Article
Section
13(1) of the Foreign Exchange Management Act, 1999 (‘FEMA’ for short)
provides for imposing penalties by Adjudicating Authority. The said
Section provides that if any person
contravenes any provision of this
Act, or contravenes any rule, regulation, notification, direction or
order issued in exercise of the powers under this Act, or contravenes
any conditions subject to which an authorization is issued by the
Reserve Bank, he shall upon adjudication, be liable to a penalty up to
thrice the sum involved in such contravention where such amount is
quantifiable, or up to ₹ 200000/- where the amount is not quantifiable
and where such contravention is a continuing one, further penalty which
may extend to ₹ 5,000/- for every day after the first day during which
the contravention continues.
For
this purpose the Central Government made ‘FEMA (Adjudication
Proceedings and Appeal) Rules, 2000 which came into effect from
01.06.2000.
Section 16 of FEMA provides that the
Central Government may, by an order, published in the Official Gazette,
appoint as many officers of the Central Government as it may think fit,
as the Adjudicating Authorities for holding an inquiry, against whom a
complaint has been made. The Central Government is also to prescribe
the jurisdiction for the Adjudicating Authorities.
Procedure for Adjudication
The following is the procedures prescribed in the Act and Rules for Adjudication:
The
Adjudicating Authority shall hold an inquiry only on a complaint in
writing made by an officer authorized by a general or special order by
the Central Government;
Where any person has committed any
contravention as specified in Section 13 of the Act, the Adjudicating
Authority shall issue a notice to such person requiring him to show
cause within such period as may be specified in the notice as to why an
inquiry should not be held against him. Normally the period of notice
shall not be less than 10 days from the date of service of notice;
Every notice shall indicate the nature of contravention alleged to have been committed by him;
The person on whom the notice is issued shall given reply within the time prescribed;
After
considering the reply by such person the Adjudicating Authority is of
the opinion that an inquiry should be held, he shall issue a notice
fixing a date for the appearance of that person either personally or
through his legal practitioner or a Chartered Accountant duly authorized
by him;
On the date fixed, the Adjudicating Authority shall
explain to the person the contravention alleged to have been committed
by him indicating the provisions of the Act or of Rules, regulation,
notifications, directions or orders or any condition subject to which an
authorization is issued by the RBI in respect of which contravention is
alleged to have taken place;
The Adjudicating Authority shall,
then, given an opportunity to that person to produce such documents or
evidence as he may consider relevant to the inquiry and if necessary,
the hearing may be adjourned to a future date and in taking such
evidence the Adjudicating Authority shall not be bound to observe the
provisions of the Indian Evidence Act;
While holding an inquiry
the Adjudicating Authority shall have the power to summon and enforce
attendance of any person acquainted with the facts and circumstances of
the case to give evidence or to produce any document which in the
opinion of the Adjudicating Authority may be useful to or relevant to
the subject matter of the inquiry;
If any person fails, neglects
or refuses to appear before the Adjudicating Authority, the Authority
may proceed with the adjudication in his absence after recording reasons
for doing so;
If, upon consideration of the evidence produced,
the Adjudicating Authority is satisfied that the person has committed
the contravention, he may, by order in writing, impose such penalty as
he thinks fit, in accordance with the provisions of Section 13 of the
Act;
The Adjudicating Authority, if he thinks fit in addition to
any penalty direct that any currency, security or any other money or
property in respect of which the contravention has taken place shall be
confiscated to the Central Government;
The Adjudicating Authority
may direct that the foreign exchange holdings, if any of the persons
committing the contraventions or any part thereof, shall be brought back
into India or shall be retained outside India in accordance with the
directions made in this behalf;
Every complaint shall be dealt as
expeditiously as possible and endeavor shall be made to dispose of the
complaint finally within one year from the date of receipt of the
complaint;
If the complaint could not be disposed within the said
period, the Adjudicating Authority shall record periodically the reasons
in writing for not disposing of the complaint within the said period;
Every
order made shall specify the provisions of the Act or of the rules,
regulations, notifications, directions or orders or any condition
subject to which an authorization is issued by the RBI in respect of
which contravention has taken place and shall contain reasons for such
decisions;
Every order made shall be dated and signed by the Adjudicating Authority;
A
copy of the order made shall be supplied free of charge to the person
against whom the order is made and all other copies of proceedings shall
be supplied to him on payment of copying fee of ₹ 2 per page;
The copying fee shall be paid in cash or by Demand draft drawn in favor of the Adjudicating Authority.
Enforcement of the orders of Adjudicating Authority
Section
19 of the Act provides that if any aggrieved person wants to file
appeal before the appellate authority against the order of Adjudicating
Authority, he is to file appeal within forty five days from the date of
receipt of the order. If no appeal is filed then the order of
Adjudicating Authority would be final and it could be enforced. Section
provides the procedure for enforcement of the orders of Adjudicating
Authority as detailed below:
If any person fails to
make full payment of the penalty imposed within a period of ninety days
from the date on which the notice for payment of such penalty is served
on him he shall be liable to civil imprisonment;
Before that the
Adjudicating Authority is to issue notice and service upon the defaulter
calling upon him to appear before him on the date specified in the
notice and to show cause why he should be committed to the civil prison;
The order of arrest is to be issued by the Adjudicating Authority if he is satisfied that-
the
defaulter, with the object or effect of obstructing the recovery of
penalty, has after the issue of the notice by the Adjudicating
Authority, dishonestly transferred, concealed or removed any part of his
property; or
the default has, or has had since the issuing of
notice by the Adjudicating Authority, the means to pay the arrears or
some substantial part thereof and refuses or neglects or has refused or
neglected to pay the same;
A warrant of arrest of the defaulter
may be issued by the Adjudicating Authority if the Adjudicating
Authority is satisfied by affidavit or otherwise, that the object or
effect of delaying the execution of the certificate the defaulter is
likely to abscond or leave the local limits of the jurisdiction of the
Adjudicating Authority;
If the default does not appear before the Adjudicating Authority, he may issue a warrant for the arrest of the defaulter;
A
warrant of arrest may also be executed by any other Adjudicating
Authority within whose jurisdiction the defaulter may for the time being
be found;
The person so arrested shall be brought before the
Adjudicating Authority issuing the warrant as soon as practicable and in
any event within 24 hours of his arrest, exclusive of the time required
for the journey;
If the defaulter pays the amount entered in the
warrant of arrest as due and the costs of the arrest to the officer
arresting him, such officer shall at once released him;
If the
defaulter appears before the Adjudicating Authority he shall give the
defaulter an opportunity showing cause why he should not be committed to
civil prison;
Pending conclusion of the inquiry, the Adjudicating
Authority may, in his discretion, order the defaulter to be detained in
the custody of such officer as he think fit or release him on
furnishing the security to the satisfaction of the Adjudicating
Authority for his appearance as and when required;
The
Adjudicating Authority may leave the defaulter for a specified period
not exceeding 15 days or release him on his furnishing security for his
appearance at the expiration of the specified period if the arrears are
not satisfied;
When the Adjudicating Authority does not make an
order of detention he shall, if the defaulter is under arrest, direct
his release;
Every person detained in the civil prison-
Where the certificate is for a demand of an amount exceeding ₹ 1 crore, up to three years; and
In any other case, up to six months;
The person detained shall be released if the amount is paid to the officer-in-charge of civil prison;
A
detention order may be executed at any place in India in the manner
provided for the execution of warrant of arrest under Cr. PC, 1973.
Appeal to Special Director
Section
17 provides for filing appeal against the order of Adjudicating
Authority to Special Director. The Central Government shall appoint one
or more Special Directors (Appeals) to hear appeals by means of
Notification in which the Central Government also to indicate the matter
and places in relation to which the Special Director (Appeals) may
exercise jurisdiction. The appeal procedure is detailed as below:
The
appeal to Special Director shall be filed within forty five days from
the date on which the copy of the order made by Adjudicating Authority
is received;
The Special Director may entertain an appeal after
the expiry of forty five days, if he is satisfied that there was
sufficient cause for not filing it within that period;
The delayed
appeal shall be accompanied by a petition, in triplicate, duly verified
and supported by the documents, if any, relied upon by the applicant,
showing cause how the applicant had been prevented from preferring the
appeal within the said period of 45 days;
The appeal shall be in Form – I signed by the appellant;
The
appeal shall be filed in triplicate and accompanied by a fee of ₹
5000/- in form of cash or demand draft payable in favor of the Special
Director (Appeals);
The appeal may set forth concisely and under
distinct heads the grounds of objection to the order appealed against
without any argument of narrative and such grounds shall be numbered
consecutively; and shall specify the address for service at which notice
or other processes may be served on the applicant, the date on which
the order appealed against was served on the applicant;
On receipt
of appeal, the Special Director (Appeals) shall send a copy of the
appeal, together with a copy of the order appealed against, to the
Director of Enforcement;
The Special Director (Appeals) shall,
then, issue notices to the appellant and the Director of Enforcement
fixing a date for hearing of the appeal;
On the date fixed for
hearing or any other day to which the hearing of the appeal may be
adjourned, the appellant as well as the Presenting Officer of the
Directorate of Enforcement shall be heard;
Any appellant may
appoint a legal practitioner or a Chartered Accountant to appear and
plead and act on his behalf before the Special Director (Appeals) under
the Act;
The Special Director (Appeals) shall have the same powers of a civil court which are conferred on the Appellate Tribunal;
The Special Director (Appeals) may decide the appeal on merits, after giving both the parties the opportunity of being heard;
The appeal is to be decided within 180 days from the date of appeal;
The order of Special Director (Appeals) shall be in writing and shall state briefly the grounds for the decision;
The order of Special Director shall be signed by the Special Director (Appeals) hearing the appeal;
The
Special Director (Appeals) shall send a copy of every order made by him
to the parties to appeal and to the concerned Adjudicating Authority.
Appeal to Appellate Tribunal
Section
18 of the Act provides that the Central Government shall, by
notification, establish an Appellate Tribunal to be known as the
Appellate Tribunal for Foreign Exchange to hear appeals against the
orders of the Adjudicating Authorities and the Special Director
(Appeals) under this Act. The procedure involved in appeal to the
Appellate Tribunal is discussed as follows:
The Central
Government or any person aggrieved by an order made by an Adjudicating
Authority, other than specified in Section 17(1) or the Special Director
(Appeals), may prefer an appeal to the Appellate Tribunal;
The
appeal shall be filed within a period of 45 days from the date on which a
copy of the order made by the Adjudicating Authority or the Special
Director is received;
The appeal shall be in Form II signed by the applicant;
The
appeal shall be in triplicate by a fee of ₹ 10,000/- in the form of
cash or demand draft payable in favor of the Registrar, Appellate
Tribunal for Foreign Exchange, New Delhi;
While filing the appeal, the appellant is to deposit the penalty imposed against him;
Where
in any particular case, the Appellate Tribunal is of the opinion that
the deposit of such penalty would cause undue hardship to such person,
the Appellate Tribunal may dispense with such deposit subject to such
conditions as it may deem fit to impose so as to safeguard the
realization of penalty;
The Appellate Tribunal may entertain an
appeal after the expiry of 45 days if it is satisfied that there was
sufficient cause for not filing it within the said period;
In such
cases the appeal shall be accompanied by a petition, in triplicate,
duly verified and supported by the documents, if any, relied upon by the
applicant, showing cause how the applicant had been prevented from
preferring the appeal within the said period of 45 days;
The
appeal shall set forth concisely and under distinct heads the grounds of
objection to the order appealed against without any argument of
narrative and such grounds shall be numbered consecutively; and shall
specify the address for service at which notice or other processes may
be served on the appellant;
On receipt of the appeal the Appellate
Tribunal shall send a copy of the appeal together with a copy of the
order appealed against, to the Director of Enforcement;
The
Appellate Tribunal shall issue notices to the appellant and the Director
of Enforcement fixing a date for hearing of the appeal;
The
appellant may appoint a legal practitioner or a Chartered Accountant to
appear and plead and act on his behalf before the Special Director
(Appeals);
On the date fixed for hearing or any other day to which
the hearing of the appeal may be adjourned, the applicant or the
presenting officer fail to appeal when the appeal is called on for
hearing, the Appellate Tribunal may decide the appeal on the merits of
the case;
The order of the Appellate Tribunal shall be in writing and shall state briefly the grounds for the decision;
The order shall be signed by the Chairman or Member of the Appellate Tribunal hearing the appeal;
The
appeal shall be disposed within 180 days from the date of receipt of
the appeal. If it could not been disposed within 180 days the Tribunal
shall record its reasons in writing for not disposing of the appeal
within the said period;
The Tribunal may, for the purpose of
examining the legality, propriety or correctness of any order may be the
Adjudicating Authority in relation to any proceeding, on its own
motion or otherwise, call for records of such proceedings and make such
order in the case as it thinks fit;
The Appellate Tribunal shall
send a copy of every order made by it to the parties to the appeal and
to the concerned Adjudicating Authority or the Special Director
(Appeals) as the case may be.
Procedure and Powers of Tribunal and Special Director (Appeals)
The
Appellate Tribunal and the Special Director (Appeals) shall not be
bound by the procedure laid down in CPC but shall be guided by the
principles of natural justice and, subject to other provisions of this
Act, the Appellate Tribunal and the Special Director (Appeals) shall
have the powers to regulate its own procedures. They are having the
same powers as are vested in a Civil Court while trying a suit, in
respect of the following matters:
summoning and enforcing the attendance of any person and examining him on oath;
requiring the discovery and production of documents;
receiving evidence on affidavits;
subject
to the provisions of Sections 123 and 124 of the Indian Evidence Act,
1872 requisitioning any public record or document or copy of such record
or document from any office;
issuing commissions for the examination of witnesses or documents;
reviewing its decisions;
dismissing a representation of default or deciding it ex-parte;
setting aside any order of dismissal of any representation for default or any order passed by it ex-parte; and
any other matter which may be prescribed by the Central Government.
An
order may be the Tribunal or the Special Director (Appeals) shall be
executable by them as a decree of civil court and, for this purpose, the
Appellate Tribunal and the Special Director (Appeals) shall have all
the powers of a civil court. They may transmit any order to a civil
court having local jurisdiction and such civil court shall execute the
order as if it were a decree made by the court.