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RBI Compounds FEMA Violations for Elsteel Modular, Ends Legal Case

The Reserve Bank of India has issued a compounding order for Elsteel Modular India Private Limited, settling alleged Foreign Exchange Management Act violations. The contraventions involved the late reporting of foreign inward payments totaling over Rs. 1.21 crore. Following a no-objection from the Enforcement Directorate, which had investigated the case, the RBI imposed a one-time payment of Rs. 14,200. This order terminates all adjudication proceedings against the company, preventing further litigation.

Key Points: RBI Compounds FEMA Violations for Elsteel Modular India

  • RBI compounds FEMA violations
  • Late reporting of over Rs. 1.21 crore
  • One-time penalty of Rs. 14,200
  • ED issued no objection for settlement
2 min read

RBI compounds FEMA violations in Elsteel Modular case

RBI issues compounding order for Elsteel Modular's FEMA violations, ending proceedings after a Rs. 14,200 penalty and ED's no objection.

"This has resulted in the termination of adjudication proceedings for the contravention under the provisions of FEMA - Enforcement Directorate Statement"

New Delhi, Jan 12

The Reserve Bank of India has issued a compounding order under Section 15 of the Foreign Exchange Management Act, in the case of Elsteel Modular India Private Limited, which has resulted in termination of proceedings against the company for alleged contraventions of the law, according to a statement issued by the Enforcement Directorate on Monday.

The order was passed by the RBI on December 12, 2025 after the Directorate of Enforcement (ED) issued a "No Objection" in the matter, the statement said.

The ED had taken up the case for investigation, based on credible information received against Elsteel Modular India Private Limited.

After completing the investigation, ED filed a complaint under Section 16 of FEMA before the Adjudicating Authority.

The contraventions under FEMA, for which compounding has been done, include late reporting of foreign inward payments, covering a sum of over Rs. 1.21 crore.

As per the provisions of FEMA, the adjudication proceedings were initiated by the Adjudicating Authority by issuance of Show Cause Notice dated September 7, 2023 under Section 6 of FEMA to the company and its directors/officers who were incharge and responsible for the conduct of the business of the company during the relevant period of contravention.

The company, later on, filed an application before the RBI for compounding contravention under FEMA as per the provisions of Section 15 of the Act.

After the reference from RBI, the ED issued its "no objection" for the compounding in line with the true spirit of the Act, the statement said.

Accordingly, the RBI, on the basis of no objection issued by ED, has compounded the contravention vide compounding order dated December 12, 2025 with a one-time payment of Rs.14,200.

This has resulted in the termination of adjudication proceedings for the contravention under the provisions of FEMA that were filed against the company. The statement also added that no further litigation will be carried out against the company.

Compounding of offences is a legal mechanism allowing an accused person or entity to settle a violation by paying a monetary penalty or fulfilling other conditions, thereby avoiding a full prosecution, lengthy litigation, and a potential criminal record, typically for less serious offenses like minor tax non-compliance or certain civil wrongs.

It involves the offender voluntarily admitting guilt and applying to a competent authority, for the offense to be condoned, resulting in the discharge of the accused.

- IANS

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Reader Comments

P
Priya S
Actually, this is a good example of the system working efficiently. The ED investigated, the company admitted fault, paid a penalty, and the matter is closed. Dragging every minor procedural lapse through years of litigation benefits no one. It saves taxpayer money and court time. 👍
R
Rohit P
The key detail is "late reporting," not hiding the money. It was an inward remittance, meaning foreign money coming INTO India. Probably an export payment. The delay in paperwork is a compliance issue, not a case of siphoning funds abroad. The penalty seems proportionate for a clerical/process delay.
S
Sarah B
As someone who runs a small business, I appreciate this mechanism. The FEMA rules are complex and sometimes smaller firms lack the legal bandwidth. A compounding option allows them to rectify genuine mistakes without being crushed by endless legal battles. It supports ease of doing business.
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Vikram M
Good to see coordination between RBI and ED. The "No Objection" from ED before RBI's order is crucial. It shows a structured approach and prevents one agency undermining another. Hope this transparency and process is followed in all cases, big or small. 🇮🇳
K
Karthik V
While the process seems smooth, I wonder about the directors/officers named in the original notice. The article says proceedings are terminated for the "company." Does the compounding absolve the individuals too? Clarity on personal liability is important for corporate governance.

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