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To settle a matter by a money payment in lieu of other liability means Compounding. This meaning clearly defines the concept of Compounding as a mechanism that provides the offender with an opportunity to avoid prosecution for the offense committed by him after paying off monitory payment(under FEMA). Compounding of offences under FEMA in the context of law means an agreeable settlement for the purpose of preventing examination and prosecution for an offense, however, Compounding is not an inherent right but provided/delegated by the respective Act under which the offense has been committed.
However, where a contravention has been compounded as above, there can’t be any further proceeding, initiating or continuing, as the case may be, in respect of the contravention so compounded.
The Central Government had made the Foreign Exchange (Compounding Proceedings) Rules, 2000 relating to compounding contraventions under chapter IV of FEMA whereas, in the exercise of the powers conferred by section 46 read with section 15(1) of Foreign Exchange Management Act.
If any person contravenes any provisions of FEMA except clause (a) of Section 3 of that Act then the following authorities under RBI shall have the power to entertain the Compounding application on the basis of monetary limits, which are as follows:
Manager of RBI
*On condition that no contravention will be compounded apart from if the amount involved in such contravention is quantifiable.
To facilitate the operational convenience and functioning, compounding powers have been delegated to the Regional Offices of the RBI to compound the following contraventions of FEMA, 1999.
The type of contravention is determined to keep in view the following indicative points:
Thus, the RBI reserves the right to categorize the contraventions as stated above and neither the contravener nor others have any right to classify any contravention as technical suo moto.
* During the pendency of the compounding application with Reserve Bank the applicants are advised to give notice of, if any, in the address/ contact details of the applicant.
The RBI is guided by the provisions of section 13 of FEMA, whereby it is said that the amount imposed can be up to three times the amount involved in the contravention. However, the amount imposed is calculated on the basis of guidance note and which is also available on the RBI’s website for information of the general public. However, the guidance note is only for the purpose of indicating the basis on which the amount to be imposed is derived by the compounding authorities. The actual amount imposed may sometimes be different, depending on the situations of the case taking into account the following factors:
Up to three times of the sum involved in the contravention.
Up to ₹ 2 Lakhs only
Over and above the aforesaid penalty, a recurring penalty of ₹ 5,000 per day can also be levied during the continuance of the offense.
The penalty has been paid – no prosecution can be initiated.
The penalty is not paid – prosecution can be initiated.
No specified time limit for the imposition of penalty.
For disseminating the information pertaining to compounding orders, it has been decided to host the compounding orders passed on or after June 1, 2016, on the Bank’s website (www.rbi.org.in). The data on the website will be updated at monthly intervals.
Now it has been decided to put the guidance note on the Bank’s website for information of the general public, which has already been discussed earlier.
Coordinating with RBI is not an easy task but with the passage of time RBI has been putting a lot of efforts to bridge this connotation and now a day’s every step of RBI is in this direction. A very good instance is the consolidated Master Circular for each subject matter, issued annually or half-yearly, whereby it complies up all the alterations were done or circulars issued during the year, into one so as to give the concerned persons an easy access and comfort while dealing with it and which has also served the base of this article.
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