PRESENTATION ON THE TOPIC OF FOREIGN EXCHANGE REGULATION ACT (FERA)

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Submitted TO Deepika Rathi

Submitted by Ankit Kumar

4/16/12

Introduction
Foreign exchange transaction were regulated in India by the Foreign exchange regulation Act (FERA),1973. This act also sought to regulate certain aspects of the conduct of business outside the country by Indian companies & in India by foreign companies. The FERA was widely describe as a draconian & obnoxious law

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Objective of FERA
TO regulate certain payments. TO regulate dealing in foreign exchange & securities. TO regulate the transactions indirectly affecting foreign exchange. TO regulate import & export of currency & bullion. TO regulate holding of immovable property outside India. TO regulate employment of foreign nationals. TO regulate foreign companies. TO regulate acquisition, holding etc. of immovable property in India by non-resident. 4/16/12

From FERA to FEMA

Under FERA it was necessary to obtain Reserve Bank of India either special or general in respect of most of the regulation, but FEMA has brought about a see change in this regard & except section 3 which relate to dealing in foreign exchange etc., no other provision of FEMA require s Reserve Bank of India. The demand of new legislation was basically on the following accounts. FERA was introduced in 1973 when Indias foreign exchange reserve position was not satisfactory. According strict control were required on the use of foreign exchange with improvement in foreign position; it is argued that
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Cont.
Many

expert state that since India has qualified for article 8 under the article of association of IMF the rupees is deemed to be convertible on current account hence FERA must be further liberalized. Corporate sector feels that current account transaction is possible without permission of RBI. The private corporate sector has been complaining for long against what is termed as DRACONION provision of FERA, which gave powers to Enforcement Directorate, arrest any person, search any premises, seize document & start proceedings against any person for then violation of FERA. The contravention/violation of
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Foreign Exchange Management Act (FEMA)

The Foreign Exchange Management Act (FEMA), 1999, replaced the Foreign Exchange Regulation Act (FERA), 1973, which regulated the foreign exchange transactions in India & which sought to control certain aspects of the conduct of business outside the country by Indian companies & in India by foreign companies. The FEMA, which came in to effect from January, 1, 2000, extends to the whole of India & also applies to all branches, offices, & agencies outside India, owned & controlled by a person resident in India.
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Objective of FEMA
To facilitate external trade & payment. To promote the orderly development & maintenance of foreign exchange market.

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Scope of FEMA
Free

transactions on current account subject to reasonable restrictions that may be imposed. RBI controls over capital account transaction. Control over realization of export proceeds. Dealing in foreign exchange through authorized persons like authorized dealer/money change/off shore banking unit. Adjudication of offences. Directorate of Enforcement.
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Provisions of FEMA
Dealing

in Foreign Exchange[Section 3] Holding of Foreign Exchange[Section 4] Current Account Transaction[Section 5] Capital Account Transaction [Section 6] Export of Goods & Services[Section 7] Realization & Repatriation of Foreign Exchange[Section 8]

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Contravention and Penalties

Penalty for any kind of contravention under this Act is liable to a penalty up to thrice the amount involved where it is quantifiable or up to Rs. 2 lakhs where it is not quantifiable & where such contravention is continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. This provision is in total contrast to the respective provision in the FERA which provided for imprisonment & no limit on fine, Under FEMA, a person will be liable to civil imprisonment only if he does not pay the fine within 90 days from the date of notice & that too after formalities of show cause notice & personal hearing, if he does not respond to the notice, there can be warrant of arrest
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Differences b/w FERA & FEMA

FERA

FEMA

FERA

consisted of 81 sections, & was more complex Presumption of negative intention & joining hands in offence existed in FEMA Terms like capital account transaction, current account transaction, parson,

FEMA

is much simple, and consist of only 49 sections These presumptions of Mens Rea & abatement have been excluded in FEMA Terms like capital account transaction, current account transaction person, 4/16/12

Cont
FERAmonetary The Under

penalty payable under FERA was nearly the five times the amount involved
FERA

did not contain any express provision on the right of an impleaded person to

FEMA the quantum of penalty has been considerably decreased to three times the amount involved FEMA expressly recognizes the right of appellant to take assistance of legal practitioner or C.A.
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FEMA

U O Y K N A H T
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