To “compound” means “to settle a matter by money payment, in lieu of any other liability.” This clearly describes the concept of compounding as a mechanism that offers the offender an opportunity to avoid prosecution from the offence committed by him after paying off a monitory payment.
Compounding of an offence in context of the law means an amicable/cordial settlement for the purpose of avoiding prosecution for an offence, nevertheless, compounding is not an intrinsic right but delegated/provided by the respective Act under which the offence has been committed.
Basic Concepts
1. As far as the Foreign Exchange Management Act, 1999 (FEMA), the provisions of section 15, permit compounding of contraventions and empowers the Reserve Bank of India (RBI) to compound any contravention as defined under the Section 13 of FEMA, except contraventions under Section 3 (a) of FEMA, on an application made by the person committing such a contravention.
Moreover, where a contravention has been compounded as given above, there can’t be any further initiating, proceeding, or continuing, as the case may be, in respect of the contravention so compounded.
2. The provisions of Section 13, states that if any person contravenes any provision of the FEMA, or any notification, rule, regulation, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the RBI, they shall, upon adjudication, be liable to a penalty up to three times the sum involved in such contravention, where the amount is quantifiable or up to rupees two lakhs, when the amount is not directly quantifiable and when the contravention is a continuing one, further penalty which may extend to rupees five thousand for every day after the first day during which the contravention continues.
3. However, in exercise of the powers conferred by Section 46 read with sub-section (1) of Section 15 of FEMA, Central Government had made the Foreign Exchange (Compounding Proceedings) Rules, 2000 relating to the compounding contraventions under chapter IV of FEMA which were effective from 03.05.2000.
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