Compounding of Contravention under FEMA (Foreign Exchange Management Act)
Persons who have flouted the Foreign Exchange Management Act (Fema) will be allowed to settle the offence by paying monetary penalty and will not have to go for litigation if such a eprson acknowledges contravention. This, however, will not apply to hawala transactions.
The government has reviewed the procedures for compounding of contravention under the Fema and the responsibility of administering compounding of contravention cases under Fema has been vested with the RBI, with the exception of havala transactions, which will be dealt with by the Directorate of Enforcement.
As per the new norms announced on 1st February 2005, the RBI will be required to conclude case proceedings within 180 days from the receipt for application for compounding and the sum worked out after compounding has to be paid within 15 days from the order of compounding.
The order passed by RBI will be applicable for a period of three years. If a second offense is committed after the expiry of three years, it will be deemed as a fresh contravention and not a repetition of the earlier one.