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Proposal for RBI Compounding Application

Ashish M. Shaji

| Updated: Aug 21, 2017 | Category: RBI Registration

Compounding

“Compound” refers to “Settling a matter by money payment, instead of any other liability.” It describes the concept of compounding as a mechanism which offers an opportunity to the offender to avoid prosecution for the offense committed by him after paying off payment.

In the context of law, compounding of an offense refers to an amicable settlement to avoid prosecution. Nevertheless, it is not an intrinsic right, but it is provided by the respective act under which the offense has been committed.

Basic Concept

  1. The provisions of the Foreign Exchange Management Act, 1999 (FEMA), permit compounding of contraventions under section 15. It empowers the Reserve Bank of India (RBI[1]) to compound contravention defined under the Section 13, except contraventions under Section 3 (a) of FEMA, on an application made by the person committing contravention. Moreover, In respect of the contravention compounded there can’t be any further proceeding.
  2. In case any person contravenes provisions, notification, rules and regulations, direction or order issued in exercise of the powers under the FEMA Act, then section 13 states that, they shall be liable to a penalty up to three times of the sum involved in contravention, where the amount is quantifiable or up to Rs. two lacs, and In case when amount is not quantifiable, and contravention is a continuing one, then further penalty which may extend to rupees five thousand for every day after the first day of the contravention continues.
  3. Central Government made the Foreign Exchange (Compounding Proceedings) Rules, 2000 in relation to compounding contraventions under chapter IV of FEMA, in the exercise of the powers conferred under section 46 read with subsection (1) of Section 15 of FEMA.

Documents Required for RBI Compounding Application

Here is the list of documents:

  • Memorandum received from RBI;
  • All FIRC’s & FDI report filed with RBI;
  • Board resolutions in relation to item 2;
  • FCGPR & allotment filed with RBI & ROC;
  • Previous compounding offenses.

Procedure for Compounding Application

The procedure is very simple. It involves the following steps:

Procedure for Compounding Application
  • Prepare compounding application;
  •  Submit it to the regional office of the RBI;
  • Get the order and pay the penalty with RBI.

It is mandatory to file RBI compounding application if you have received Memorandum from the RBI for delayed reporting, then unless the application has been filed, RBI will not approve the forms filed with them.

Failure to pay the penalty

The prescribed penalty has to be cleared within 15 days, failing of which, the entire process will not be considered and where the consequences will be severe in nature and Directorate Enforcement will take over your case.

Conclusion

With the provisions of RBI compounding application, any lawsuits arising from the offence can be avoided in the future. However, it may be noted that it is not an intrinsic right.

Read our article:Can a struck off company get restored?

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Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on criminal and corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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