Fema and Fera Act

Chanderprabhu Jain College of Higher Studies
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Class : B.A.LL.B/ BBA LL.B VI Semester

Paper Code : LLB 308
Subject : Investment and Competition law
UNIT-III
The Foreign Exchange Management Act, 1999
Introduction
Foreign Exchange Regulation Act, 1973 was introduced with an object of having stringent control
to conserve foreign exchange and utilise these scarce resources in the best interest of the country.
After liberalisation, the was increased flow of foreign exchange to India. So there arises need to
review the provisions of FERA. A Task Force was constituted to have an overall look on the
subject and suggest the required changes. The Task Force submitted its report in 1994.
On the recommendations of the Task Force and keeping in view the significant developments that
had taken place since 1993 the Foreign Exchange Management Bill was introduced in the
Parliament.
Statement of Objects and Reasons

The Foreign Exchange Regulation Act, 1973 was reviewed in 1993 and several amendments were
enacted as part of the on-going process of economic liberalisation relating to foreign investments
and foreign trade for closer interaction with the world economy. At that stage, the Central
Government decided that a further review of the Foreign Exchange Regulation Act would be
undertaken in the light of subsequent developments and experience in relation to foreign trade and
investment. It was subsequently felt that a better course would be to repeal the existing Foreign
Exchange Regulation Act and enact a new legislation. Reserve Bank of India was accordingly
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asked to undertake fresh exercise and suggest a new legislation. A Task Force constituted for this
purpose, submitted its report in 1994 recommending substantial changes in the existing Act.
Significant developments have taken place since 1993 such as substantial increase in our foreign
exchange reserves, growth in foreign trade, rationalisation of tariffs, current account
convertibility, liberalisation of Indian Investment abroad, increased access to external commercial
borrowings by Indian corporates and participation of foreign institutional investors in our stock
markets.
Keeping in view the changed environment, the Central Government has decided to introduce the
Foreign Exchange Management Bill and repeal the Foreign Exchange Regulation Act, 1973.
The provisions of the Bill aim at consolidating and amending 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
Object of the Act

The preamble to the Act reads that it is an Act: -
1. to consolidate and amend the law relating to foreign exchange.
2. with the objective of facilitating external trade and payments and,
3. for promoting the orderly development and maintenance of foreign exchange market in
India.
Regulations framed by the Reserve Bank of India in Respect of Possession and Relation of
Foreign Currency
The Reserve Bank of India has framed Foreign Exchange Management (Possession and Retention
of Foreign Currency) Regulations, 2000. The provisions of these regulations are as follows:
1. An authorised person acting within the scope of his authority may possess foreign currency
and coins without any limit.
2. Any person may possess foreign coins without any limit.

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3. A person resident in India may possess or retain foreign currency notes, bank notes and foreign
currency travellers' cheques not exceeding US$ 2,000 or its equivalent in aggregate, provided
that such foreign exchange-
(a) was acquired by him while on a visit to any place outside India by way of payment for
services not arising from any business in or anything done in India; or
(b) was acquired by him, from any person not resident in India and who is on a Visit to India, as
honorarium or gift or for services rendered or in settlement of any lawful obligation; or
(c) was acquired by him by way of honorarium or gift while on a visit to any place outside India;
or
(d) represents upspent amount of foreign exchange acquired by him from an authorised person for
travel abroad.
Possession of Foreign Exchange by a Person Resident in India but not Permanently

Resident therein (Regulation 4)
A person resident in India but not permanently resident therein may possess without limit foreign
currency in the form of currency notes, bank notes and travellers cheques, if such foreign
currency was acquired, held, or owned by him when he was resident outside India and, has been
brought into India in accordance with the regulations made under the Act
CURRENT ACCOUNT TRANSACTIONS [Section:2(j) and Section:5]
Section 2(j) of the Act defines what is meant by current Account transactions.
“Current Account Transaction" means a transaction other than a capital account transaction
and includes:
a) payments due in connection with foreign trade, other current business, and short-term
banking and credit facilities in the ordinary course of business.
b) payments due as interest on loans and net income from investments.
c) remittances for living expenses of parents, spouse and children residing abroad and

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d) expenses in connection with foreign travel, education and medical care of parents, spouse,
and children.
Section:5 provides that any person may sell or draw foreign exchange to or from an authorised
person if such sale or drawal is a current account transaction. However, the Central Government
may in public interest and in consultation with the Reserve Bank of India, impose such
reasonable restrictions for current account transactions as may be prescribed. In other words,
foreign exchange is freely available for a current account transaction if the following two
conditions are satisfied:
 The transaction is not prohibited by the rules.
 The transaction is within the ceiling limit, prescribed by the rules, or the permission of the
Reserve Bank of India or the Central Government, as the case may be, is obtained.
Foreign Exchange Management (Current Account Transactions) Rules,2000

The Central Government has framed Foreign Exchange Management (Current Account
Transactions) Rules, 2000. Under this, the current account transactions have been divided into
following three categories:
1. Transactions for which drawal of foreign exchange is prohibited.
2. Transactions for which foreign exchange can be drawn subject to the prior approval of the
Central Government.
3. Transaction for which foreign exchange can be drawn subject to the prior approval of the
Reserve Bank of India.
Section 6(2) provides that the Reserve Bank may, in consultation with the Central Government,
specify the permissible class or classes of capital account transactions, involving debt
instruments, limits upto which foreign exchange will be allowed for such transactions and any
other conditions which may be placed on such transactions. However, the Reserve Bank or the
Central Government shall not impose any restrictions on the drawal of foreign exchange for

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payment due on account of amortisation of loans or for depreciation of direct investments in the
ordinary course of business.
Further, the Central Government may, in consultation with the Reserve Bank, prescribe the
permissible class or classes of capital account transactions, not involving debt instruments, limits
upto which foreign exchange allowed for such transactions and any other conditions which may
be placed on such transactions. [Section 6(2A)]
For the purpose of this section, "debt instruments" shall mean, such instruments as may be
determined by the Central Government in consultation, with the Reserve Bank. [Section 2(7)]
Section 6(4) provides that a person resident in India may hold, own, transfer or invest in foreign
currency, foreign security or any immovable property situated outside India, if such currency,
security, or property was acquired, held or owned by such person when he was resident outside
India or inherited from a person who was resident outside India.
Section 6(5) provides that a person resident outside India may hold, own, transfer or invest in
Indian currency, security, or any immovable property situated in India if such currency, security,
or property was acquired, held, or owned by such person when he was resident in India or
inherited from a person who was resident in India.
Finally, Section 6(6) provides that the Reserve Bank of India is empowered to prohibit, restrict, or
regulate establishment in India of a branch, office or other place of business by a person resident
outside India, for carrying on any activity relating to such branch, office or other place of
business.
In Needle Industries (India) Ltd. v. Needle Industries Neway (India) Holding Ltd., the Reserve
Bank of India had put the condition that the dilution shall be effected would cease automatically
on the non-compliance with the conditions at the end of the extended period while granting
permission to the company to carry on its business.

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Foreign Exchange Management (Permissible Capital Account Transactions) Regulations,

2000
Contravention and Penalties

Chapter IV containing Section 13 to 15 deals with contravention and penalties.
Penalties [Section 13]

Section 13(1) provides that if any person contravenes any provision of the Act, rules, regulations
etc. or contravenes any condition subject to which the authorization is granted by RBI, he shall be
liable for penalty upon adjudication, which may extend upto thrice the sum involved in such
contravention where such amount is quantifiable or upto two lakh rupees where the amount is not
quantifiable. If the contravention continues, the penalty of Rs. 5000 per day after the first day
during the period in which the contravention continues shall be imposed.
Section 13(1A) provides that if any person is found to have acquired any foreign exchange,
foreign security or immovable property, situated outside India, of the aggregate value exceeding
the threshold prescribed under the proviso to sub-section (1) of Section 37A, he shall be liable to
a penalty up to three time the sum involved in such contravention and confiscation of the value
equivalent, situated in India, the Foreign exchange, foreign security or immovable property.
Section 13(1B) provides that if the Adjudicating Authority, in a proceeding under sub-section(1A)
deems fits, he may, after recording the reasons in writing, recommend for the initiation of
prosecution and if the Director of Enforcement is satisfied, he may, after recording the reasons in
writing, may direct prosecution by filing a Criminal Complaint against the guilty person by an
officer not below the rank of Assistant Director.
Section 13(1C) provides that if any person is found to have acquired any foreign exchange,
foreign security or immovable property, situated outside the India, of the aggregate value
exceeding the threshold prescribed under proviso to sub-section (1) of Section 37A, he shall be, in
addition to the penalty imposed under sub-section (1A), punishable with imprisonment for a term
which may extend to five years and with fine.Section 13(ID) provides that no court shall take

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cognizance of an offence under sub-section (1C) of Section 13 except as on complaint in writing

by an officer not below the rank of Assistant Director referred to in sub-section (1B).
Section 13(2) provides that any adjudicating authority may, in addition to the penalty, 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. It may further direct that the foreign
exchange holdings, if any, of the persons committing the contravention or any part thereof, shall
be retained outside India in accordance with the directions made in this behalf.
Enforcement of the Orders of Adjudicating Authority [Section 14]

Section 14(1) provides that if a person fails to make full payment of the penalty imposed within a
period of 90 days from the date on which the notice of payment of such penalty is served on him,
he shall be liable to civil imprisonment.
Section 14(2) further provides that, however, the defaulter shall not be arrested or detained in civil
prison, unless he has been issued and served a notice by Adjudicating Authority calling upon him
to show cause why he should not be committed to civil prison.
Section 14(3) provides that the Adjudicating Authority may issue a warrant for the arrest of a
defaulter if it is satisfied by affidavit or otherwise that the defaulter is likely to abscond or leave
the local limits of the jurisdiction of the Adjudicating Authority with the intention of delaying the
execution.
Section 14(4) provides that the arrest warrant may be issued by Adjudicating Authority if the
defaulter fails to make an appearance in pursuance of the notice issued by him.
Section 14(5) provides that the arrest warrant issued by an Adjudicating Authority may be
executed by any other Adjudicating Authority within whose jurisdiction the defaulter may for the
time being be found.
Section 14(6) provides that every arrested person shall be presented before the Adjudicating
Authority as soon as practicable but not later than 24 hours of his arrest. For the purpose, time
required for the journey should be excluded. It is further provided that, if the defaulter pays the

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amount mentioned in the arrest warrant and the cost of arrest to the arresting officer, such officer
should release him immediately.
Section 14(7) provides that 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 then
the Adjudicating Authority shall give him an opportunity to show cause why he should not be
committed to the civil prison.
Section 14(8) provides that pending the conclusion of inquiry, the Adjudicating Authority may
detain the defaulter or release him on his furnishing the security to the satisfaction of the
Adjudicating Authority for his presence as and when required.
Section 14(9) provides that after the conclusion of inquiry, the Adjudicating Authority may make
an order of detention in civil prison and order for arrest if not arrested earlier.
Section 14(10) provides that if Adjudicating Authority does not make an order of detention under
Section 14(9), then he shall be released, if he is under arrest.
Section 14(11) provides that every defaulter shall be detained in civil prison upto 3 years if the
certificate is for a demand of an amount exceeding Rs. 1 crore, and in other cases upto 6 months.
It is further provided that a defaulter so detained in civil prison shall be released from detention
on the amount mentioned in the warrant of detention being paid to the officer in charge of the
civil prison.
Section 14(12) provides that a defaulter released from detention shall not merely by reason for his
release, be discharged from his liability for the arrears, but he should not be liable to be arrested
under the certificate in execution of which he was detained in the civil prison.
Section 14(13) provides that a detention order may be executed at any place in India in the
manner provided for execution of warrant under Code of Criminal Procedure, 1973.
Powers to recover arrears of penalty [Section 14A]

Section 14A added by Finance Act, 2016 provides as follows: -
(1) The Adjudicating Authority may, by order in writing, authorise an officer of Enforcement not
below the rank of Assistant Director to recover any arrears of penalty from any person who fails

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to make full payment of penalty imposed on him under section:13 within the period of ninety
days from the date on which the notice for payment of such penalty is served on him
(2) The officer of Enforcement not below the rank of Assistant Director shall exercise all the like
powers which are conferred on the income-tax authority in relation to recovery of tax under the
Income-tax Act, 1961 and the procedure laid down under the Second Schedule to the said Act
shall mutatis mutandis apply in relation to recovery of arrears of penalty under this Act.
Power to Compound Contravention [Section 15]

Section 15 empowers the Directorate of Enforcement or Officer of the Directorate of Enforcement
and Officers of the Reserve Bank as may be authorized by the Central Government in this behalf
to compound the offences. Any contravention under Section:13 may be compounded on an
application made by the person committing such contravention within 180 days from the date of
receipt of application. Further, any contravention so compounded, relieves the accused person
from further proceedings for that contravention.
Powers of Appellate Tribunal and Special Director (Appeals) [Section 28]

Section 28 provides the following powers of the Appellate Tribunal and Special Director
(Appeals): -
1. The Appellate Tribunal and Special Director (Appeals) while disposing of an appeal, shall
not be bound by the Code of Civil Procedure but will be guided by the principles of natural
justice and other provisions of the Act
2. The Appellate Tribunal and the Special Director (Appeals) shall have for the purpose of
discharging its functions under this Act, the same power as are vested in a civil court under
the Code of Civil Procedure, 1908 while trying suit, in respect of the following matters,
namely:
(a) Summoning and enforcing the attendance of any person and examining him on oath.
(b) requiring the discovery and production of documents
(c)receiving evidence on affidavits.

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(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872
requisitioning any public record or document or copy of such record or document from any
office.
(e) issuing commissions for the examination of witnesses or documents
(f) reviewing its decisions.
(g) dismissing a representation of default or deciding it ex parte,
(h) setting aside any order of dismissal of any representation for default or any order passed
by it ex parte; and
(i) any other matter which may be prescribed by the Central Government
3. An Order made by the Appellate Tribunal or the Special Director (Appeals) under this Act
shall be executable by the Appellate Tribunal or the Special Director (Appeals) as a decree of
civil court and, for this purpose, the Appellate Tribunal and the Special Director (Appeals)
shall have all powers of a civil court.
4. Notwithstanding anything contained in (3), the Appellate Tribunal or the Special Director
(Appeals) may transmit any order made by it to a civil court having local jurisdiction and
such civil court shall execute the orders as if it were a decree made by that court.
5. All proceedings before the Appellate Tribunal and the Special Director (Appeals) shall be
deemed to be judicial proceeding within the meaning of Sections 193 and 228 of the Indian
Penal Code and the Appellate Tribunal shall be deemed to be a civil court for the purpose of
Section 345 and 346 of the Code of Criminal Procedure, 1973.
Right of Appellant to take Assistance Of Legal Practitioner or Chartered Accountant and of

Government, to Appoint Presiding Officers [Section 32]
Section 32(1) provides that a person preferring an appeal to the Special Director (Appeals) may
either appear in person or take the assistance of a legal practitioner or a chartered accountant of
his choice to present his case before the Special Director (Appeals), as the case may be.

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Section 32(2) provides further that Central Government may authorise one or more legal
practitioners or chartered accountants or any of its officers to act as presenting officers and every
person so authorised may present the case with respect to any appeal before the Special Director
(Appeals).
Officers and Employees, etc. to be Public Servant [Section 33]

Section 33 provides that the adjudicating authority, Competent Authority and the Special Director
(Appeals) shall be deemed to be public servant within the meaning of Section 21 of the Indian
Penal Code, 1860.
Members, etc. to be Public Servant [Section 33]

Section 33 provides that the Chairperson, Members and other officers and employees of the
Appellate Tribunal and the Special Director (Appeals) and the Adjudicating Authority shall be
deemed to be Public Servants within the meaning of Section:21 of the Indian Penal Code, 1860.
Court not to have Jurisdiction [Section 34]

Section 34 provides that no civil court shall have jurisdiction to entertain any suit or proceeding in
respect of any action which an Adjudicating Authority or the Appellate Tribunal or the Special
Director (Appeals) is empowered by or other authority in respect of any action taken or to be
taken in pursuance of any power conferred by or under the Act.
Appeal to High Court [Section 35]

Section 35 provides that any person aggrieved by any decision or order to the Appellate Tribunal
may file an appeal to the High Court. Such appeal must be filed within 60 days from the date of
communication of the decision or order of the Appellate Tribunal. However, a relaxation for a
period of 60 days for making an appeal may be granted by the High Court if it is satisfied that the
appellant was prevented by sufficient cause from filing the appeal within the said period. The
appeal to the High Court can be made on any question of law arising out of such order:

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Provided that the High Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a further
period not exceeding sixty days.
Directorate of Enforcement
Chapter V containing Sections 36 to 38 makes provisions as regards Directorate of Enforcement.
Directorate of Enforcement [Section:36]

Section 36 provides that the Central Government shall establish a Directorate of Enforcement
with a director and such other officer’s or class of officers as it thinks fit, who shall be called
officers of Enforcement, for the purposes of this Act. Subject to such conditions and limitations
as the Central Government may impose, an officer of Enforcement may exercise the powers and
discharge the duties conferred or imposed on him under this Act.
Power of Search, Seizure, etc. [Section 37]

Section 37(1) provides that the Director of Enforcement and other officers not below the rank of
an Assistant Director shall take up for investigation on the contravention of any provisions of
Section 13.
Section 37(2) provides that the Central Government may by notification authorize any officer or
class of officers in the Central Government, State Government, Reserve Bank of India, not below
the rank of under-secretary to Government of India to investigate any such contravention.
Section 37(3) provides that the officer so appointed shall exercise the like powers which are
conferred on the income-tax authorities under Income-tax Act, 1961, subject to such conditions
and limitation as the Central Government may impose.
In Dr. Pratap Singh v. Directorate of Enforcement, FERA, AIR 1985 SC 989, the Court held
that when a search warrant is to be issued under this Section, it is not obligatory on the issuing
officer to record in writing the grounds for entertaining reasonable belief that the documents

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useful for investigation are secreted. It is not necessary to specify the things for which search is to
be made and the things and documents which are seized in the search may be used for furnishing
evidence.
Special Provisions Relating to Assets held Outside India in Contravention of Section 4

[Section 37A]
Section 37A provides as follows: -
(1) Upon receipt of any information otherwise, if the Authorised Officer prescribed by the Central
Government has reason to believe that any foreign exchange, foreign security, or any immovable
property, situated outside India, is suspected to have been held in contravention of Section 4, he
may after recording the reasons in writing by an order, seize value equivalent within India, of
such foreign exchange, foreign security, or immovable property:
However, no such seizure shall be made in case where the aggregate value of such foreign
exchange, foreign security or any immovable property situated outside India, is less than the value
as may be prescribed.
(2) The order of seizure along with relevant material shall be placed before the Competent
Authority, appointed by the Central Government, who shall be an officer not below the rank of
Joint Secretary to the Government of India by the Authorised Officer within a period of thirty
days from the date of such seizure.
(3) The Competent Authority shall dispose of the petition within a period of one hundred eighty
days from the date of seizure by either confirming or by setting aside such order, after giving an
opportunity of being heard to the representatives of Directorate of Enforcement and the aggrieved
person. The explanation attached to the Section 37A provides that while computing the period of
one hundred eighty days, the period of stay granted by court shall be excluded and a further
period of at least thirty days shall be granted from the date of communication of vacation of such
stay order.
(4) The order of the Competent Authority confirming seizure of equivalent asset shall continue till
the disposal of adjudication proceedings and hereafter, the Adjudicating Authority shall pass

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appropriate directions in the adjudication order with regard to further action as regards the seizure
made under sub-under the section (1).
However, if, at any stage of the proceedings under this Act, the aggrieved person discloses the
fact of such foreign exchange, foreign security or immovable property and brings back the same
into India, then the Competent Authority or the Adjudicating Authority, as the case may be, on
receipt of an application in this regard from the aggrieved person, and after affording an
opportunity of being heard to the aggrieved person and representatives of the Directorate of
Enforcement, shall pass an appropriate order as it deems fit, including setting aside of the seizure
made under sub-section (1).
(5) Any person aggrieved by any order passed by Competent Authority may prefer an appeal to
the Appellate Tribunal.
(6) Nothing contained in Section 15 shall apply to this section.
Empowering Other Officers [Section 38]

Section 38 provides that the Central Government may, by order and subject to such conditions
and limitations as it thinks fit to impose, authorize any officer or customs or any central excise
officer or any police officer or any other officer of the Central Government or a State Government
to exercise such of the powers and discharge such of the duties of the Director of Enforcement or
any other officer of Enforcement under this Act as may be stated in the order.
It is further provided that the officer so appointed shall exercise the like powers which are
conferred on the income-tax authorities under the Income-tax Act, 1961, subject to such
conditions and limitations as the Central Government may impose.
Miscellaneous Provisions
Power of Central Government to Give Directions (Section: 41)
Section 41 provides that for the purpose of this Act, the Central Government may, from time to
time, give to the Reserve Bank such general or special directions as it thinks fit and the Reserve
Bank shall, in the discharge of its functions under this Act, comply with such directions.

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Contravention by Companies [Section 42]

Section 42(1) provides that where a person committing a contravention of any of the provisions of
this Act or of any rule, direction or order made thereunder is a company, every person who, at the
time the contravention was committed, was in charge of, and was responsible to, the company for
the conduct of the business of the company as well as the company, shall be deemed to be guilty
of the contravention and shall be liable to be proceeded against and punished accordingly.
However, it is further provided that such a person would not be liable to punishment if he proves
that the contravention took place without his knowledge or that he exercised due diligence to
prevent such contravention.
Section 42(2) provides that where a contravention of any of the provision of this Act or of any
rule, direction or order made thereunder has been committed by a company and it is proved that
the contravention has taken place with the consent or connivance of, or is attributable to any
neglect on the part of, any director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be guilty of the contravention
on and shall be liable to the proceeded against and punished accordingly.
Death or Insolvency in Certain Cases [Section 43]

Section 43 provides that any right, obligation, liability, proceeding or appeal arising in relation to
any contravention referred to in Section 13, shall not abate (be interrupted, suspended, or
extinguished) by reason of death or insolvency of the person liable under Section 13. Upon such
death or insolvency, such rights and obligations shall devolve on (be transmitted or passed to) the
legal representative of such person or the official receiver or the official assignee, as the case may
be. However, a legal representative of the deceased shall be liable only to the extent of the
inheritance or estate of the deceased.

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Bar of Legal Proceedings [Section 44]

Section 44 provides that no suit, prosecution on other legal prosecution shall lie against the
Central Government or the Reserve Bank or any officer of that Government or of the Reserve
Bank or any other person exercising any power or discharging any functions or performing any
duties under the Act, for anything in good faith done this Act or any rule, regulation, notification,
direction, or order made thereunder.
So, this Section bars the prosecution or legal proceedings against the officers of the Central
Government or the Reserve Bank or any other person exercising any power or discharging any
functions or performing any duties under the provisions of this enactment for anything done in
good faith.
Removal of Difficulties [Section 45]

Section 45(1) provides that if any difficulty arises in giving effect to the provisions of this Act,
the Central Government may, by order, do anything not inconsistent with the provisions of this
Act for the purpose of removing the difficulty:
Provided that no such order shall be made under the section after the expiry of two years from the
commencement of this Act.
Section 45(2) provided that every other made under this section shall be laid, as soon as may be
after it is made, before each House of Parliament.
Power to Make Rules [Section 46]

Section 46(1) provides that the Central Government may, by notification makes rules to carry out
the provisions of the Act.
Section 46(2) further provides that such rules may provide for following namely: -
(a) the imposition of reasonable restrictions on current account transactions under section 5;
 The instruments which are determined to be debt instruments under Sub-section (7) of
Section 6;
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 The permissible classes of capital transactions in accordance with sub-Section (2A) of

Section 6, the limits of admissibility of foreign exchange, and the prohibition, restriction,
or regulation of such transactions.
(b) The manner in which the contravention may be compounded under sub-section (1) of section
15,
(c) The Manner Of Holding An Inquiry By The Adjudicating Authority Under Sub-Section (1) Of
Section 16;
(d) The form of appeal and fee for filing such appeal under section 17 and 19;
(e) The salary and allowances payable to and the other terms and conditions of service of the
Special Director (Appeals) under sub-section (3) of section:23
(f) The salaries and allowances and other conditions of service of the officers and employees of
the office of the Special Director (Appeal) under sub-section (3) of section 27;
(g) The additional matters in respect of which the Appellate Tribunal and the Special Director
(Appeals) may exercise the powers of a Civil Court under clause (1) of sub-section (2) of section
28; the aggregate value of foreign exchange referred to in sub-section (1) of Section 37A.
(h) the authority or person and the manner in which any document may be authenticated under
clause (ii) of section 39; and
(i)any other matter which is required to be, or may be, prescribed
Power to Make Regulations [Section 47]

Section 47(1) provides that, the Reserve Bank, by notification make regulations to carry out the
provisions of this Act and the rules make there under.
Section 47(2) further provides that such regulations may provide for following: -
 The Permissible Classes Of Capital Transactions Involving Debt Instruments Determined
Under Sub-Section (7) Of Section 6, The Limits Of Admissibility Of Foreign Exchange For
Such transaction, and the prohibition, restriction or regulation of such capital account
transactions under section 6;

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 The manner and the form in which the declaration is to be famished under clause (a) of sub-
section (1) of section 7,
 The period within which and the manner of repatriation of foreign exchange under section 8;
 The limit up to which any person may possess foreign currency or foreign coins under clause
(a) of section 9,
 The class of persons and the limit up to which foreign currency account may be held or
operated under clause (b) of section 9,
 The limit up to which foreign exchange acquired may be exempted under clause (d) of
section 9;
 The limit up to which foreign exchange acquired may be retained under clause (e) of section
9;
 Export, import or holding of currency or currency notes
 Any other matter which is required to be, or may be, specified.
Section 47(3) provides that all regulations made by the Reserve Bank before the date on which
the provisions of this section are notified under section 6 and Section 47 of this Act on capital
account transactions, the regulation making power in respect of which now vests with the Central
Government, shall continue to be valid, until amended or rescinded by the Central Government.
Rules and Regulations to be laid before Parliament [Section 48]

Section 48 provides that every rule and regulation made under this Act shall be laid, as soon as
may be after it is made, before each House of Parliament, while it is in session, for a total period
of thirty days which may be comprised in one session or in two or more successive sessions, and
if, before the expiry of the session immediately following the session or the Successive sessions
aforesaid, or both Houses agree that the rule or regulation should not be made, the rule and
regulation shall thereafter have effect only in such modification form or be of no effect, as the
case may be, so, however that any such modification or annulment shall without prejudice to the
validity of anything previously done under that rule or regulations.

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School of Law
Difference between Fera and Fema

Differences FERA FEMA
Provisions FERA consisted of 81 FEMA is much more

Sections, and was more simpler and consists of only
complex 49 sections
New Terms in FEMA Terms like Capital Account Terms like Capital Account
Transaction, Current Account Transaction, Current Account
Transaction, person, service Transaction, person, service
etc. were not defined in etc. have been defined in
FEMA detail in FEMA
Features Presumption of negative These presumptions of Mens
intention (Mens Rea) and Rea and abetment have been
joining hands in offence excluded in FEMA
existed in FERA
Definition of "Authorised Definition of “Authorised The definition of Authorised
Person” Person” in FERA was a person has been widened to
narrow one [2(6)] include banks, money
changes, off-shore banking
Units etc.[2(c)]
Meaning of There was a big difference in The provisions of FEMA,
“Resident" as compared the definition of “Resident” are in consistent with
with Income Tax Acts under FERA, and the Income Income Tax, in respect of
Tax Act the definition of term criteria
of "In India for 182 days” to

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School of Law
make a person resident has

been brought under FEMA,
Therefore, a person who
qualifies to be non- resident
under the Income Tax Act,
1961 will also be considered
a no resident for the
purposes application of
FEMA, but a person who is
considered to be non-resident
under FEMA may not
necessarily Be non-resident
under the Income Tax Act.
For instance a businessman
going abroad and staying
there for a period of 182 days
or more in a financial year
will become a non- resident
under FEMA
Punishment Any offence under FERA, was Under FEMA the quantum of
a criminal offence, punishable penalty has been
with imprisonment as per considerably
Code of Criminal Procedure, decreased to three times
1973 the amount involved.
Quantum of Penalty The monetary penalty payable The appellate authority under
under FERA was nearly five FEMA is the Special Director
times the amount involved. Appeals.

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School of Law
Appeal against the order of

Adjudicating Authorities and
special Director (Appeals)
lies Before "Appellate
Tribunal for Foreign
Exchange." An appeal from
an order of Appellate
Tribunal would lie to the
High Court, (Sections 17, 18,
35)
Appeal An appeal against the order of FEMA expressly recognises
"Adjudicating office", before the right of appellant to take
"Foreign Exchange Regulation assistance of legal
Appellate Board" went before practitioner or chartered
High Court. accountant (Section 32)
Right of Assistance FERA did not contain any The scope and power of
During Legal express provision on the right Search and seizure has been
Proceedings of an impleaded person to curtailed to a great extent
take legal assistance.
Power of Search and FERA conferred wide powers Not Applicale to FEMA
Seizure on a police officer not below
the rank of a Deputy
Superintendent of Police to
make a search.


Fema and Fera Act

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Fema and Fera Act

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Chanderprabhu Jain College of Higher Studies

Class : B.A.LL.B/ BBA LL.B VI Semester

Statement of Objects and Reasons

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Object of the Act

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Possession of Foreign Exchange by a Person Resident in India but not Permanently

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Foreign Exchange Management (Current Account Transactions) Rules,2000

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Campus: Plot No. OCF, Sector A-8, Narela,Delhi-110040

Foreign Exchange Management (Permissible Capital Account Transactions) Regulations,

Contravention and Penalties

Penalties [Section 13]

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cognizance of an offence under sub-section (1C) of Section 13 except as on complaint in writing

Enforcement of the Orders of Adjudicating Authority [Section 14]

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Powers to recover arrears of penalty [Section 14A]

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Power to Compound Contravention [Section 15]

Powers of Appellate Tribunal and Special Director (Appeals) [Section 28]

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Right of Appellant to take Assistance Of Legal Practitioner or Chartered Accountant and of

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Officers and Employees, etc. to be Public Servant [Section 33]

Members, etc. to be Public Servant [Section 33]

Court not to have Jurisdiction [Section 34]

Appeal to High Court [Section 35]

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Directorate of Enforcement [Section:36]

Power of Search, Seizure, etc. [Section 37]

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Special Provisions Relating to Assets held Outside India in Contravention of Section 4

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Empowering Other Officers [Section 38]

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Contravention by Companies [Section 42]

Death or Insolvency in Certain Cases [Section 43]

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Bar of Legal Proceedings [Section 44]

Removal of Difficulties [Section 45]

Power to Make Rules [Section 46]

 The permissible classes of capital transactions in accordance with sub-Section (2A) of

Power to Make Regulations [Section 47]

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Rules and Regulations to be laid before Parliament [Section 48]

Campus: Plot No. OCF, Sector A-8, Narela,Delhi-110040

Difference between Fera and Fema

Provisions FERA consisted of 81 FEMA is much more

Campus: Plot No. OCF, Sector A-8, Narela,Delhi-110040

make a person resident has

Campus: Plot No. OCF, Sector A-8, Narela,Delhi-110040

Appeal against the order of

Campus: Plot No. OCF, Sector A-8, Narela,Delhi-110040

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