It is crucial to compound any form of contraventions under FEMA. This can seriously help in avoiding legal action. Now learn the procedure for RBI compounding
Overview
Compounding of contraventions under the Foreign Exchange Management Act (FEMA), 1999 clarifies the ability to compound by RBI, power of enforcement directorate to compound contraventions under FEMA, and delegation of powers to regional offices. Read this blog to know about Procedure of RBI Compounding.
If someone contravenes any requirements indicated in the Act or any law, announcement, restriction, order, or advice published while practicing the powers of the Act, or contravenes any situation topic to permissions published by the RBI, he shall be charged a liability up to thrice the amount associated to such a contravention.
Note: This amount can go to a maximum of ₹2 lakhs, wherever the said quantity is quantifiable. Whenever the amount is not quantifiable or the same is continuous in behavior, the punishment may be expanded to ₹5000 per day, after the first day of the spotting of such contravention.
In the context of law, compounding means a cordial or agreeable concession that may direct to averting trial for a before offense. However, compounding is not heeded as an intrinsic right. It is only given by the apprehensive Acts of law under which the said offense has been dedicated.
Power of Reserve Bank to Compound Contraventions
Any contravention shall be compounded only if the total amount raised due to contravention surpasses a certain quantity complicated in such contravention is quantifiable. Established on the sum involved in contraventions the additional administrators of the RBI can compound.
| The sum involved in the contravention | Officer of RBI |
| Is up to ₹10 lacs | assistant general manager |
| It’s around ₹10 lakhs – ₹40 lakhs | deputy general manager |
| ₹40 lakhs or more but less than ₹1 crore | general manager |
| ₹1 crore or more | chief general manager |
In the case of the director of enforcement, the following compounding authorities are chosen based on the criteria explained below.
- If the sum of contravention is ₹5 lakhs or less it is compounded by the deputy director of the Directorate of Enforcement (DOE)
- In the case where the sum pertained to in such contravention is greater than ₹5 lakhs and not more than ₹10 lakhs, then it is compounded by the additional director of the DOE
- If the sum is more than ₹10 lakhs but less than ₹50 lakhs, it is compounded by the Special Director (SD) of the DOE
- If the sum pertained to in the contravention is ₹50 lakhs to ₹1 crore by SD with deputy legal adviser the DOE
- If the sum of contravention is more than ₹1 crore, it is compounded by the DOE with SD of the enforcement directorate.
Procedure of RBI Compounding
- Initially, as soon as the individual is aware of the contravention he has to report to the RBI with a compound application. Along with the application he has to provide a demand draft (DD) of ₹5000 in the name of the RBI and submit it to the local RBI office. Based on the type of contravention the compounding authority will be assigned
- Procedure of RBI Compounding authorities will request any data, documents, or any other articles related to the compounding proceedings
- The compounding administration shall pass an ordinance of compounding after paying for an opportunity of being learned to all the impatient as expeditiously as feasible and not later than 180 days from the date of the petition
- Admiration to any proceeding inaugurated under rule 4, if the enforcement directorate is of the impression that the said proceeding pertains to a severe contravention like money laundering, terror financing, or affecting sovereignty and integrity of the nation, the compounding authority shall not continue with the course and shall remit the case to other authorities for handling the contravention under Section 13.
Payment Involved in Procedure of RBI Compounding
The amount for which the contravention is compounded as stipulated in the order of compounding under Sub-rule (2) of rule 8, shall be spent by demand draft in favor of the authority in 15 days from the time of the order of compounding of such contravention. If someone is not able to compensate the whole amount of compounding with rule 9 in the period then the compounding petition will never be taken into consideration.
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