The Procedure for Compounding
- Procedure for Compounding
- When a person is made aware of the contravention of the provisions of the Act by the RBI or any other statutory authority or the auditors or by any other means, she/he may file an application in the prescribed format along with the prescribed fee to RBI for compounding the contravention. One can also make an application to RBI for compounding, suo moto, on becoming aware of the contravention. However it is important to note that, no contravention shall be compounded unless the amount involved in such contravention is quantifiable.
- On receipt of the application for compounding, the RBI will examine the application based on the documents and submissions made in the application and assess whether contravention is quantifiable or not and, if so, the amount of contravention. While examining the nature of contravention RBI needs to keep in view, inter alia, the following indicative points:
- Whether the contravention is technical and/or minor in nature and needs only an administrative cautionary advice;
- Whether the contravention is serious and warrants compounding of the contravention; and
- Whether the contravention, prima facie, involves money-laundering, national and security concerns involving serious infringements of the regulatory framework.
Following are the contraventions which cannot be compounded under the Act:
- if contravention involving issues, such as, those having money laundering, hawala transactions and national security concerns;
- if matter is already subject matter of show cause before the Enforcement Directorate;
- if similar matter compounded within the period of three years from the date on which a similar contravention was compounded by the applicant;
- if matters is pending at any level in appeal;
- Contraventions relating to any transaction where proper approvals or permission from the Government or any statutory authority concerned, as the case may be, have not been obtained, such contraventions would not be compounded unless the required approvals are obtained from the concerned authorities.
The purpose to bring this Act was to simplify the foreign exchange regulatory regime in India and to facilitate external trade and payments and maintenance of foreign exchange. However, over a course of time, due to numerous procedural and filing requirements that have been introduced under the Act by way of executive rule making has made the filling requirements under the Act more complicated instead of simplifying the same. Because of the complicated procedural and filing requirements, many breaches occur which are merely technical in nature, and most of them do not involve a malafide intent or deliberate default. Looking at this scenario maybe it’s time for RBI to re-consider the need of complicated procedural and filing requirements under the Act. Simplifying such requirements and doing away with the non-critical ones will go a long way towards clearing the regulatory maze and the ease of doing business in India.
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Procedure for Compounding When a person is made aware of the contravention of the provisions of the Act by the RBI or any other statutory authority or the auditors or […]