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

The Enforcement Directorate suspects that Zenith Traders Pvt Ltd contravened FEMA by holding foreign exchange without authority. Which statement about the consequences under FEMA is correct?

Under FEMA, contravention is dealt with civilly. The adjudicating authority can impose a monetary penalty up to three times the sum involved where the amount is quantifiable. Imprisonment is not the primary punishment, and no minimum threshold of Rs 10 crore is required for penalty.

  1. AContravention is a criminal offence punishable only with imprisonment, without any civil penalty
  2. BThe adjudicating authority may impose a monetary penalty, which can be up to three times the sum involved where quantifiable, and such contravention is civil in natureCorrect
  3. CPenalty is possible only if the amount exceeds Rs 10 crore
  4. DFEMA provides no penalties, only advisory notices

Explanation

FEMA is a civil law: contravention leads to adjudication and a monetary penalty up to thrice the sum involved where the amount is quantifiable (or up to a prescribed sum where it is not). Imprisonment is only a civil-detention route on non-payment of penalty, not the primary punishment. No Rs 10 crore threshold applies.

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