This post is in continuation of our previous post here.
Salient Features of FEMA
B. Duties and Liabilities of the authorized persons
An authorized person may deal in foreign exchange or in foreign securities, as an authorized dealer, money changer or off-shore banking unit or in any other manner as it deems fit.
Section 2(c) defines “authorized person” as an authorized dealer, money changer, offshore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities.
Chapter III – Sections 10 and 12 – deal with duties and liabilities of the authorized persons. Authorised person has been defined in Sec.2(c) of the Act which means an authorised dealer, money changer, off shore banking unit or any other person for the time being authorized to deal in foreign exchange or foreign securities.
Section 10 –
Who may be authorized to be an ‘authorized person’ –
Procedure of authorization
- On an application made to The Reserve Bank.
- RBI shall authorize in writing and an authorization shall be subject to the conditions laid down therein.
- An authorised person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give
- An authorized person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of his authorization under this section, except with the previous permission of the Reserve Bank.
- An authorised person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder.
- Where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorized person shall refuse in writing to undertake the transaction and shall if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank.
Revocation of Authorization (Section 10(3))
An authorization may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that—
- it is in public interest so to do; or
- the authorized person has failed to comply with the condition subject to which the authorization was granted or has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made thereunder.
- No such authorization on shall be revoked on any ground referred above unless the authorised person has been given a reasonable opportunity of making a representation in the matter.
Section 11 – Reserve Bank’s powers to issue directions to the authorized person
Purposes for which directions may be issued by RBI–
- The Reserve Bank may, for the purpose of securing compliance with the provisions of this Act and of any rules, regulations, notifications or directions made thereunder, give to the authorised persons any direction in regard to the making of payment or the doing or desist from doing any act relating to foreign exchange or foreign security.
- The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorized person to furnish such information, in such manner, as it deems fit.
Penalty for contravention of directions of RBI–
Section 11 provides that where any authorised person contravenes any direction given by the Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank may, after giving reasonable opportunity of being heard, impose on the authorised person a penalty which may extend to ten thousand rupees and in the case of continuing contravention with an additional penalty which may extend to two thousand rupees for every day during which such contravention continues.
Section 12 – Power of Reserve Bank to inspect the authorized person
- The Reserve Bank may, at any time, cause an inspection to be made, by any officer of the Reserve Bank specially authorized in writing by the Reserve Bank in this behalf, of the business of any authorized person as may appear to it to be necessary or expedient for the purpose of—
(a) verifying the correctness of any statement, information or particulars furnished to the Reserve Bank;
(b) obtaining any information or particulars which such authorized person has failed to furnish on being called upon to do so;
(c) securing compliance with the provisions of this Act or of any rules, regulations, directions or orders made thereunder.
- It shall be the duty of every authorized person, and where such person is a company or a firm, every director, partner or other officer of such company or firm, as the case may be –
(a) to produce to any officer making an inspection, such books, accounts and other documents in his custody or power and
(b) to furnish any statement or information relating to the affairs of such person, company or firm as the said officer may require within such time and in such manner as the said officer may direct.
Penalties and Enforcement Directorate shall be discussed in the next post.
Image from here