Salient Features of Foreign Exchange Management Act,1999 (Part-3)

This post is in continuation of our previous posts here and here.

C. Penalties

Chapter 4- Sections 13 and 15  of the Act deal with penalties and enforcement of the orders of Adjudicating Authority as well power to compound contraventions under the Act.

Section 13

Offence

  • Contravention of any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or
  • contravention of any condition subject to which an authorisation is issued by the Reserve Bank.

Penalty for the above offence

He shall, upon adjudication, be liable to a penalty (Section 13(1)) –

  • up to thrice the sum involved in such contravention where such amount is quantifiable, or
  • up to two lakh rupees where the amount is not quantifiable, and
  • where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.

Imposition of further order by  Adjudicating Authority (Section 13(2)) –

Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention –

  • 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 and
  • further 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.

Section 14- Enforcement of the orders of Adjudicating Authority :

  • Failure to make full payment of penalty imposed under Section 13 within the specified time

If any person fails to make full payment of the penalty imposed on him under section 13 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 under this section.

  • Notice upon the defaulter must

No order for the arrest and detention in civil prison of a defaulter shall be made unless the Adjudicating Authority has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice. He must be asked to show cause why he should not be committed to the civil prison.

Unless the Adjudicating Authority, for reasons in writing is satisfied that the defaulter, with the object or effect of obstructing the recovery of penalty, has after the issue of notice by the Adjudicating Authority, dishonestly transferred concealed, or removed any part of his property, or that the defaulter 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.

Warrant for the arrest of the defaulter in certain situations-

A warrant for the arrest of the defaulter may be issued by the Adjudicating Authority if the Adjudicating Authority is satisfied, by affidavit or otherwise, that with 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.

Warrant for the arrest of the defaulter on failure to appear

Where appearance is not made pursuant to a notice issued and served under , the Adjudicating Authority may issue a warrant for the arrest of the defaulter.

Production of defaulter before the Adjudicating Authority after his arrest

Every person arrested in pursuance of a warrant of arrest under this section shall be brought before the Adjudicating Authority issuing the warrant as soon as practicable and in any event within twenty-four 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 release him.

Opportunity to show cause

When a defaulter appears before the Adjudicating Authority pursuant to a notice to show cause or is brought before the Adjudicating Authority under this section, the Adjudicating Authority shall give the defaulter an opportunity showing cause why he should not be committed to the civil prison.

Orders pending the conclusion of the inquiry

Pending the conclusion of the inquiry, the Adjudicating Authority may, in his discretion, order –

  • the defaulter to be detained in the custody of such officer as the Adjudicating Authority may think fit or
  • release him on his furnishing the security to the satisfaction of the Adjudicating Authority for his appearance as and when required.

Order upon the conclusion of the inquiry

Upon the conclusion of the inquiry, the Adjudicating Authority may make an order for the detention of the defaulter in the civil prison and shall in that event cause him to be arrested if he is not already under arrest.

In order to give a defaulter an opportunity of satisfying the arrears, the Adjudicating Authority may, before making the order of detention, leave the defaulter in the custody of the officer arresting him or of any other officer for a specified period not exceeding fifteen days, or release him on his furnishing security to the satisfaction of the Adjudicating Authority for his appearance at the expiration of the specified period if the arrears are not satisfied.

Direction to release

(When the Adjudicating Authority does not make an order of detention, he shall, if the defaulter is under arrest, direct his release.

Detention period –

Every person detained in the civil prison in execution of the certificate may be so detained,—

  • where the certificate is for a demand of an amount exceeding rupees one crore, up to three years, and
  • in any other case, up to six months:

He shall be released from such detention on the amount mentioned in the warrant for his detention being paid to the officer-in-charge of the civil prison.

Release from detention not to amount to discharge from his liability for the arrears

A defaulter released from detention under this section shall not, merely by reason of his release, be discharged from his liability for the arrears, but he shall not be liable to be arrested under the certificate in execution of which he was detained in the civil prison.

Execution of detention order at any place in India

A detention order may be executed at any place in India in the manner provided for the execution of warrant of arrest under the Code of Criminal Procedure, 1973 (2 of 1974).

Section 15 – Power to compound contravention

  • Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by the Director of Enforcement or such other officers of the Directorate of Enforcement and Officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed.
  • Where a contravention has been compounded , no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded.

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Bhumika Sharma

She is currently a Research Scholar, (PhD) at Himachal Pradesh University, Shimla. She finds peace in research and writing on a variety of social issues. She believes in the power of education and awareness to deal with various problems.

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