2. FEMA
The Foreign Exchange Management Act, 1999
(FEMA) is an Act of the Parliament of India
"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".
3. Objectives of FEMA
The main objective of FEMA was to help facilitate external trade and
payments in India. It was also meant to help orderly development
and maintenance of foreign exchange market in India. It defines the
procedures, formalities, dealings of all foreign exchange
transactions in India.
These transactions are mainly classified under two categories --
Current Account Transactions and Capital Account Transactions.
FEMA is applicable to all parts of India and was primarily
formulated to utilize the foreign exchange resources in efficient
manner. It is also equally applicable to the offices and agencies
which are located outside India however is managed or owned by
an Indian Citizen. FEMA head office is known as Enforcement
Directorate and is situated in heart of city of Delhi.
4. Applicability of FEMA Act
• exports of any foods and services from India to outside,
foreign currency, that is any currency other than Indian
currency,
• foreign exchange,
• foreign security,
• Imports of goods and services from outside India to India,
• securities as defined in Public Debt Act 1994,
• banking, financial and insurance services,
• sale, purchase and exchange of any kind (i.e. Transfer),
• any overseas company that is owned 60% or more by
an NRI (Non Resident Indian) and
• any citizen of India, residing in the country or outside (NRI)
5. Major Provisions of FEMA, Act
• Free transactions on current account subject to
reasonable restrictions that may be imposed.
• RBI controls over capital account transactions.
• Control over realization of export proceeds.
• Dealing in foreign exchange through authorized
persons like authorized dealer or money changer
etc.
• Appeal provision including Special Director
(Appeals)
• Directorate of enforcement
6. • Any person can sell or withdraw foreign exchange, without any
prior permission from RBI and then can inform RBI later.
• Enforcement Directorate will be more investigative in nature
• FEMA recognized the possibility of Capital Account convertibility.
• The violation of FEMA is a civil offence.
• FEMA is more concerned with the management rather than
regulations or control.
• FEMA is regulatory mechanism that enables RBI and Central
Government to pass regulations and rules relating to foreign
exchange in tune with foreign trade policy of India.
7. Chapter V (Section 16 to 35) of the Foreign Exchange Management Act,
1999(FEMA) deals with the provisions of Adjudication and Appeal as
under:
Adjudicating Authority
For the purpose of adjudication under Section 13 of FEMA (dealing with
Penalties), the Central Government may, by an order published in the
Official Gazette, appoint as many officers of the Central Government as it
may think fit, as the Adjudicating Authorities for holding an inquiry in the
manner prescribed after giving the person alleged to have committed
contravention under Section 13, against whom a complaint has been
made. Adjudicating Authority shall not hold an enquiry except upon a
complaint in writing made by any officer authorised by a general or special
order by the Central Government.
8. Appeal to Special Director (Appeals)
Central Government shall, by notification, appoint
one or more Special Directors (Appeals) to hear
appeals against the orders of the Adjudicating
Authorities. Every appeal shall be filed within
forty-five days from the date on which the copy
of the order made by the Adjudicating Authority
is received by the aggrieved person and it shall be
in such form, verified in such manner and be
accompanied by prescribed fee.
9. Appeal to Appellate Tribunal
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.
Every appeal shall be filed within a period of forty-five 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 and it shall be in such form, verified in such
manner and be accompanied by such prescribed.
10. Appeal to High Court
Any person aggrieved by any decision or order
of the Appellate Tribunal may file an appeal to
the High Court within sixty days from the date
of communication of the decision or order of
the Appellate Tribunal to him on any question
of law arising out of such order.
11. Duty of persons to realise foreign
exchange due:
• A person resident in India to whom any amount of foreign
exchange is due or has accrued shall, save as otherwise
provided under the provisions of the Foreign Exchange
Management Act, 1999, or the Rules and Regulations made
thereunder, or with the general or special permission of the
Reserve Bank of India , take all reasonable steps to realise
and repatriate to India such foreign exchange, and shall in
no case do or refrain from doing anything, or take or refrain
from taking any action, which has the effect of securing –
a. that the receipt by him of the whole or part of that foreign
exchange is delayed;
or b. that the foreign exchange ceases in whole or in part to
be receivable by him.
12. Manner of Repatriation
(1) On realisation of foreign exchange due, a person
shall repatriate the same to India, namely bring
into, or receive in, India and –
a. sell it to an authorised person in India in
exchange for rupees;
or b. retain or hold it in account with an authorised
dealer in India to the extent specified by the
Reserve Bank;
or c. use it for discharge of a debt or liability
denominated in foreign exchange to the extent
and in the manner specified by the Reserve Bank.
13. • (2) A person shall be deemed to have
repatriated the realised foreign exchange to
India when he receives in India payment in
rupees from the account of a bank or an
exchange house situated in any country
outside India, maintained with an authorised
dealer.
14. Period for surrender of realised foreign
exchange:
A person not being an individual resident in India
shall sell the realised foreign exchange to an
authorised person, within the period specified
below :-
i. foreign exchange due or accrued as remuneration
for services rendered, whether in or outside
India, or in settlement of any lawful obligation, or
an income on assets held outside India, or as
inheritance, settlement or gift, within seven days
from the date of its receipt;
15. ii.
in all other cases within a period of ninety days
from the date of its receipt.
16. • According to Section 42 of the Foreign Exchange
Management Act, 1999, where a person
committing a contravention of any of the
provisions of the Act or of any rule, direction or
order made there under is a company, every
person who, at the time 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 and
shall be liable to be proceeded against and
punished accordingly.
17. It may be noted that nothing contained in this sub-section shall render any
such person liable to punishment if he proves that the contravention took
place without his knowledge or that he exercised due diligence to prevent
such contravention.
Where a contravention of any of the provisions of this Act or of any rule,
direction or order made thereunder has been committed by a company
and it is proved that the contravention has taken place with the consent or
connivance of, or is attributable to any neglect on the part of, any director,
manager, secretary or other officer of the company, such director,
manager, secretary or other officer shall also be deemed to be guilty of
the contravention and shall be liable to be proceeded against and
punished accordingly.
For the purposes of section 42 of the Act,
“Company” means anybody corporate and includes a firm or other
association of individuals; and “director”, in relation to a firm, means a
partner in the firm.
