law and justice

UNDER the globalization regime, fast movement of goods and services to and from countries, foreign direct investment, rapid changes in the inter-se trade and investment related rules and regulation, compelled the respective governments to reconsider their respective international business laws. Here is a broad view of the new law, more for information and less as a   basis for any legal action.

The Government of India reappraised the Foreign Exchange Regulation Act, 1973 (FERA), as a part of    liberalization in 1991.  Several amendments were made in 1993. The need to have a total recast of the existing laws was still felt with the rapidly changed international business atmosphere.  The Foreign Exchange Regulation Act, 1973 had to be repealed and a new Foreign Exchange Management Act, 1999 (FEMA) was brought into force on June 1, 2000.

The Act provided basic provisions relating to regulation of foreign exchange and its management and authorized the Indian Government to frame rules and regulations. Consequently, exhaustive regulations were framed separately dealing with acquisition and transfer of immoveable property in and out side India, borrowing and lending in rupees and in foreign exchange, foreign exchange deposits, opening of accounts by non-residents, establishment in India of branches or other offices of foreign companies. Other areas included export and import of currency and of services, foreign currency accounts by residents in India, manner of receipt and payment of foreign exchange, management of current account transactions, encashment of drafts, cheques, payment of interest, and of various other aspects.

The Act provides that no person, save as otherwise provided in the Act or Rules made there under or general and special permission of the Reserve Bank, deal in or transfer any foreign exchange except an authorized person nor shall he make any payment to or for the credit of any person resident out side India in any manner. He cannot as well receive any payment by order or on behalf of any person resident out side India in any manner except through an authorized person. There is a restriction on entering into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire any asset out side India by any person.

It is prohibited to acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immoveable property situated out side India save as otherwise provided in the Act. A person may sell or draw foreign exchange to and from the authorized person if such sale or drawal is current account transaction.

The Act also imposes certain restrictions on capital account transactions, and on account of export of goods and services. While exporting goods and services, the exporter of goods has to submit a declaration to the Reserve Bank providing true and correct material particulars including the amount representing the full export value and such other information as may be required.

The Act contemplates penalty up to thrice the sum involved in such contravention and where such amount is not quantifiable penalty is up to Rs.2.00 lakhs. Earlier under the Foreign Exchange Regulation Act, 1973 the person violating the provision was to be charged for a criminal offence under the Act and could be convicted and imprisoned.  Under the Foreign Exchange Management Act, 2000 the violation is not a criminal offence but it is liable to penalty thrice the amount involved or Rs.2 lakhs if the amount is not ascertainable. 

The regulations regarding possession and retention of foreign currency provide the limit and conditions of possession and retention of foreign currency by residents of India up to the limit of US $ 5000 or its equivalent in aggregate, provided that such foreign exchange in the form of currency notes, bank notes and travellers cheques-

(a) was acquired by him while on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India; or

(b) was acquired by him, from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or (c) Was acquired by him by way of honorarium or gift while on a visit to any place outside India; or (d) represents unspent amount of foreign exchange acquired by him from an authorized person for travel abroad. 

Regulations were framed in exercise of the powers conferred under the Act regarding acquisition and transfer of immoveable property in India by a person resident out side India who is a citizen of India or by a person of Indian origin may not be a citizen of India and in the event of sale of immoveable property regarding the repatriation of sale proceeds.