What happens when a FEMA rule has been breached, and how it can be resolved. General legal information only.
Civil, not criminal
FEMA contraventions are civil in nature. The consequences are mainly monetary penalties, not imprisonment.
Compounding
Many contraventions can be compounded by applying to the RBI. A compounding application sets out the facts and the contravention, and the RBI passes an order with a sum to be paid. Compounding is generally appropriate where the contravention is voluntarily disclosed and the facts are clear.
Adjudication
Where a contravention is detected by the authorities, the Enforcement Directorate can start adjudication proceedings, issue a show-cause notice and pass an order for penalty. Appeals lie to the Appellate Tribunal and then to the High Court.
What to do
- Identify the contravention and its dates and amounts.
- Gather the remittance, filing and bank documents.
- Rectify the filing or the transaction if it can be corrected.
- Take advice on whether compounding or another route fits.
- If a notice arrives, respond within the time allowed.
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Important disclaimer: This article is general legal information, not legal advice. It does not create a lawyer-client relationship and is not an advertisement or solicitation under Bar Council of India rules. Verify current statutes, rules and judgments before relying on it.
