CAPITAL ACCOUNT TRANSACTION:(FEMA)

Capital account transaction is defined as a transaction which:RESIDENT OF INDIA:Alters the assets or liabilities outside India of persons resident in India. In other words, it includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered ( either increased or decreased).

NON RESIDENT OF INDIA:Alters the assets or liabilities in India of persons resident outside the India. In other words, it includes those transactions which are undertaken by a non-resident such that his/her assets or liabilities in India are altered (either increased or decreased).

RESTRICTION ON CAPITAL ACOUNT TRANSACTION:Every exporter of goods shall:(i)Furnish to the Reserve Bank or to such other authority a declaration in such form and in such manner as may be specified, containing true and correct material particulars, including the amount representing the full export value. (ii)Furnish to the Reserve Bank such other information as may be required by it, for the purpose of ensuring the realization of the export proceeds by such exporter.

ENFORCEMENT: Enforcement is with enforcement directorate. The central government has appointed Directors of Enforcement, Additional directors, Special Director, Deputy Director and Assistant Directors for enforcement of FEMA. (Sec. 36) Powers are similar to Income tax authorities. Cheques and other NIs recovered during enforcement will be deposit with RBI. If Indian currency is found, it shall be deposited in a separate a/c in the name of Director of enforcement. The central government will indemnify the enforcement authority for en-cashing the NIs.

PENALTIES UNDER FEMA: Offenses under FEMA are civil offenses.

Central government appoints the adjudicating authority. [S.16(1)]

They conduct enquiry on the complaint received from an authorized person. It should give the verdict within1year, if not, should state the reason.

While adjudicating the case, it acts as a quasi judicial body and has to follow the principles of natural justice.
Opportunity should be given to the respondent to represent his case.

 The adjudicating authority has got the powers of a civil court.

The penalty can be upto thrice the sum involved in contravention where the amount is quantifiable. If not, penalty can be up to Rs. 2 lakhs. If the transgression continues all officers in default will be liable to pay 5000/ per day. [S. 13(1)] A person on whom the verdict is passed has to make payment within 90 days. If not he is liable to civil imprisonment. S. 14(1) For amount less than 1 crore- 6 months than 1 crores- up to 3 years. [S.14(11)] For amount more

Compounding is permitted within 180 days.

APPEALS Assist. Director/deputy director to special directors. Further appeal lies with Appellate Tribunal for foreign exchange.

The tribunal consists of chairperson and members.

It sits in Delhi or in other places as may be notified.

Division bench will hear matters above 5lakhs.

Jurisdiction of civil court is barred when the matter is pending before the tribunal. Second appeal lies to high courts and supreme court.

LIMITATION OF FEMA: PROVISIONS FOR FEMA CANNOT BE FOUND AT ONE PLACE FEMA has provisions for enforcement, penalties, adjudication and appeals SO FEMA CONTAINS ONLY THE BASIC LEGAL FRAME WORK. THE PRACTICAL ASPECTS ARE SPREAD OVER RBI DIRECTIONS AND CIRCULARS ISSUED BY CENTRAL GOVERNMENT AND VARIOUS POLICIES ISSUED BY SEPARATE MINISTRIES. Industrial policy announced by Ministry of Industry contains provisions for FDIs (foreign direct investment), foreign technical collaborations, royalty payments, joint ventures abroad etc. which also has relevance in understanding FEMA.

Policy in external commercial borrowing announced by Ministry of Finance has relevance in FEMA. SEBI guidelines and Income tax provisions also find relevance in understanding FEMA provisions.

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