FERA
AND FEMA - COMPARISION
SIMILARITIES
The
similarities between FERA and FEMA are as follows: The Reserve Bank
of India and central government would continue to be the regulatory bodies. Presumption
of extra territorial jurisdiction as envisaged in section (1) of FERA has been
retained. The Directorate of Enforcement continues to be the agency
for enforcement of the provisions of the law such as conducting search and seizure
DIFFERENCES
BETWEEN FERA AND FEMA | Sr.
No | DIFFERENCES | FERA | FEMA | | 1 | PROVISIONS | FERA
consisted of 81 sections, and was more complex | FEMA
is much simple, and consist of only 49 sections. | | 2 | FEATURES | Presumption
of negative intention (Mens Rea ) and joining hands in offence (abatement) existed
in FEMA
| These presumptions
of Mens Rea and abatement have been excluded in FEMA | | 3 | NEW
TERMS IN FEMA | Terms like
Capital Account Transaction, current Account Transaction, person, service etc.
were not defined in FERA. | Terms
like Capital Account Transaction, current account Transaction person, service
etc., have been defined in detail in FEMA
| | 4 | DEFINITION
OF AUTHORISED PERSON | Definition
of "Authorised Person" in FERA was a narrow one ( 2(b) | The
definition of Authorised person has been widened to include banks, money changes,
off shore banking Units etc. (2 ( c ) | | 5 | MEANING
OF "RESIDENT" AS COMPARED WITH INCOME TAX ACT. | There
was a big difference in the definition of "Resident", under FERA, and
Income Tax Act
| The
provision of FEMA, are in consistent with income Tax Act, in respect to the definition
of term " Resident". Now the criteria of "In India for 182 days"
to make a person resident has been brought under FEMA. Therefore a person who
qualifies to be a non-resident under the income Tax Act, 1961 will also be considered
a non-resident for the purposes of application of FEMA, but a person who is considered
to be non-resident under FEMA may not necessarily be a non-resident under the
Income Tax Act, for instance a business man going abroad and staying therefor
a period of 182 days or more in a financial year will become a non-resident under
FEMA. | | 6 | PUNISHMENT | Any
offence under FERA, was a criminal offence , punishable with imprisonment as per
code of criminal procedure, 1973 | Here,
the offence is considered to be a civil offence only punishable with some amount
of money as a penalty. Imprisonment is prescribed only when one fails to pay the
penalty. | | 7 | QUANTUM
OF PENALTY. | The monetary
penalty payable under FERA, was nearly the five times the amount involved. | Under
FEMA the quantum of penalty has been considerably decreased to three times the
amount involved. | | 8 | APPEAL | An
appeal against the order of "Adjudicating office", before " Foreign
Exchange Regulation Appellate Board went before High Court | The
appellate authority under FEMA is the special Director ( Appeals)Appeal against
the order of Adjudicating Authorities and special Director (appeals) lies before
"Appellate Tribunal for Foreign Exchange."An appeal from an order of
Appellate Tribunal would lie to the High Court. (sec 17,18,35) | | 9 | RIGHT
OF ASSISTANCE DURING LEGAL PROCEEDINGS. | FERA
did not contain any express provision on the right of on impleaded person to take
legal assistance | FEMA
expressly recognises the right of appellant to take assistance of legal practitioner
or chartered accountant (32) | | 10 | POWER
OF SEARCH AND SEIZE | FERA
conferred wide powers on a police officer not below the rank of a Deputy Superintendent
of Police to make a search | The
scope and power of search and seizure has been curtailed to a great extent |
A
STEP AHEAD FROM FERA TO FEMA Enactment of FEMA has brought in many changes
in the dealings of Foreign Exchange, as compared to FERA. Some of them are restrictive,
and some has widened the scope. However some of the relevant progress made,
from FERA to FEMA, are as follows: RAWAL OF FOREIGN EXCHANGE Now,
the restrictions on drawal of Foreign Exchange for the purpose of current Account
Transactions, has been removed. However, the Central Government may, in public
interest in consultation with the Reserve Bank impose such reasonable restrictions
for current account transactions as may be prescribed. FEMA has also by
and large removed the restrictions on transactions in foreign Exchange on account
of trade in goods, services except for retaining certain enabling provisions for
the Central Government to impose reasonable restriction in public interest. 2.
OMISSION OF CRIMINAL PROCEEDINGS Under FERA, any contravention was
a criminal offence and the proceedings were governed by the code of Criminal Procedure.
Moreover the Enforcement Directorate had powers to arrest any person, search any
premises, seize documents, initiate proceeding. Now all these have been
done away with, and contravention of FEMA is no more a Criminal offence, and only
monetary penalty, i.e. civil proceedings are applicable. Civil imprisonment is
provided, only in case of default to pay fine. 3. RESIDENTIAL STATUS
The definition of "Residential Status" under FEMA has gone
through considerable change. It has now been made compatible with the definition
provided under "Income Tax" Act. The residential status is now
based on the physical stay of the person in the country. The period of 182 days
as provided, indicates that it is not necessary that there should be a continuos
period of stay. The period of stay would be calculated by adding up all the days
of stay of the individual in the country. An Indian resident becomes a non-resident
when he goes abroad and takes up a job or engages in business. A major change
in the definition of residential status of partnerships and firms in worth noticing.
Earlier, under FERA, a branch was considered a resident of a place where it was
situated. Now, under FEMA, an office, branch or agency outside India owned or
controlled by a person resident in India will be considered a resident in India
for the purposes of this Act. For example, a person residing in India has
a branch in Maurtius; such branch will be considered a resident in India. 4.
IMMOVABLE PROPERTY OUTSIDE INDIA Earlier, under FERA, there was no restriction
placed on foreign citizens who were residents of India, for acquiring immovable
property outside India. Now FEMA prohibits a resident to acquire, own process,
hold or transfer any immovable property situated outside India. This restriction
applies irrespective of whether the resident is an Indian citizen or foreign citizen.
With this provision being effective a foreign citizen who is a resident in India
has to take approval of Reserve Bank of India for selling or buying any immovable
property situated outside India. 5. IMMOVABLE PROPERTY IN INDIA Earlier,
under FERA, a foreign citizen could acquire or transfer immovable property in
India only after seeking permission from the Reserve Bank. Now, under FEMA,
the control of Reserve Bank is determined by the residential status of a person.
Only a non-resident as defined within the meaning of FEMA would require permission
of the Reserve Bank to acquire or transfer an immovable property in India. The
distinction based on citizenship has been abolished and that based on residentship
has been introduced. 6. EXPORT OF SERVICES FERA had no provision
for export of services. Now, FEMA has included payment received by an Exporter
of Services in its ambit. Every Exporter, who receives payment from outside
India, for his services rendered is obliged to furnish details of payment to the
'Reserve Bank. For example; a Doctor, or Engineer or Lawyer or Accountant
or any other professional may give opinions or consultation to people outside
India, via internet or mail, and his fees may be credited to his credit account.
Then he is obliged to furnish details of such payment to Reserve Bank. 7.
INCLUSION OF NEW TERMS Some new terms like "Capital Account Transactions,
Current Account Transactions"; have been included in FEMA. Reserve Bank has
been confirmed with powers and with consultation with central government to specify
maximum permissible limit upto which exchange is admissible for such transactions. WHAT
TYPE OF OFFENCES? Although under FEMA, offences pertain to transactions
in foreign Exchange only. However relevant offences are as follows: DETAILS
IN FOREIGN EXCHANGE: Only a person Authorised by Reserve Bank
can deal in foreign Exchange No one can make a payment to a person
resident outside India, without permission of Reserve Bank. No
one receives any payment from a person resident outside India, without permission
of Reserve Bank. A person resident in India cannot deal in foreign
exchange, foreign security or any immovable property situated outside India, without
permission of Reserve Bank. (sec 4) Similarly a person resident
outside India, cannot acquire immovable property in India without permission.
EXPORTER OF GOODS AND SERVICES Every exporter of
goods and services is under an obligation, to give details to Reserve Bank regarding
value of export, mode of payment, amount of payment received etc. REPATRIATION
OF FOREIGN EXCHANGE Where any amount of foreign exchange has become
due or accrued to any person who is a resident in India, he shall realise and
repatriate (Bring Back) such amount, within the time specified by Reserve Bank. AUTHORISED
PERSON An "Authorised Person" under FEMA, is a person who
is authorised by Reserve Bank to deal in Foreign Exchange. For being registered
as an "Authorised Person", necessary application alongwith relevant
documents has to be furnished to Reserve Bank. An "Authorised Person"
is also, not given a free hand to deal in foreign Exchange. He has to furnish
details and information, to Reserve Bank from time to time as may be required
by it. PROSECUTION OF OFFENCES COMMITTED Before detailing the
procedure for prosecution, it is important to mark out the Adjudicating Agencies.
They are: ADJUDICATING AUTHORITY The inquiry of any contravention
of FEMA is conducted by an Adjudicating Authority appointed by the Central Government. APPEAL
TO SPECIAL DIRECTOR (APPEALS) The special Director (Appeals) is authorised
to hear the appeals arising out of in order of the Adjudicating Authority. APPEAL
TO THE APPELLATE TRIBUNAL The Appellate Tribunal is entitled to hear
appeals made in accordance, from an order made by Adjudicating Authority or special
Director (Appeals). DIRECTOR OF ENFORCEMENT The Director of
Enforcement and other officers has power to conduct investigation, search and
seize any articles.
PROCEDURE
INQUIRY
BY ADJUDICATING AUTHORITY (14) The inquiry of any contravention of FEMA
is conducted by an Adjudicating Authority. When, an inquiry is to
be conducted against a person for any contravention; the Adjudicating Authority
shall issue a notice to such person. The notice will also indicate
the date on which the offender is required to appear before authority, and will
also mention the nature of offence committed by him. Such person
(offender) will have a right to give reasons or explanation, and then a date will
be fixed for his appearance. He can appear either personally or through an Advocate
or chartered accountant. On the date of appearance, the Adjudicating
Authority shall present its case, and explain the reason and type & implications
of offence committed by offender. Then in turn, such person will
also be given an opportunity to put up his case, and to produce documents and
evidence. Finally, if Adjudicating Authority is convinced, that
the offender has committed an offence, then it will impose such fine and penalty,
as it thinks fit.
APPEAL TO SPECIAL DIRECTOR (APPEALS) (17) Appeal
from an order of "Adjudicating Authority" lies before" special
Director (appeal)" The appeal shall be made in "Form No.
1", alongwith three copies of the order appealed against and the requisite
fees. The appeal should be filed within 45 days, from the date
of receipt of receipt of impugned order. On the date of hearing
the appeal the applicant may appoint a legal practitioner or a chartered accountant
to appear, plead and act on their behalf before the special Director (Appeal) The
order of the special Director (Appeals) made at the conclusion of the proceedings
shall be in writing and shall state briefly the grounds for the decision.
APPEAL
TO THE APPELLATE TRIBUNAL (19)
"Appellate Tribunal" is entitled
to hear appeal arising out of an order from "Adjudicating Authority"
and "special Director (appeal)." The appeal shall be made
in Form No. 2, alongwith three copies of the impugned order and requisite fees. The
appeal shall be made within 45 days, from the date on which copy of the impugned
order is received. A copy of the order and appeal shall be sent
to the opposite party, i.e. "Director of Enforcement," and a date shall
be fixed for hearing of the appeal. The appellant shall have the
right to present his case / appeal through a legal practitioner or chartered Accountant. On
the fixed date of hearing, the "Appellate Tribunal" shall pass its order
in writing and the reasons therefore.
APPEAL TO HIGH COURT
(35) An appeal from the decision of "Appellate Tribunal"
lies before High Court. The appeal shall be filed within "60
days" from the date of communication of the decision or order of the Appellate
Tribunal to him on any question of law arising from the impugned order.
AMOUNT
OF PENALTY
Any contravention, under FEMA, may invite following kinds
of penalties: - If, the amount against which offence is quantities,
then penalty will be "THRICE" the sum involved in contravention.
-
Where the amount cannot be quantified the penalty may be imposed upto two lakh
rupees.
- If, the contravention is continuing everyday, then Rs. Five Thousand
for every day after the first day during which the contravention continues.
Further
in addition to the penalty, any currency, security or other money or property
involved in the contravention may also be confiscated.
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