RBI compounds FEMA violations in Touras India case
New Delhi, June 29
The Reserve Bank of India has issued a compounding order under Section 15 of the Foreign Exchange Management Act, in the case of Touras India Private Limited, which has resulted in the termination of proceedings against the company for contraventions of the law's provisions with a one-time payment of Rs 26,950, according to a statement issued by the Directorate of Enforcement on Monday
The order has been passed by the RBI after issuance of a "no objection" by the ED.
Section 15 provides a mechanism for individuals or companies to voluntarily admit to a violation of FEMA regulations, pay a penalty, and regularise the contravention without undergoing lengthy litigation or legal proceedings.
The ED had carried out an investigation based on the credible information received against the company. After completion of the investigation, the ED filed a complaint under Section 16 of FEMA before the Adjudicating Authority, pointing out a breach of provisions on account of delay in reporting of foreign inward remittance in the Advance Reporting Form (AFR). This is a mandatory form under FEMA used by Indian companies to report incoming Foreign Direct Investment (FDI) to the RBI. The contraventions related to an amount of Rs 28,05,125, the official statement said.
There was also a delay in reporting of Foreign Currency-Gross Provisional Return. (FCGPR) by the company, which involved an amount of Rs 1,86,91,350. Under FEMA, it is a mandatory statutory form that an Indian company must file with the RBI whenever it issues eligible capital instruments to a foreign investor.
Besides, there was a delay in the issue of shares after receipt of remittances.
The company, later on, filed an application before the RBI for compounding of these contraventions under FEMA as per the provisions of Section 15 of the Act. On reference from the RBI, the ED issued no objection for such compounding in line with the true spirit of the Act.
Accordingly, the RBI, on the basis of the no objection issued by the ED, has compounded these contraventions with the issuing of an order dated June 18, the statement added.
— IANS
Reader Comments
The penalty seems too low for the amount involved 😕. ₹1.86 crore delay in reporting FCGPR and they pay just 27k? Should be proportionate to the violation amount. Otherwise companies will see delay as cost of doing business. Need stricter deterrents.
At least the company voluntarily came forward for compounding - that shows good corporate governance. Many companies try to hide violations until ED catches them. Touras India did the right thing by approaching RBI proactively. This is how compliance should work in India - encourage self-reporting.
Interesting to note the ED and RBI coordination here. Under FEMA, compounding is a good mechanism for minor procedural violations. But I hope companies understand that delay in reporting foreign investments can seriously affect India's capital account monitoring. The AFR and FCGPR forms are crucial for tracking FDI inflows.
As someone who works with cross-border compliance in India, I can confirm that many companies struggle with FEMA reporting deadlines. ₹28 lakh and ₹1.86 crore are not huge amounts but the regulatory burden is real. The compounding route avoids court cases which could drag for years. Smart move by the company.
Question is - why did the company delay reporting? Was it genuine oversight or deliberate? ED should investigate whether there was any round-tripping or money laundering angle. Just paying 27k and getting clean chit seems too easy. Need more transparency in such compounding orders.
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