Under FEMA, contraventions, penalties, adjudication, and appeals are handled through a structured legal process to ensure fairness and regulatory compliance in foreign exchange dealings.
Contravention Under FEMA
A contravention occurs when any person, company, or entity violates the provisions, rules, regulations, or directions issued under FEMA, or acts against the conditions attached to any authorization from the RBI. Common examples include unauthorized forex transactions, delayed filing or reporting, and non-compliance with FDI regulations.
Penalties for Contravention
- If the amount involved is quantifiable, the penalty can be up to three times the sum involved
- If not quantifiable, the penalty may be up to ₹200,000.
- For continuing contravention, there can be an additional penalty of up to ₹5,000 per day after the first day of violation.
- Property, currency, securities, or assets involved in contraventions may be confiscated.
- In cases of failure to pay a penalty within 90 days, civil imprisonment may be imposed.
- For certain serious offences, prosecution and imprisonment up to five years may be possible (especially for holding assets abroad in excess of Rs. 1 crore).
Adjudication Process
- The Directorate of Enforcement investigates alleged contraventions and, if evidence is found, files a complaint with an Adjudicating Authority (AA).
- The AA conducts inquiries, considers the defence, and issues a written order imposing a penalty, and can also order confiscation of property.
- Penalty proceedings are quasi-judicial and governed by principles of proportionality and fairness.l
- Offences may also be compounded (settled by paying a prescribed fee) at the discretion of RBI or ED within 180 days of application.
- Appeals Procedure
- Appeals against orders of the Adjudicating Authority are first filed before the Special Director (Appeals).
- Further appeal lies with the Appellate Tribunal for Foreign Exchange, which must decide cases expeditiously.
- On substantial questions of law, appeals may be filed before the High Court within 60 days of receiving the Tribunal order.
- The process allows representation by a legal practitioner or chartered accountant, and typically attracts a prescribed appeal fee.
Summary Table: Contravention, Penalties, Adjudication, and Appeals under FEMA
| Aspect | Key Details |
| Contravention | Violation of FEMA rules, notifications, or RBI directions |
| Penalties | Up to 3x sum involved, or ₹200,000 if not quantifiable; ₹5,000/day for continuing |
| Adjudication | Investigated by Enforcement Directorate, decided by Adjudicating Authority |
| Appeals | First to Special Director (Appeals), then Appellate Tribunal, High Court (law) |
| Imprisonment | For non-payment or serious contraventions (assets abroad > ₹1 crore) |
| Compounding | Possible by RBI/ED for most contraventions on application within 180 day |
These mechanisms ensure that FEMA compliance is enforced with due process and remedies for aggrieved parties, balancing regulatory discipline with fair adjudication.
⚖️ Disclaimer: This blog is for educational purposes only and does not constitute legal advice. Readers are advised to refer to the official FEMA Act, regulations, and RBI notifications before making business or investment decisions.
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