh or less than that then it is compounded by the deputy director of DOE
  • If the total amount is more than ₹5 lacs but less than ₹10 lakhs then it is compounded with the additional director of enforcement
  • If the sum pertained to the contravention is more than ₹10 lakhs but less than ₹50 lakhs, it is compounded by the special director of the DOE
  • If the sum related to contravention is around ₹50 lakhs but not above ₹1 crore it’s compounded by the special director with deputy legal adviser of DOE
  • In case the sum pertained to such contravention is more than  ₹1 crore or above that, the DOE with the special director of the enforcement directorate takes care of the compounding
  1. Nothing included in Sub-section (1) shall pertain to a contravention perpetrated by any individual within three years from the date on which a related contravention perpetrated by him was compounded under these laws. As we discussed earlier based on this law any contravention conducted by an applicant after the provided period of 3 years will be considered the first contravention
  2. All the officers present in the directorate of enforcement are bound under the sub-rule(1) of this law should exercise the powers to compound any form of contravention adhering to the advice and maintenance of the DOE
  3. The petitioner should apply for any compounding of contravention directly to the directorate of enforcement by filling a suitable form along with a DD of ₹5000 in the name of RBI and the compounding authorities.

Procedure for Compounding

  1. The compounding authority can call for any proof, documentation, or any other articles related to the compounding proceedings
  2. The compounding authority shall enact a rule of compounding after paying for a chance of standing to listen to all the apprehensive as expeditiously as apparent and not later than 180 days from the date of the petition.

Gave that with appreciation to any proceeding inaugurated under rule 4, if the enforcement directorate is of the view that the said proceeding associates to a severe contravention like money laundering, terror financing, or influencing sovereignty and quality of the nation, the compounding authority shall not continue with the process and shall pass on the case to the adjudicating authority for adjudicating contravention under Section 13. 

How Vakilsearch Can Help in Compounding Contraventions

When it comes to applying for RBI compounding it is best for reaching out to an expert. Experts at Vakilsearch help more than 1000 companies every month in their legal process. RBI compounding is one of the cases handled by our expert team.

Reach out to our experienced team of attorneys who will help you to file an RBI compounding application in just three steps. Initially, our team will collect the files of the previous compounding if any, and board resolution approval. They will collect the first report and submit the compounding application on your behalf to the RBI office. Reach out to us for a holistic approach.

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