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CA Intermediate · Corporate and Other Laws · The Foreign Exchange Management Act, 1999

An officer of the Directorate of Enforcement finds that Sunrise Traders contravened FEMA by not repatriating export proceeds. The contravention involved a sum quantifiable in money. What is the maximum penalty the Adjudicating Authority can impose under the Act, and what is the position if the contravention continues?

Where the sum is quantifiable, the penalty can be up to three times the sum involved in the contravention. If the contravention continues, a further penalty up to Rs 5,000 per day applies after the first day. FEMA contraventions attract civil penalties, not imprisonment as a first step.

  1. AA fixed penalty of Rs 5,000 irrespective of the amount
  2. BUp to three times the sum involved in the contravention; and if it continues, a further penalty up to Rs 5,000 for every day after the first day during which it continuesCorrect
  3. CUp to ten times the sum involved, with imprisonment of seven years
  4. DOnly confiscation of the goods, without any monetary penalty

Explanation

Where the amount is quantifiable, the penalty is up to thrice the sum involved. Where the contravention is continuing, a further penalty up to Rs 5,000 per day applies after the first day. Option A applies to unquantifiable cases in a different form, and options C and D are not FEMA provisions since contraventions are civil.

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