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Introduction

m An act to consolidate and amend the law relating to

foreign exchange with the objective of facilitating
external trade and payments and for promoting the
orderly development and maintenance of foreign
exchange markets in India.
m It extends to the whole of India and also to branches,
offices and agencies outside India owned or controlled
by a person resident in India and also to any
contravention there under committed outside India by
any person to whom this Act applies.

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„
 
m {omplex
m Terms like current account
transaction, person etc were
not defined
m Definition of authorised
person was narrow
m Definition of Dzresidentdz was
different from Income Tax Act
m {riminal offence
m Penalty was 5 times the
amount involved
m Police had wide powers to
search and seize
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„
 
m simple
m Terms like current account
transaction, persons etc were
defined
m Definition of authorised
person was expanded
m Definition of Dzresidentdz is
similar to Income Tax Act
m {ivil offence
m Penalty is 3 times the amount
involved
m Powers of the police is
considerably decreased.
©
initions
m Adjudicating Authority" :- an officer authorized
under section 16.
m "Appellate TribunalDz :- the Appellate Tribunal for
Foreign Exchange established under section 18
m DzAuthorized personDz :- an authorized dealer, money
changer, off-shore banking unit or any other person for the
time being authorized to deal in foreign exchange or
foreign securities.
m Dz{urrency" :- all currency notes, postal notes, postal
orders, money orders, cheques, drafts etc as may be
notified by the Reserve Bank.
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{ontd͙
m Dz{apital Account Transaction" :- a transaction which
alters the assets or liabilities, including contingent
liabilities, outside India of persons resident in India or
assets or liabilities in India of persons resident outside
India, and includes transactions referred to in section 6.
m Dz{urrent Account Transaction" :- a transaction other than a
capital account transaction and without prejudice to the
generality of the foregoing. Such transaction includes:-
0 payments due in connection with foreign trade
0 remittances for living expenses of parents, spouse and children
residing abroad
0 expenses in connection with foreign travel etc

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{ontd͙
m DzExportDz means the taking out of India to a place outside India any
goods and provision of services from India to any person outside India

m DzForeign Exchange" means foreign currency and includes,Ȅ

0 deposits, credits and balances payable in any foreign currency, drafts
etc expressed or drawn in Indian currency but payable in any foreign
currency,or drafts,
0 travellers cheques, letters of credit etc drawn by banks, institutions or
persons outside India, but payable in Indian currency

m "Indian currency" means currency which is expressed or drawn in

Indian rupees but does not include special bank notes and special one
rupee notes

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{ontd
m DzForeign Security" means any security, in the form of
shares, stocks, bonds, debentures or any other instrument
denominated or expressed in foreign currency
m DzImportdz means bringing into India any goods or
services
m DzPerson" includes an individual, a Hindu undivided
family, a company, an association of persons or a body of
individuals, whether incorporated or not, every artificial
juridical person, not falling within any of the preceding
sub-clauses, and any agency, office or branch owned or
controlled by such person.

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{ontd
m DzPerson resident in Indiadz includes a person residing
in India for more than 182 days during the course of the
preceding financial year but does not include
0 A person who had gone out of India or stays outside India
0 A person who has come to stay in India

m DzPerson Resident Outside India" means a person who

is not resident in India;

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{ontd͙
m DzRepatriate To India" means bringing into India the
realised foreign exchange andȄ
0 the selling of such foreign exchange to an authorised
person in India in exchange for rupees, or
0 the holding of realised amount in an account with an
authorised person in India to the extent notified by the
Reserve Bank
m Security means shares stock bonds and debentures, government
securities as defined in the public debt act,1944 etc
m Service means service of any description which is made available to
potential users and includes the provision of facilities in connection
with banking, financing etc
m Transfer includes sale , purchase, exchange, mortgage, pledge, gift,
loan or any other form of transfer of right, itle, possession or lien
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 ulation &
ana  nt o

„or in
chan

©
 

  
o person shall -
a) deal in or transfer any foreign exchange to any
person not being authorized ;
b) make any payment to or for the credit of any
person resident outside India in any manner ;
c) receive otherwise through an authorized
person,any payment by order or on behalf of any
person resident outside India in any manner
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6   

 
 

o person resident in India shall acquire

hold,own,possess or transfer any foreign
exchange,foreign security or any immovable
property situated outside India

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{  

 

Any person may sell or draw foreign exchange

to or from an authorized person if such sale or
drawal is a current account transaction which
includes following :
- Payment due in connection with foreign trade
- Payments due as interest on loans and as net
income from investments
- Remittances for living expenses of parents,spouse
and children residing abroad
- Expenses in connection with foreign
travel,education

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{

 

 

It means and includes

- A transaction which alters the assets or liabilities,
including contingent liabilities outside India of
persons resident in India
- A transaction which alters the assets or liabilities
in India of persons resident outside India
- Transfer or issue of any foreign security by a person
resident in India

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î   {

 


Foreign investment in India in any {ompany engaged or
proposes to engage in following business is completely
prohibited Ȃ chit fund Ȃ agricultural or plantation
activities Ȃ
real estate business Ȃ Trading in Transferable
Development Rights

All capital account transactions are prohibited unless

specifically permitted.

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î  {

 


    

-Investment in foreign securities by a person
resident in India
-Foreign currency loans raised in India and abroad
-Transfer of immovable property outside India
-Export, import and holding of currency/currency
notes
-Loans and overdrafts by a person resident in India
from a person resident outside India

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î  {

 


      

-Investment in India in security issued by a

corporate body or an entity in India
-Acquisition and transfer of immovable property in
India by a person resident outside India
-Import & Export of currency/currency notes
into/from India by a person resident outside India
-Foreign currency accounts in India of a person
resident outside India

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6
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Save as otherwise provided in the Act,where

any amount of foreign exchange is due or has
accrued to any person resident in India,such
person shall take all reasonable steps to realize
and repatriate to India such foreign exchange
within such period and in such manner as may be
specified by the Reserve Bank.

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%


6 
 

Section 9 provides exemption from provisions of section 4 & 8
in the following cases:
- Possession of foreign currency by any person up to such
limit as the RBI may specify.
- Foreign currency account held or operated by such person
and the limit up to which the RBI may specify.
- Foreign exchange acquired before 8.7.1947 or any income
arising thereon which is held outside India by any person in
pursuance of a general or special permission granted by
RBI.
- Foreign exchange held by a person resident in India up to
such limit as the RBI may specify,if such foreign exchange
was acquired by way of gift or inheritance.
- Foreign exchange acquired from
employment,business,trade, or any other legitimate means
up to such limit as the RBI may specify.
- Such other receipts in foreign exchange as the RBI may
specify.

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   % î  '(

According to Section 10
- The RBI may, on an application made to it in its
behalf,authorize any person to be known as authorized
person to deal in foreign exchange as an authorized dealer.
- An authorization under this section shall be in writing.
- An authorization granted may be revoked at any time if the
RBI is satisfied that
- It is in the public interest to do so ; or
- The authorized person has failed to comply with the
condition subject to which the authorization was granted.
- An authorized person shall, in all his dealings in foreign
exchange or foreign security, comply with such general or
special dealings as the RBI may think fit to give.

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6  " )
*+,   

  %   ''

- The RBI may, for the purpose of securing compliance with

the provisions of this Act, give to the authorized persons
any direction in regard to making of payment or doing or
desist from doing any act relating to foreign exchange
security.
- The RBI may, for the purpose of ensuring the compliance
with the provisions of this Act or of any rule or regulation
made there under direct any authorized person to furnish
such information, in such manner ,as it deems fit.
- Where any authorized person contravenes any direction
given by the RBI under this Act or fails to file any return as
directed by the RBI, the RBI may impose on the authorized
person a penalty which may extend to Rs. 10000.

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©ir ctorat O

n
orc  nt
åarious officers that may be appointed by the {entral
Government for the purposes of this Act are;
1. Directors of enforcement
2. Additional directors of enforcement
3. Special directors of enforcement
4. Deputy directors of enforcement
5. Assistance directors of enforcement
6. Such other class of officers below assistant
directors for the purpose of this act.

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oint nt and ow rs
1)Power of search, seizure, etc
2)Power like income tax authorities
3)Power to compound contravention

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ow rin oth r o

ic rs with
unctions and
ow rs o
dir ctorat o
n
orc  nt

- Fit to impose, authorize any officer of customs or any

central excise officer of customs or any other police
officer
- Officers shall exercise the like powers which are
conferred on the income-tax authorities

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Authorities under the act
- Adjudicating authorities
- Special director (appeals)
- Appelate tribunal
- Directorate of enforcement

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îroc dur o
nquiry and ow rs o

adjudicatin authority

- All proceedings before it shall be deemed to be

judicial proceedings within the meaning of sections
193 and 228 of the IP{.
- Shall be deemed to be a civil court of the criminal
procedure.

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 cial dir ctor (a als)
- Appoint one or more special directors
- Appeal
- Time and procedure for filling appeal
power to condone delay
- Procedure and order an appeal
- {opy of order
- Powers of special directors (appeals)

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 llat tribunal
Procedure and powers of appellate tribunal -
- Shall not be bound by the procedures
- Same powers for discharging its functions under the act for
the foll;
m Summoning and enforcing
m Requiring the discovery
m Receiving evidence
m Requisitioning any public record
m Issuing commissions
m Reviewing its decisions
m Any other matter
- Shall be executable by special director
- Transmit any order
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 al to a llat tribunal
- Appeal made by central government or other person
- Deposit of penalty amount
- Waiver of deposit
- Time limit
- {ondonation of delay
- Passing of order
- {opy of order
- Time limit for disposal of appeal
- Recording reasons for delay
- Summoning of records

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 {ONT
NTION N©
î
NTI


section 13 deals with the contraventions as civil offences as

distinguished from criminal offences under FERA 1973.The
adjudicating officers are empowered to impose penalties as
follows:
1. Quantum of penalty Ȃ
AMT QUATIFIABLE - penalty up to thrice the sum involved
OT QUAITIFIABLE Ȃ up to 2 lakh
{OTIUES-5000 for -every day.

2. {onfiscation of currency,security,money or property

property includes - deposits in the bank
- Indian currency
- other property arising out of conversion of the said property.
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n
orc  nt o
th ord rs o
adjudicatin
authority („
 1999  ction - 14)

1. {ivil imprisonment for failure to deposit penalty account

2. show course notice before arrest and detention.
3. Warrant for arrest if defaulter likely to abscond.
4. Arrest warrant for failure to appear notice u/s 14(1)
5. Power to other adjudicating authority to execute arrest
warrant.
6. Time limit for producing arrested person.
7. Show cause notice before committing to civil person.
8. Detention of person pending enquiry.
9. Procedure upon conclusion of enquiry.
10. Release.
11. Period of imprisonment.
12. Release not to discharge from liability for arrears.
13. Detention order can 
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be executed anywhere in India.
îOW
 O„ {
NT TH
GO
N
NT
a) Power to suspend operation of this act (sec
40)

b) power of central government to give

directions (sec 41)

c) Power to remove difficulties in giving effect

to the provisions (sec 45)

d) Power to make rules (sec 46)

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 îow r o
r s rv bank to ak r ulations
m Section 47 empowers the RBI to make regulations,by notification to carry out the
provisions of this act and the rules make thereunder.
m The permissible classes of capital account transactions,the limits of admissibility of
foreign exchange for such transactions,and the prohibition,restriction or regulation of
certain capital account transaction under section 6.
m Manner & form in which declaration is to be furnished under clause (a) sec 7(1)
m Period within which and manner of repatriation of foreign exchange u/s 8
m Limit upto which any person may possess foreign currency or foreign coins u/c (a) sec 9
m {lass of persons & limit upto which foreign currency account may be held or operated
u/c (b) sec 9.
m Limit to which foreign exchange acquired may be exempted (clause d sec 9)
m Limit to which foreign exchange acquired may be retained (clause d sec 9 )
m Any other matter which is required to be or maybe specified.

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