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Submitted TO - Submitted by
Deepika Rathi Ankit Kumar
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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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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.
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Under FERA it was necessary to obtain Reserve Bank ofIndia either special or general in respect of most ofthe regulation, but FEMA has brought about a seechange in this regard & except section 3 which relateto dealing in foreign exchange etc., no otherprovision of FEMA require s Reserve Bank of India.The demand of new legislation was basically on thefollowing accounts.
FERA was introduced in 1973 when Indias foreignexchange reserve position was not satisfactory.
According strict control were required on the use offoreign exchange with improvement in foreignposition; it is argued that such strict control are notrequired now.
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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 currentaccount transaction is possible without
permission of RBI.
The private corporate sector has been
complaining for long against what is termed asDRACONION provision of FERA, which gave
powers to Enforcement Directorate, arrest any
person, search any premises, seize document &
start proceedings against any person for thenviolation of FERA. The contravention/violation of
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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 ofbusiness 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 & alsoapplies to all branches, offices, & agencies
outside India, owned & controlled by a person
resident in India.
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To facilitate external trade & payment.
To promote the orderly development &
maintenance of foreign exchange market.
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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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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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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 tofive 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 limiton 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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FERA FEMA
FERA consisted of 81sections, & was morecomplex
Presumption of negativeintention & joininghands in offence existedin FEMA
Terms like capitalaccount transaction,
current accounttransaction, parson,service, etc., were notdefined in FERA
FEMA is much simple,and consist of only 49sections
These presumptions ofMens Rea & abatementhave been excluded inFEMA
Terms like capitalaccount transaction,
current accounttransaction person,services, etc., havebeen defined in detailin FEMA
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FERA FEMA
The monetary penaltypayable under FERAwas nearly the fivetimes the amountinvolved
FERA did not containany express provision
on the right of animpleaded person totake legal assistance
Under FEMA thequantum of penaltyhas been considerably
decreased to threetimes the amountinvolved
FEMA expresslyrecognizes the right
of appellant to takeassistance of legalpractitioner or C.A.
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