Meenakshi Lakshmanan

RBI being the apex Bank of India regulating the Banking Sector and Non-Banking Financial Sector cannot perform all the functions at its Head office. Therefore, RBI in its notification dated 13th December, 2011 had delegated certain powers related to Compounding of offence to its regional offices located at Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi, Bhopal, Bhubaneshwar, Chandigarh, Guwahati, Jaipur, Jammu, Kanpur, Patna for amount of contravention without any limit. But, Kochi and Panaji Regional offices can compound the above contraventions for amount of contravention below INR One hundred Lakh (Rs.1,00,00,000/-). The powers were delegated with an idea of facilitating operational convenience, effective and efficient functioning of the RBI.

Following were the powers delegated earlier in connection with the contravention of FEMA

1. Delay in reporting inward remittance

2. Delay in filing FC-GPR after allotment

3. Delay in issue of shares/refund of share application money beyond 180 days, mode of receipt of funds, etc.

4. Violation of pricing guidelines for issue of shares

5. Issue of ineligible instruments such as NCD’s, partly paid up shares, shares with optionality clause etc.

6. Issue of shares without approval of RBI or FIPB respectively wherever required.

7. Delay in submission of form FC-TRS on transfer of shares from Resident to Non-Resident.

8. Delay in submission of form FC-TRS on transfer of shares from Non-Resident to Resident

9. Taking on record transfer of shares by Investee Company, in the absence of certified form FC-TRS.

Present amendment

Apart from the above delegations, RBI has delegated an additional duty of compounding for contravention relating to;

Delay in filing the Annual Return on Foreign Liabilities and Assets (FLA return), by all Indian companies which have received Foreign Direct Investment in the previous year(s) including the current year.

The jurisdiction of the regional offices remains the same as mentioned above.

However, there is no definition for the amount of contravention. Amount of contravention is the amount of FDI/ODI/ECB or any other asset or liability depending on case to case. This is important to know the jurisdiction. For example, the amount of FDI is INR 2 crores, the regional office where the compounding can be made shall be all the regional offices but not Kochin and Panji.

Apart from this, in case there is any contravention other than the contraventions mentioned above, it will be dealt with the Foreign Exchange Department, Mumbai.

(Author is associated with Vinod Kothari & Co.)

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February 2024