Every institution or an organization requires an adjudicating authority to function in accordance with the rules and regulations of such an institution. If you observe keenly, you would know that for every Act, there is an adjudicating authority appointed under the Act for the compliance of its rules and regulations. Likewise, the Foreign Exchange Management Act, 1999 provides for adjudicating authority for imposing penalties in case any person contravenes any rule, regulation, notification or order issued in exercise of the powers under this Act. In this article, we shall look at the Adjudicating Authority under FEMA and the provision of appeal that it provides, but before that, let's have a brief understanding of FEMA. What is FEMA? Foreign Exchange Management Act, 1999 (FEMA) was enacted by an act of Parliament of India. It was enforced on 1st June 2000. FEMA was brought in with a view to promoting the systematic development and maintenance of a healthy foreign exchange market in India. It replaced the erstwhile Foreign Exchange Regulation Act, 1973 (FERA). Another reason to enact FEMA was to somewhat relax the control on foreign exchange in India. Appointment of Adjudicating Authority under FEMA Section 16 of the Foreign Exchange Management Act, 1999 (FEMA), provides for the appointment of adjudicating authority. It provides that- The Central Government is authorized to appoint as many officers as the adjudicating authorities by publishing an order under the official gazette. They are appointed for holding an inquiry against whom the complaint has been made in the prescribed manner.In the order published in the official gazette, the Central Government is required to specify, while appointing the adjudicating authority under FEMA, about their respective jurisdictions. Procedure for Adjudication by Adjudicating Authority under FEMA The procedure of adjudication is as mentioned below. The adjudicating authority is required to hold an inquiry only on a complaint, which is in written form made by the officer authorized by either a general or special order by the Central Government.If any person commits any contravention under the Act, the adjudicating authority will issue a show-cause notice to that person mentioning him to show cause within a period as specified in the notice why an inquiry should not be initiated against him.The notice must contain the nature of contravention alleged by the adjudicating authority under FEMA.The person on whom the notice is issued must reply to it within the prescribed period.If the adjudicating authority is under the opinion that an inquiry should be held against such person after considering his reply, he may issue a notice specifying the date for the appearance of the said person, whether personally or through a legal practitioner or a CA authorized by him.The adjudicating authority will, on the date fixed, specify to the person the contravention alleged on him and indicate the provisions of the Act or the rules in respect of which the contravention has been committed. Thereafter, the adjudicating authority shall provide an opportunity to that person to produce documents and evidences that he may consider relevant in the inquiry, and the hearing may be adjourned if necessary. It is vital to note that the adjudicating authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872, while taking such evidence.The adjudicating authority is empowered to summon and enforce the attendance of any person while holding the inquiry. It could be for giving evidence or producing any document that is useful or relevant to the inquiry in the opinion of the adjudicating authority.In case a person refuses, fails, neglects to appear before it, then the authority may proceed with adjudication without that person but after recording reasons for doing so.If the adjudicating authority is satisfied, after consideration of the evidence, that the person has contravened, then he may impose penalty on him under the provisions of Section 13 of the Act.In addition to the penalty, the Adjudicating Authority under FEMA may also direct the security, currency or any other money or property in respect of which the contravention took place, to be confiscated to the Central Government.It shall further direct that the foreign exchange holdings, in case any person committing the contravention, shall be brought to India or will be retained outside India according to the directions made in this behalf.The adjudicating authority must look to deal with the complaint diligently and dispose of the matter within one year from the date of receipt of such complaint.In case the adjudicating authority fails to dispose of the matter within the specified period, then the Adjudicating Authority shall record reasons in writing for such failure.The orders made by the authority must specify the provisions of the Act or rules, regulations, directions, notifications or any condition in respect of which the contravention took place and shall include the reason for such decision.The order must be dated and signed by the adjudicating authority.The copy of the said order must be given freely to the person against whom the order is made, and other copies of proceedings may be supplied to him on payment of 2 Rs. per page as a copying fee.Such copying fee shall be paid either in cash or DD in favor of the Adjudicating Authority under FEMA. Read, Also: The Significance of Foreign Exchange Market. Enforcement of orders of the Adjudicating Authority under FEMA The provision followed for enforcement of orders of the Adjudicating Authority under FEMA is mentioned below: In case of failure to make complete payment of the penalty imposed on any person within 90 days from the date on which the notice for such payment was served, he shall be liable to civil imprisonment.However, such imprisonment cannot be made unless the defaulter has been served a notice by the adjudicating authority to appear before him on such date as specified in the notice and show cause why he should not be imprisoned in civil prison.The arrest order can be made if the adjudicating authority is satisfied that-The defaulter to obstruct the recovery of penalty has after the issuance of the notice, dishonestly transferred, concealed or removed any part of his property;Or the defaulter has or had the means to pay the arrears or some part of it, and he refuses or neglects to pay the same.An arrest warrant of the defaulter can be issued if the adjudicating authority is satisfied that the object or the effect of delaying the execution of the certificate the defaulter may abscond or leave the adjudicating authority’s local limit.In case the defaulter doesn't make his appearance, then the authority may issue a warrant for his arrest.The arrested person shall then be brought to the Adjudicating Authority under FEMA within the prescribed time, and if the amount entered in the warrant of arrest is paid by the defaulter along with the cost of arrest to the officer who arrests him, then the officer shall release him.The adjudicating officer may, for the conclusion of the inquiry, either detain him or leave the defaulter for not more than 15 days period or release him on providing security for his appearance.The adjudicating authority under FEMA may direct the release of a defaulter who is under arrest if it doesn’t make an order for his detention.A person may be detained for the following years-In case the certificate is for the demand of amount exceeding Rs. 1 Crore- up to three years,And in any other case- up to six months. It may be noted that if the amount mentioned in the warrant is paid to the officer in charge of the prison, then the person shall be released. A detention order can be executed at any place within India in the prescribed manner under CRPC, 1973. Appeal against the order of the Adjudicating Authority under FEMA (i) To Special Directors (Appeals) As per Section 17 of the Act, the Central Government must appoint Special Directors who will hear the appeals against the order of the adjudicating authority. It shall further specify the matter and places where such directors may exercise jurisdiction. Any person who is not pleased with the order of the adjudicating authority may file an appeal to special directors under the Act. The said appeal must be filed within 45 from the date of receipt of a copy of the order by the authority. It is essential to know that in case a person files appeal after expiry date, then it is upon the discretion of the special directors to admit the plea once he is satisfied that such delay was due to reasonable cause. The special director may provide the parties to an appeal the opportunity to be heard on receiving the appeal. Then he may, if satisfied, pass an order confirming, modifying, or setting aside the order of adjudicating authority. A copy of such order should be sent to the parties to the appeal and also to the concerned Adjudicating Authority under FEMA. The special directors shall also have the similar powers of a civil court that are with the Appellate Tribunal. (ii) To Appellate Tribunal Section 18 of the Act provides for the constitution by the Central Government of an Appellate Tribunal that would hear appeals against the orders of the adjudicating authority and the Special Director under the Act. Further Section 19 of the Act provides that the appeal must be filed before it within 45 days period from the date of receipt of the order’s copy made by the adjudicating authority or the special director under the Act. The appeal should be in Form II, and it shall be signed by the applicant. The appeal will be in triplicate by a fee of Rs. Ten thousand in either cash or DD payable to the Registrar of Appellate Tribunal of Foreign Exchange, New Delhi, provided that the applicant will deposit the penalty amount imposed on him by either Adjudicating Authority or the Special Director as the case may be to the authority as may be notified. In case the tribunal feels that the deposit of the penalty may cause hardship to the depositor, then the Tribunal may dispense with such deposit with certain conditions. The appeal must set forth the grounds of objection to the appealed order concisely and under distinct heads without any argument of narrative. The grounds shall be numbered. It shall mention the address for service where the notice to the appellant may be served. The procedure of appeal to Appellate Tribunal shall be in the following method: Once the Appellate Tribunal receives the appeal, it shall send a copy of such appeal to the Director of Enforcement along with the copy of the order appealed against.Thereafter the Appellate Tribunal issues notice to the applicant and to the Director of Enforcement fixing the date of hearing.Then on the fixed date or any other date to which the hearing is adjourned, the applicant and the officer of the Director of Enforcement shall be heard.If the applicant or the officer of the Director of Enforcement fails to appear on the designated date, the Appellate Tribunal shall decide the case (Appeal) on merits.Appellate Tribunal's order will be in writing, and it must specify the grounds for the decision made.It shall be signed by the chairman or by the Appellate Tribunal’s member hearing such appeal.The appeal should be disposed of in 180 days from the date such appeal was received. If the appeal could not be disposed of in the specified period, then the Appellate Tribunal must record the reasons in writing for not completing it within the prescribed period.An essential point to know is that the Tribunal may, for examining the legality, propriety, or its correctness of any order given by the Adjudicating Authority under FEMA, call for records of such proceedings and make orders as it thinks fit. Read this: Appeal on National Company Law Tribunal Process & Requirement. (iii) To High Court Any person who is not pleased with the decision of the Appellate Tribunal may file an appeal to the High Court within 60 days of such decision or order. In case of delay, the High Court is satisfied that such delay in filing the appeal was due to sufficient cause and it prevented the appellant from filing the appeal, the High Court may allow a period further to file the appeal not exceeding 60 days. Conclusion FEMA facilitates the working of external trade and payments, thereby promoting the orderly development. Simply speaking, its aim is to maintain a healthy foreign exchange market in India. However, it requires an authority that shall handle the matters relating to contravention of the provisions under the Act. Therefore, the role of the Adjudicating Authority under FEMA becomes significant in the proper compliance of the regulations under the Act.