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Corporate and Economic Laws · Foreign Exchange Management Act, 1999

Contraventions, Penalties and Adjudication under FEMA, 1999

Updated 11 October 2026 · Fact-checked

Under FEMA, a person who contravenes the Act, or any rule, regulation, direction or order under it, is penalised after adjudication. Section 13 fixes the penalty: up to thrice the sum involved, or up to ₹2 lakh if not quantifiable, plus up to ₹5,000 per day if the contravention continues. Appeals go to the Appellate Tribunal.

Understand Contraventions, Penalties and Adjudication

FEMA is a civil law. Its aim is to manage foreign exchange, not to punish crime. So a breach is first dealt with through adjudication, which is an inquiry by an officer of the Central Government, and not through a criminal trial. This is the core idea of the topic.

Section 13(1) says that if you contravene any provision of the Act, any rule, regulation, notification, direction or order issued under it, or any condition of an RBI authorisation, you are liable to a penalty after adjudication. The penalty is up to three times the sum involved where the amount can be quantified. Where it cannot be quantified, it is up to ₹2 lakh. If the contravention continues, a further penalty up to ₹5,000 for every day after the first day can be added.

Section 13(2) adds a second power. The adjudicating authority may, in addition to the penalty, order confiscation of the currency, security or other money or property involved. It may also direct that foreign exchange holdings of the person be brought back into India or kept outside India, as it directs. The property includes bank deposits and Indian currency into which it was converted, and anything that resulted from that conversion.

Section 16 deals with the Adjudicating Authority. The Central Government appoints officers of the Central Government by a Gazette order and specifies their jurisdictions. An authority can hold an inquiry only on a written complaint by an officer authorised by the Central Government. The person must get a reasonable opportunity of being heard. He may appear in person or through a legal practitioner or a chartered accountant. The authority has civil court powers, and should try to dispose of the complaint within one year.

Section 19 gives the appeal. A person aggrieved by the authority's order can appeal to the Appellate Tribunal within 45 days of receiving the order. The Tribunal can condone delay for sufficient cause. The penalty must be deposited when appealing, unless the Tribunal dispenses with it for undue hardship. Sections 13(1A) to 13(1D) and 37A cover undisclosed foreign assets, with seizure of equivalent value in India. Compounding and the Directorate of Enforcement's wider role are not in the text above, so learn them from your study material.

Key rules to remember

Penalty where amount is quantifiable (Section 13(1))
Penalty ≤ 3 × sum involved in the contravention
This is a ceiling. The adjudicating authority decides the actual amount.
Penalty where amount is not quantifiable (Section 13(1))
Penalty ≤ ₹2,00,000
Applies only when the sum involved cannot be quantified.
Continuing contravention (Section 13(1))
Further penalty ≤ ₹5,000 × number of days after the first day
The first day is excluded. Count days from the second day.
Appeal time limit (Section 19(2))
Appeal within 45 days of receiving the order
Delay can be condoned if the Tribunal finds sufficient cause.
Disposal targets
Adjudicating Authority: 1 year (Section 16(6)); Tribunal: 180 days (Section 19(5))
These are endeavour targets. Reasons must be recorded if the time is exceeded.
Undisclosed foreign assets (Section 13(1A) and 13(1C))
Penalty ≤ 3 × sum involved plus confiscation of equivalent value in India; imprisonment up to 5 years and fine
Applies where value exceeds the threshold prescribed under the proviso to Section 37A(1).
Section 37A seizure process
Seizure order placed before Competent Authority within 30 days; Competent Authority disposes within 180 days
The Competent Authority is an officer not below the rank of Joint Secretary.

How to solve Contraventions, Penalties and Adjudication questions

Most exam questions give a contravention and ask for the consequence. Work through the same chain each time.

  1. 1Identify the contravention: breach of the Act, a rule, regulation, direction, order, or an RBI authorisation condition.
  2. 2Check whether the sum involved is quantifiable. This decides between the 3 times limit and the ₹2 lakh limit.
  3. 3Check whether the contravention continues. If yes, add up to ₹5,000 for each day after the first day.
  4. 4Note the extra powers: confiscation of property and directions on bringing back or retaining foreign exchange under Section 13(2).
  5. 5Name the forum and procedure: Adjudicating Authority, complaint in writing by an authorised officer, reasonable hearing, and representation by a legal practitioner or chartered accountant.
  6. 6State the appeal route: Appellate Tribunal within 45 days, with penalty deposit unless waived for undue hardship.
  7. 7If foreign assets are involved, apply Sections 37A and 13(1A) to 13(1D) and mention the prescribed threshold.
  8. 8Conclude with the maximum exposure and the remedy, using words such as up to and may.

Quickest way: Penalty ceiling in three lines

When to use it: Use for numerical questions asking for the maximum penalty or for MCQs on time limits.

  1. Quantifiable: maximum = 3 × sum involved. Not quantifiable: maximum = ₹2,00,000.
  2. Continuing: add ₹5,000 × (total days − 1).
  3. Recall the numbers 1 year, 45 days, 180 days for adjudication, appeal filing and Tribunal disposal.
  4. Add a line on confiscation if the question mentions property or currency.

Common mistakes in Contraventions, Penalties and Adjudication

  • Treating the penalty as fixed at three times the sum involved.

    Students remember the multiple and forget the words up to.

    Fix: Always write up to. The adjudicating authority fixes the amount within the ceiling.

  • Counting the daily penalty from the first day of contravention.

    The words every day sound like all days.

    Fix: The text says for every day after the first day. Use days minus one.

  • Applying both ₹2 lakh and 3 times the sum together.

    Both limits appear in the same sentence.

    Fix: They are alternatives. Use 3 times when the amount is quantifiable, ₹2 lakh when it is not.

  • Saying the Adjudicating Authority can start an inquiry on its own.

    Students assume authorities act suo motu.

    Fix: It can hold an inquiry only on a written complaint by an officer authorised by the Central Government.

  • Confusing the 45-day appeal period with the 30-day and 180-day periods in Section 37A.

    Several time limits appear in the same Act.

    Fix: Link each limit to its stage: 45 days for appeal under Section 19, 30 days for placing a seizure order before the Competent Authority, 180 days for the Competent Authority to decide.

  • Saying the appellant need not deposit the penalty.

    Students recall the hardship waiver and forget the rule.

    Fix: The penalty must be deposited when appealing. The Tribunal may dispense with it only for undue hardship, on conditions.

Worked examples

Example 1

Rohan Traders Pvt Ltd of Pune remitted ₹40,00,000 abroad in breach of an RBI direction. The contravention is quantifiable. Find the maximum penalty under Section 13(1) and say where the company can appeal.

Show the solution
  1. The contravention is of a direction issued under the Act, so Section 13(1) applies.
  2. The sum involved is quantifiable: ₹40,00,000.
  3. Maximum penalty = 3 × ₹40,00,000 = ₹1,20,00,000.
  4. The adjudicating authority may also order confiscation of the property involved under Section 13(2).
  5. An aggrieved company can appeal to the Appellate Tribunal within 45 days of receiving the order, depositing the penalty unless the Tribunal dispenses with it for undue hardship.

Answer: Penalty up to ₹1,20,00,000, with possible confiscation. Appeal lies to the Appellate Tribunal within 45 days.

Example 2

Meera Exports Ltd breached a condition of an RBI authorisation. The sum involved cannot be quantified. The breach continued for 10 days. Compute the maximum penalty.

Show the solution
  1. Breach of a condition of an RBI authorisation falls under Section 13(1).
  2. The amount is not quantifiable, so the base penalty is up to ₹2,00,000.
  3. Continuing contravention: days after the first day = 10 − 1 = 9.
  4. Further penalty = 9 × ₹5,000 = ₹45,000.
  5. Total maximum = ₹2,00,000 + ₹45,000 = ₹2,45,000.

Answer: Maximum penalty is ₹2,45,000.

Exam tips

  • Memorise the numbers: 3 times, ₹2 lakh, ₹5,000, 1 year, 45 days, 180 days. MCQs test these directly.
  • In numerical questions, show the day count as days minus one so the examiner sees the first day excluded.
  • In case answers, name the forum and procedure: written complaint, hearing, representation by an advocate or chartered accountant, then appeal.
  • Use up to wherever you state a penalty. Do not give a fixed figure.
  • Keep Section 37A separate in your mind. It deals with seizure of equivalent value in India for foreign assets held in contravention of Section 4.

Practice questions from Foreign Exchange Management Act, 1999

Contraventions, Penalties and Adjudication in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Contraventions, Penalties and Adjudication: frequently asked questions

What is the penalty under Section 13 of FEMA?

A person who contravenes the Act or a rule, regulation, direction or order under it is liable, after adjudication, to a penalty up to three times the sum involved if quantifiable, or up to ₹2 lakh if not. For a continuing contravention, a further penalty up to ₹5,000 per day after the first day applies.

Who is the Adjudicating Authority under FEMA?

It is an officer of the Central Government appointed by a Gazette order under Section 16, with a specified jurisdiction. It can hold an inquiry only on a written complaint by an officer authorised by the Central Government, after giving the person a reasonable hearing.

How long do you have to appeal to the Appellate Tribunal?

You must appeal within 45 days of receiving the order under Section 19(2). The Tribunal may accept a late appeal if there was sufficient cause. You must deposit the penalty, unless the Tribunal waives it for undue hardship.

Is FEMA contravention a criminal offence?

Ordinary contraventions under Section 13(1) are dealt with by civil penalty after adjudication. The exception in the text is undisclosed foreign assets above the prescribed threshold, where Section 13(1C) provides imprisonment up to five years and fine, and a court can act only on a written complaint by an officer not below Assistant Director.