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

Under FEMA, 1999, an Authorised Person fails to comply with a direction issued by the Reserve Bank to it. Which statement reflects the correct legal position?

Directions of the Reserve Bank are binding on Authorised Persons. If one fails to comply, it can be penalised under FEMA, and the Reserve Bank may also revoke its authorisation after giving it a reasonable opportunity of being heard. They are not mere advice.

  1. ANo consequence arises because RBI directions are only advisory
  2. BThe Authorised Person may be penalised and its authorisation may be revoked by the Reserve BankCorrect
  3. COnly a criminal prosecution under the Indian Penal Code can follow
  4. DThe matter can only be heard by the Supreme Court in the first instance

Explanation

RBI may give directions to Authorised Persons, and contravention can attract a penalty under FEMA, apart from RBI's power to revoke the authorisation after giving a reasonable opportunity of being heard. The directions are binding, not advisory. FEMA is essentially civil in nature, and adjudication starts before the adjudicating authority, not the Supreme Court.

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