With the excess number of laws applicable on an organization and ever-changing corporate environment, organizations and individuals often end up contravening the various provisions of law. Therefore, the Government of India has introduced the concept of Compounding of offences under FEMA, whereby a person can voluntarily accept the contravention and apply for the compounding of offence, seeking redressal without going through the lengthy process of litigation.

Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. The Reserve Bank is empowered to compound any contraventions as defined under section 13 of FEMA, 1999 except the contravention under section 3(a), for a specified sum after offering an opportunity of personal hearing to the contravener. Applications seeking compounding of contraventions under section 3(a) of FEMA, 1999 may be submitted to the Directorate of Enforcement.

OFFENCES THAT CAN BE COMPOUNDED BY THE REGIONAL OFFICES OF RBI

Delay in reporting inward remittance received for issue of shares.
Delay in filing form FC(GPR) after issue of shares.
Delay in filing the Annual Return on Foreign Liabilities and Assets (FLA).
Delay in issue of shares/refund of share application money beyond 60 days, mode of receipt of funds, etc.
Violation of pricing guidelines for issue/transfer of shares.
Issue of ineligible instruments
Issue of shares without approval of RBI or Government, wherever required.
Delay in submission of form FC-TRS on transfer of shares from Resident to Non-Resident.
Receiving investment in India from non-resident or taking on record transfer of shares by investee company
Delay in reporting the downstream investment made by an Indian entity or an investment vehicle in another Indian entity (which is considered as indirect foreign investment for the investee Indian entity in terms of these regulations), to Secretariat for Industrial Assistance, DIPP.
Delay in reporting receipt of amount of consideration for capital contribution and acquisition of profit shares by Limited Liability Partnerships (LLPs)/ delay in reporting disinvestment/transfer of capital contribution or profit share between a resident and a non-resident (or vice-versa) in case of LLPs.
Gift of capital instruments by a person resident in India to a person resident outside India without seeking prior approval of the Reserve Bank of India.

** Willful, malafide and fraudulent transactions, serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation are, however, viewed seriously, which will not be compounded by the Reserve Bank.

AUTHORISATION TO COMPOUND THE CONTRAVENTIONS BY FOREIGN EXCHANGE DEPARTMENT (FED CO) CELL, NEW DELHI

Contraventions relating to acquisition and transfer of immovable property outside India
Contraventions relating to acquisition and transfer of immovable property in India
Contraventions relating to establishment in India of Branch office, Liaison Office or Project office
Contraventions falling under Foreign Exchange Management (Deposit) Regulations, 2000

NOTE: Accordingly, applications for compounding related to the above contraventions may be submitted to the respective Regional Offices under whose jurisdiction they fall or to FED, CO Cell, New Delhi, as applicable. For all other contraventions, applications may continue to be submitted to Cell for effective implementation of FEMA (CEFA), Foreign Exchange Department, Reserve Bank of India, 5th floor, Amar Building, Sir P. M. Road, Fort, Mumbai 400001.

POWER OF RBI TO COMPOUND CONTRAVENTION

For contravention of any provisions of Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of the Act:

S. No.	Sum Involved in Contravention	RBI Officer
1.	Upto Ten lakhs rupees	Assistant General Manager of the RBI
2.	More than rupees Ten lakhs but less than rupees Forty lakhs	Deputy General Manager of RBI
3.	Forty lakhs or more but less than rupees One Hundred lakhs	General Manager of Reserve Bank of India
4.	One Hundred Lakhs or more	Chief General Manager of RBI

POWER OF ENFORCEMENT DIRECTORATE TO COMPOUND CONTRAVENTIONS

For the contravention of provisions of Section 3(a) of Foreign Exchange Management Act:

S. No.	Sum Involved in Contravention	Directorate of Enforcement Officer
1.	Upto Five lakh rupees	Deputy Director of DE
2.	More than rupees Five lakhs but less than rupees Ten lakhs	Additional Director of DE
3.	Ten lakhs or more but less than fifty lakhs rupees	Special Director of DE
4.	Fifty lakhs or more but less than one crore rupees	Special Director with Deputy Legal Adviser
5.	One crore or more	Director of Enforcement with Special Director of the Enforcement Directorate

PROCESS OF COMPOUNDING:

All applications for compounding may be submitted together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at the concerned Regional Office and by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at Mumbai for cases submitted to the Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. Authority shall examine the application based on the documents and submissions made in the application and assess whether contravention is quantifiable and if so, the amount of contravention.
The Compounding Authority may call for further information, record or other document.
The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible as and not later than 180 days from the date of receipt of application.
The sum for which the contravention is compounded as specified in the order of compounding shall be paid by way of demand draft in favour of the “Reserve Bank of India” within 15 days from the date of the order of compounding of such contravention. In case of failure to pay the sum compounded within the time specified in the compounding order and the Foreign Exchange (Compounding Proceedings) Rules, 2000, it shall be deemed that the contravener had never made an application for compounding of any contravention under these Rules.
On realization of the sum for which contravention is compounded a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order.

THE J&P ADVANTAGE

Our CS Team at J&P handles the whole process with utmost due diligence. From documents compiling to the completion of the process our team works with utmost care leaving no potential loopholes. Our team will provide complete assistance in the matter under consideration.