ANKIT MITTAL

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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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