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

Sundaram Pvt Ltd contravened a FEMA provision where the amount involved is quantifiable at ₹40 lakh. The Adjudicating Authority, after inquiry, imposes a penalty. Which statement correctly states the maximum monetary penalty under Section 13 for such a contravention, and the consequence of non-payment?

For a quantifiable contravention, Section 13 allows a penalty up to three times the sum involved, here ₹1.2 crore on ₹40 lakh. If the penalty is not paid, the person may face civil imprisonment under Section 14. Twice the sum is not the stated limit.

  1. AUp to ₹10,000 only; non-payment leads to imprisonment for life
  2. BUp to three times the sum involved, i.e. up to ₹1.2 crore; non-payment may lead to civil imprisonmentCorrect
  3. CUp to twice the sum involved, i.e. up to ₹80 lakh; non-payment leads to attachment only
  4. DUp to five times the sum involved; non-payment leads to cancellation of incorporation

Explanation

Under Section 13, where the amount is quantifiable, the penalty can be up to three times the sum involved, so 3 × ₹40 lakh = ₹1.2 crore. If the penalty is not paid within the period specified, civil imprisonment may follow under Section 14. The option with twice the sum understates the limit.

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