RBI compounds FEMA violations in Apothecon Pharmaceuticals case
The Reserve Bank of India (RBI) has issued a compounding order in the case of Apothecon Pharmaceuticals Private Limited, which has resulted into closure of
The Reserve Bank of India (RBI) has issued a compounding order in the case of Apothecon Pharmaceuticals Private Limited, which has resulted into closure of investigation against the company by the Enforcement Directorate under the Foreign Exchange Management Act (FEMA). The compounding order for one-time payment of ₹40,52,622 was passed on July 6 after issuance of a “no objection certificate (NOC)” by the ED, which was probing multiple FEMA violations, said the Directorate. “In this connection, it may be noted that as a matter of policy, the Enforcement Directorate issues an NOC where the contravention is eligible for compounding, the prescribed conditions are fulfilled and no investigation or other legal impediment exists.
This facilitates voluntary compliance, reduces avoidable litigation and promotes ease of doing business,” it said. As FEMA is primarily a civil legislation, its Section 15 provides for compounding of contraventions punishable under Section 13 to facilitate voluntary compliance, reduce litigation and ensure expeditious disposal of cases. The procedure for compounding is prescribed under the Foreign Exchange (Compounding Proceedings) Rules, 2024, notified under Section 46 read with Section 15 of FEMA, which lay down the manner of filing applications, examination of cases and passing of compounding orders.
As per the Rules, certain contraventions are not compoundable which include the contraventions related to a serious contravention suspected of money-laundering, terror financing or affecting the sovereignty and integrity of the nation. “Under Rule 3 of the Foreign Exchange (Compounding Proceedings) Rules, 2024, the RBI is the competent authority to compound eligible contraventions falling within its jurisdiction. The RBI has also issued Master Directions on Compounding of Contraventions under FEMA, prescribing a compounding matrix for determining the compounding amount based on factors such as the nature, gravity, duration and amount involved in the contravention,” said the ED.
“While applying for compounding, the applicant may submit that the contravention was inadvertent, corrective action has been taken, robust compliance mechanisms have been instituted, and adequate safeguards have been implemented to prevent recurrence,” the agency said. Once the RBI compounds the contraventions, the ED drops the proceedings and closes the investigation.
The BriefWire