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Compounding refers to settlement of the offence committed by the contravener by imposing monetary penalty instead of going to litigation. It is a voluntary process where a person or a corporate seeks compounding of an admitted contravention. Section 15 of Foreign Exchange Management Act 1999 allows the Reserve Bank to compound a contravention defined under Section 13 of FEMA 1999, except contraventions under section 3 (a) of the FEMA 1999. Let’s know more on Compounding of contraventions under FEMA.
Application for compounding can be submitted along with the prescribed fee (5000 rupees) through demand draft drawn in favor of the RBI and payable at the concerned regional office/CO Cell New Delhi through demand draft in favor of RBI.
Such application submitted to the RBI should have the contact details of the applicant/authorized official or representative of the applicant.
The compounding authority will pass an order of compounding but not before providing an opportunity of being heard to all concerned as expeditiously as possible (not later than 180 days from the application date).
Apart from the application in the format prescribed, the applicant should further provide the information and documents as enumerated below:
Hence when a contravention is identified by the Reserve Bank or if it is notified by the entity involved in contravention, the bank must examine the following:
The procedure for compounding are as follows:
The Reserve Bank shall issue the order of compounding within 180 days from the date of application based on averments made in the application as well as other documents and submissions made in this context from the contravener in the personal hearings.
The sum for which the contravention’s compounded should be paid through the demand draft in favor of the Reserve Bank of India (RBI) within 15 days from the date of the compounding order of such contravention. The manner how the demand draft should be drawn and deposited has to be indicated in the order of compounding.
Hence from the above information, one can conclude that Application for compounding of contraventions under FEMA can be submitted along with the prescribed fee through demand draft drawn in favor of the RBI. The compounding authority will pass the order of compounding but not before providing an opportunity of being heard to all concerned as expeditiously as possible (not later than 180 days from the application date).
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