ED and RBI Facilitate Compounding of Over 150 FEMA Cases

The Enforcement Directorate has facilitated the closure of more than 150 cases under the Foreign Exchange Management Act through compounding and termination of adjudication proceedings after obtaining approval from the Reserve Bank of India.nnThe move is aimed at reducing long-pending litigation and resolving FEMA-related matters through the prescribed compounding mechanism. According to the available information, the RBI has terminated proceedings in these cases on the basis of no-objection certificates issued by the ED.nnSeveral of these matters had remained pending for a long period. In one recent case involving alleged FEMA violations of approximately Rs. 850 crore, proceedings were terminated after payment of the applicable compounding amount by the company and its directors. The company paid over Rs. 17 crore, while the concerned directors paid Rs. 18 lakh each.nnSince January, the RBI has compounded 45 FEMA-related cases after receiving ED no-objection certificates. These include cases involving delays or procedural violations related to foreign exchange reporting and compliance requirements. In one matter, a company paid Rs. 2.8 lakh to settle a case linked to delay in filing an annual performance report for transactions exceeding Rs. 45 crore. Other entities paid compounding amounts of Rs. 21.7 lakh and Rs. 4.7 lakh respectively for closure of FEMA proceedings.nnUnder the compounding process, the concerned party applies to the RBI for settlement of the FEMA violation. The proceedings are terminated after the ED issues a no-objection certificate and the applicant pays the determined compounding amount. This process enables regulatory closure of eligible FEMA matters without prolonged adjudication or litigation. CA Sansaar