The Foreign Emergency Management Act of 1999 (FEMA) governs cross-border funds, foreign exchange transactions, and even trade between Indian residents and non-residents. FEMA is a short Act with 49 sections, and its operation is similar to that of any other corporate law. FEMA has a number of rules and standards that must be followed. If the procedures are not followed or the transactions exceed the limit, approvals must be obtained. If there is an infringement of the regulations, the penalty is imposed. If the penalty is not paid within the specified time frame, the penalty may be prosecuted.
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Authorities Role
- Enforcement Directorate
- Adjudicating Authority
- Director of Special Operations
Penalties
FEMA is not a completely independent law because the RBI makes regulations and has a significant influence over it. Under FEMA, there are a variety of monetary penalties[6] for any violation. According to Section 13 (1), if any person attempts to violate any rules, regulations will impose a penalty three times the total amount violated, and if the penalty is not paid within a specified time, it can be increased up to Rs. two lakhs.
And if the violation continues, the penalty that may be imposed is Rs. 5,000 per day beginning on the first day of the violation and ending on the last day of the violation. Apart from the penalty, the authorities have the authority to seize currency or property.
The penalty has a 90-day grace period to be paid, and failure to do so will result in imprisonment. Provisions have also been made under Sections 17 and 19[7] whereby an appeal can be taken against an order from the adjudicating authority to the Special Director, and then the order made by the Special Director can be appealed to the Appellate Tribunal. An appeal against the Appellate Tribunal’s decision can be filed in the High Court. The Directorate of Enforcement was established primarily to prevent foreign exchange fraud.
Proceedings prior to Adjudicatory Authority
- The Central Government may appoint officers as Adjudicating Authorities under the provisions of Chapter IV of the Foreign Exchange Management Act by publishing order in the Official Gazette.
- When it is discovered that any person has violated Section 13 of the Act. The Adjudicating Authority will issue a notice to such person to appear and show cause within a specified time frame, as well as to explain why an inquiry should not be held against him. The timeframe cannot be less than 10 days from the date of service of the notice. It is necessary to include the nature of the violation committed by him in that notice.
- The person must respond within the time specified, and then the Adjudicating Authority will issue a notice for appearance, either alone or with the assistance of a Chartered Accountant or a legal practitioner duly authorised by him. On the date of his appearance, the Authority will explain the violation that he has committed by citing the provisions of the Act, rules, regulations, or any circumstances to which an authorisation has been issued by the Reserve Bank of India.
- The next hearing will be reserved for the production of relevant documents or evidence that he believes is relevant to the inquiry, and in such evidence, the Adjudicating Authority will not be bound to observe the Indian Evidence Act, 1872. The Adjudicating Authority will have the authority to summon any person he deems necessary in light of the circumstances of the case to provide any evidence that is relevant to the subject matter. If a person fails to appear, the Adjudicating Authority may proceed with the proceedings after recording the reasons for doing so.
- After the Adjudicating Authority has heard the evidence and is satisfied that the person has violated the Act, he may issue a written order imposing the penalty that he deems appropriate under Section 13 of the Act. It must be signed and dated by the Adjudicating Authority. The person will be given a free copy of the order, and other copies of the proceedings will be provided to him for a fee of Rs. 2 per page.
- The Adjudicating Authority may also issue an arrest warrant if the person fails to pay the amount imposed within ninety days and if he is satisfied that the person is obstructing the recovery of property by dishonestly transferring or removing any part of it.
Trials in front of the Special Director and the Appellate Tribunal
Director of special events
For the purpose of presenting the appeal to the Special Directors, the applicant must complete and sign Form 1. Further appeals must be accompanied by a fee of Rs. 5,000 in cash or demand draught, and the appeal must be filed with three copies of the order. The appeal can only be filed within forty-five days, and if the time limit has passed, it must be accompanied by a petition with properly supported documents and a showing of cause as to why the applicant was unable to file within the time limit prescribed.
Proceedings
- Upon receipt, the Special Director will send a copy of the appeal, along with the order, to the Director of Enforcement, and a date for appearing and hearing the appeal will be set by issuing notice to both parties.
- On the scheduled date, both parties, the Appellant and the Presenting Officer of the Directorate of Enforcement, will be heard, and the case will be decided on the merits by the Special Director. The case must be decided within 180 days.
- The order will be in writing, signed and dated, and will include reasons for the decision, which will be stated briefly.
- Under these rules, a notice can be issued that must be served to any person in the following ways: by delivering it to that person or his duly authorised person, by sending the notice by registered post either at his place of residence or where he carries on the business and also acknowledging, or by affixing it to the outer door of his place where he resides or to the place where he carries on business, or, if neither of the previous options can be served, it can be served
Appellate Tribunal
To present the appeal to the Appellate Tribunal, the applicant must fill out Form II and sign it. Further appeals must be accompanied by a fee of Rs. 10,000 in cash or demand draught, and the appeal must be filed with three copies of the order. Furthermore, the applicant must deposit the amount of the penalty imposed by the Adjudicating Authority or Special Directors with such authority as the Central Government will notify. If the Appellate Tribunal believes that it will cause undue hardship to that person, he may waive the deposit subject to certain conditions.
The appeal should be filed under a distinct heading to the ground of objection in the appealed order. The appeal can only be filed within forty-five days, and if the time limit has passed, it must be accompanied by a petition with properly supported documents and a showing of cause as to why the applicant was unable to file within the time limit prescribed.
Proceedings
- Upon receipt, the Appellate Tribunal will send a copy of the appeal, along with the order, to the Director of Enforcement, and a date for appearing and hearing the appeal will be set by issuing notice to both parties. On the scheduled date, both parties, the Appellant and the Presenting Officer of the Directorate of Enforcement, will be heard, and the case will be decided on the merits by the Appellate Tribunal.
- The order will be in writing, signed and dated, and will include reasons for the decision, which will be stated briefly.
- Under these rules, a notice can be issued that must be served to any person in the following ways: delivering it to that person or his duly authorised person, sending it by registered post either at his place of residence or where he carries on a business and also acknowledging or affixing it to the outer door of his place where he resides or where he carries on business or if neither of the previous options can be served, it can be mailed.
Conclusion
For more than a decade, the functioning of the Indian foreign market has provided a favourable environment for growth on a large scale. By liberalising foreign exchange, a careful and proper regulating method is used to ensure that financial uncertainty is avoided. In a few years, the Indian market, which is a large market, will be developed, and foreign investment will be at an all-time high. Even though the RBI has strict provisions for FEMA regulation, approvals at various stages in specific sectors are required to ensure that no violations occur and that the work is more systematic.
