Proposal for RBI Compounding Application

Section 13 of the FEMA Act states that if an individual contravenes any provisions mentioned in the Act or any rule, notification, regulation, order or direction issued while exercising the powers of the Act , or contravenes any condition subject to authorizations issued by the RBI, he shall be levied a penalty up to thrice the amount related to such a contravention. This amount can go to a maximum of Rs 2 lakhs, wherever the said amount is quantifiable. Whenever the amount is not quantifiable or the same is continuous in nature, the penalty may be extended to Rs 5000 per day, after the first day of the discovery of such a contravention.

In the context of law, compounding means a cordial or amicable settlement that may lead to avoiding prosecution for a past offence. However, compounding is not regarded as an intrinsic right. It is only provided/delegated by the concerned Acts of law under which the said offence has been committed.

Basic Concepts

1. As mentioned in Section 15 of the FEMA (Foreign Exchange Management Act) 1999 compounding of contraventions is permitted. It also empowers the RBI ( Reserve Bank of India) to compound as per laid down provisions of Section 13 of FEMA. However, it will exclude contraventions under section 3(a), if an application is made by the person committing the said contravention.

Besides, wherever any such contravention has been compounded, no further proceeding, continuation or initiation will be there., with respect to the contravention thus compounded.

2. Section 13 of the Act says that if an individual contravenes any provisions mentioned in the Act or any rule, notification, regulation, order or direction issued while exercising the powers of the Act , or contravenes any condition subject to authorizations issued by the RBI, he shall be levied a penalty up to thrice the amount related to such a contravention. This amount can go to a maximum of 2 lakhs, wherever the said amount is quantifiable. Whenever the amount is not quantifiable or the same is continuous in nature, the penalty may be extended to Rs 5000 per day, after the first day of the discovery of such a contravention.

3. However, by exercising the powers conferred by Section 46, along with that of Section 15, sub-section (1) of the FEMA, the Central Government has framed the Foreign Exchange (Compounding Proceedings) Rules, 2000. It relates to the compounding contraventions mentioned in Chapter IV of FEMA and has come into effect from 03.05.2020.

Application for Compounding

To The Compounding Authority Reserve Bank of India Exchange Control Department Central Office, Mumbai

Subject: Application for Compounding of Contravention under FEMA, 1999

Dear Sir/Madam,

I, [Your Name], [Designation], [Company Name] (if applicable), hereby request compounding of a contravention of the Foreign Exchange Management Act, 1999 (FEMA), as detailed below:

1. Nature of Contravention: [Describe the specific contravention that occurred, providing clear and concise information.]

2. Circumstances Leading to Contravention: [Explain the reasons or events that led to the contravention, ensuring transparency.]

3. Voluntary Admission of Contravention: I hereby voluntarily admit to the contravention and express my sincere regret for the same.

4. Undertaking to Comply with FEMA: I undertake to comply with all applicable provisions of FEMA in the future.

5. Documents Enclosed:

• [List all the documents you are enclosing with the application, such as bank statements, invoices, contracts, etc.]

6. Request for Compounding: I kindly request the Compounding Authority to consider my application favorably and grant compounding of the contravention. I am prepared to pay the compounding fee as determined by the Authority.

Thank you for your consideration.

Yours faithfully, [Your Name] [Designation] [Company Name] (if applicable) [Address] [Contact Number] [Email Address]

Date: [Date of Application]

Enclosures: [List of enclosed documents]

Documents Required for RBI Compounding Application

Good News! Just Some Basic Documents. Just See Our Checklist Below:

• Memorandum received from RBI
• All the FIRC’s & FDI report filed with RBI
• Board resolutions in respect of item 2
• FCGPR & allotment filed with RBI & ROC
• Previous compounding offences, if any
• Litigations

Procedure for RBI Compounding Application

Procedure for filing an RBI Compounding Application under FEMA, 1999:

1. Determine Eligibility:

• Ensure the contravention is admitted and not willful, malafide, or fraudulent.

2. Obtain Application Form:

• Download Form ‘Compounding of Contraventions under FEMA, 1999’ from RBI’s website (link provided earlier).
• If unavailable online, contact the RBI directly.

3. Pay Application Fee:

• Submit a non-refundable fee of ₹5000/- by demand draft in favor of Compounding Authority.
• Fees may vary as it’s subject to change!

4. Gather Required Documents:

• Complete the application form.
• Attach the demand draft.
• Provide copies of relevant documents supporting the contravention.
• Write a clear explanation of the circumstances leading to the contravention.
• Include a statement of voluntary admission of contravention.
• Provide an undertaking to comply with FEMA regulations in the future.

5. Submit Application:

• Send the application to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai.

6. Application Processing:

• RBI will review the application and may seek further information.
• The compounding authority will decide on the compounding amount and issue an order.
• Pay the compounding amount within 15 days of the order.

7. Expected Timeline:

• The process typically takes around 180 days from receipt of a complete application.

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