ANKIT MITTAL

8/2/2019 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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