Features - Foreign Exchange Management Act(2000), Business Law Video Lecture | Corporate & Other Laws for CA Intermediate

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welcoming students we are going to
discuss foreign exchange Management Act
2000 part 2 this is in unit number 6 of
your syllabus business regulatory
framework you may recall in the previous
program that is FEMA 2000 part 1 we have
understood the rationale behind
introduction of foreign exchange
Management Act as was said earlier that
because of the economic policies of the
government because of the liberalization
privatization and globalization regime
setting in in the economic it has become
essential for the law makers to
introduce a bill or introduce the Act
which will facilitate the foreign
business as well as the movement of
foreign exchange in that program we had
talked about the extent of the fem a--
act objectives of the act and various
definitions of different terminology
used in the act now in this particular
program we are basically going to focus
on the aspects of various providence
related to the regulation and management
of foreign exchange namely six
provisions are there then we will also
be talking about the aspects of the
different authorities the authorized
persons appointed by the Reserve Bank of
India and then different appellate
authorities what is the organizational
structure if a party has to lodge the
appeal against any of the orders so
first of all we will be discussing the
provisions of the Act
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now providence related to regulation and
management of foreign exchange as I have
said there are six provisions namely
Providence s two transaction in foreign
exchange this is highlighted in section
3 of the 8 provision says two holding of
foreign exchange security by residents
section 4 s 2 current account
transactions very important 1 section 5
Providence s to capital account
transactions section 6 Providence s to
export of goods and services section 7
and finally Providence s to realization
and repatriation of foreign exchange
covered under section 8 of the Act you
will be appreciating the effect that it
is these six provisions which form the
core of the FEMA Act 2001 by one will be
understanding the interrelationship
which is there among these provisions
and they go in this fashion that first
of all transactions in foreign exchange
security will be discussed
followed by provisions as to who will be
holding foreign exchange security that
will be covered then like I have said
current account transactions capital
account transactions then the provisions
related to export of goods and services
and finally the Providence regarding
realization and repatriation of foreign
exchange will be discussed
now first Providence which are covered
under section 3 of the Act relate to the
Providence regarding transactions in
foreign exchange security as per the Act
it is very clearly mentioned that no
person number one shall deal or transfer
for an exchange
other than authorized person for any
transaction in foreign exchange
the Reserve Bank of India appoints the
authorized person how the authorised
person is appointed and what are its
responsibilities and roles we'll be
discussing in the next part of the
program but the this provision very
clearly specifies that no person shall
deal or transfer in foreign exchange
other than authorized person number two
is that no person shall make any payment
to person resident outside number three
is that no person will be allowed to
receive any payment on behalf of any
person resident in or outside India only
the authorized person can receive
payment by order on behalf of person
resident in or outside India and lastly
no person shall enter into any financial
transaction in India to acquire any
asset outside India so that means that
that these are the clear-cut Providence
regarding the transactions in foreign
exchange security as per the Act only
the authorized person is authorized to
act as the agent who will be helping you
out in the foreign exchange transactions
the interpretation of this provision is
that that there is a parallel trade
which is called hawala trade and the
provisions of this act effectively try
to curb the malpractice of hvala
and so that so that the foreign exchange
currency transactions are taking place
only through the authorized person
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second provision covered under section 4
of the Act is regarding the provisions
related to holding of foreign exchange
who can hold foreign exchange no person
resident in India shall acquire or hold
foreign exchange foreign security
immovable property that is of the
foreign located in foreign locations so
then we are actually trying to interpret
here that regarding the foreign currency
and foreign exchange foreign security it
will not be hold by any person other
than the authorized person there are
some exceptions to this particular
section for which are mentioned in
section 9 of the Act and only those
exceptions are allowed to hold the
foreign exchange or foreign security
otherwise in general this provision will
be applicable now we come to the
all-important provision regarding
provision s 2 current account
transactions now any person may sell or
draw for an exchange to are from an
authorized person the transaction has to
be done through an authorized person if
it is a current account transaction but
the central government and especially
the Reserve Bank of India has the power
to impose restrictions and they do
impose restrictions in the cases such as
where speculation is involved for
example if it is a foreign lottery then
that leads to or that encourages
gambling then that is not allowed as a
current account transaction s per the
provisions of this act this is one of
the restriction imposed by the central
government regarding the Providence s to
current account transactions this famer
Act 2000
was amended on 20th April 2009 and the
latest amendment has made it clear that
some of the restrictions that were put
on by the RBI have been relaxed as per
the new amendment some of the
restrictions are also there in the
capital account transactions which is
the fourth provision of the FEMA Act
2000 and this is covering section 6 of
the Act now as per this provision any
person may sell or draw for an exchange
to are from an authorized person if it
is a capital account transaction as per
the restrictions are regulations by
Reserve Bank of India transfer of
foreign security by Indian resident
transfer of any security by Indian
resident transfer of any security by any
branch office or agency and finally any
borrowing or lending of the foreign
exchange will be permissible under this
particular capital account transaction
that is where the main difference
between current account and capital
account transaction will be aware that
the transactions are taking place with
the intention of developing some
physical capital some asset which may
have long term life then similarly
continuing further this provision
related to capital account transactions
also cover any borrowing of lending
deposits between Indian and foreign
residents Export Import holding currency
that is one of the exceptions regarding
the holding currency transfer of a
movable property in or outside India
giving guarantee of date such Providence
would be covered under the capital
account transactions
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as far as the next revision is concerned
this provision is regarding the export
of goods and services many of the Indian
business organizations may be engaged in
exporting their products to any company
located outside the country and in
certain cases some of these services are
also exported especially when we look at
India our strength lies in the field of
information technology so many IT
enabled services are exported from India
some of the BPO related business is also
taking place which will come under the
export of service criteria but here the
provisions are clear that every exporter
has to furnish declaration to the
Reserve Bank of India regarding facts
relating to exports now this exporter
not only has to go do the declaration
but has to also furnish information
asked by Reserve Bank of India from time
to time it will be the duty of exporter
to furnish to Reserve Bank of India the
declaration for that means that it will
be a self-motivated exercise the
exporter has to arrange for the
declaration for and furnish the
information RBI has the power to direct
any exporter to furnish information or
declaration especially in cases where
any particular default is found then we
shift our attention to the 610 last
Providence that is Providence's to
realization and repatriation of foreign
exchange any foreign exchange due to any
resident Indian now he will have to take
steps to realize and repatriate to India
such foreign exchange repatriation is
not needed in the following cases
position of foreign currency up to
specified
limit by reserving of India holding
foreign currency account up to limit is
specified by Reserve Bank of India
foreign currency received before July
1947 a special permission of RBI is
required for that foreign exchange by
gift up to specified limits by Reserve
Bank of India for an exchange acquired
abroad up to limit is specified by
Reserve Bank of India any other receipt
is specified by RBI so meaning thereby
that the foreign currency that is
received in the form of gift or in the
form of other exchanges other transfers
then the limits are specified by Reserve
Bank of India and up to that particular
limit only one can hold the foreign
exchange or foreign currency and this is
what I was telling you that exception
which is given in the section 9 of the
Act here
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after having discussed the six
provisions of the Act now we turn our
attention to the next aspect of the Act
FEMA 2000 that is authorized person
because in the previous Providence it
was discussed that the role of an
authorized person is very important one
when it comes to the transactions of
foreign exchange currency then this is
the procedure which is to be followed
it is only Reserve Bank of India in our
country which is authorized to empower
any person RBI can authorize any person
but then that person has to actually
apply to the reservoir India that he
wants to be recognized as an authorized
person so that he can be dealing in the
aspects such as the transactions of
foreign exchange now he has to use
foreign exchange only for declared
purpose or else it will be treated as
contravention now meaning thereby that
once he is authorized by Reserve Bank of
India then he has to fulfill the
conditions terms and conditions of the
Reserve Bank of India all the dealings
that authorized person will be
undertaking will be Esper directions or
orders of Reserve Bank of India as far
as the revocation is concerned if it is
found that the authorized person has
contravened some of the rules or EXOR
provisions of FEMA and if the Reserve
Bank of India Dean's it in the public
interest that the person fails to comply
to the provisions of the Act or he has
contravened some of the rules then
Reserve Bank of India may think about or
may take steps about revocation of the
sir ization that was given to the person
now it is the duty of the authorized
person who has to submit in a timely
manner
declaration as it is information and he
has to also receive return end
conditional authorization from Reserve
Bank of India now the Act goes on to
discuss the aspects of if there are any
disputes or if there are any problems
then what is the institutional mechanism
for entertaining such kind of cases and
the 8mi 2000s the Providence of the
appointment of adjudicating Authority
now this adjudicating authority is
appointed by the central government any
number of central government officers
may be appointed as adjudicating
authority because less number of
authorities will not be sufficient the
number of instances where in such kind
of adjudication has to be done may be
large in number as a result of which
what happens is that that the
adjudication process may become tedious
and slow so central government has to
decide a specified number of the central
government officers who can be appointed
as adjudicating Authority now the
functions of these adjudicating
authority are to hold inquiry and
inquiry of especially the defaulters and
directing them to comply to the
provisions of the FEM Act their
jurisdiction jurisdiction of the
educating Authority will also be
specified by the central government
different officers may be given
different jurisdiction and
then inquiry will be conducted only when
any written complaint is received by
them and once a complaint is received
then the defaulter may have to appear
personally or through legal practitioner
so then personal appearance is up to the
wish of the defaulter he may go in for
the use of legal practitioner to appear
on his behalf
before the adjudicating authority the
adjudicating authorities have similar
powers as that of civil court
and so these adjudicating authorities
have statutory status statutory powers
equivalent to that of a civil court
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once the adjudicating authorities have
given their judgment then if the any of
the party is not satisfied with that
then the FEMA egg mm makes further
provision for the appointment of a
special director and appeal can be made
to a special director this is part 7 of
the Act egg Mex appointment of a special
director to hear the appeals against the
adjudicating authorities that if any
complaint was launched to the
adjudicating authorities they gave the
default er an opportunity to either
personally appear or appear through
their legal practitioner and then the
decision of the adjudicating authority
was given either favoring the
complainant or exonerating the default
er so either of the party if they are
not satisfied with the decision of the
adjudicating authority can approach
agency hire body that of a special
director now this is special director
again there will be appointment of
directors by central government again
like adjudicating officers there will be
not one but many directors will be
appointed by central government and any
person who is aggrieved by the judgment
of the adjudicating Authority has right
to appeal but period of Appeal is 45
days from the passing of order by
dedicating Authority after 45 days are
over then that order of adjudicating
Authority cannot be challenged now the
order is given by special directors
after hearing from both the parties and
the special directors have the power to
set aside order if they deem fit
as far as sending copy of order is
concerned that copy of order
also goes to appeal party the one who is
approached a special director and a copy
of the order is also sent to the
adjudicating authority so that they also
have the knowledge as to whether the
decision they have taken earlier in the
same case whether it was upheld by the
higher body that of a special director
or it was set aside by the special
director now once again like
adjudicating Authority a special
director also has the powers same as
that of civil court finally there is the
provision in the FEM Act 2000 that we
have the Appellate Tribunal for foreign
exchange
now this Appellate Tribunal is also
estimated by central government through
this notification and this is the
highest level of appellate authority in
which we find that the judgments of both
adjudicating Authority as well as
special directors are examined by this
highest body of Appellate Tribunal as I
have said earlier that this Appellate
Tribunal is established by central
government through the budget
notification a chairman is appointed for
this Appellate Tribunal and this
Chairman then can have many members of
the Appellate Tribunal the Chairman has
to work along with the members to take
give judgement regarding the judgment of
the lower level bodies again same as the
previous case period of Appeal is within
period of 45 days ordered by the
tribunal after hearing they can confirm
set aside and third option is they can
modify the order also as the order is
appealed against
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in this program we have talked about six
provisions of the very important for an
exchange Management Act 2000 we have
also discussed the procedure of
appointment of an authorized person by
Reserve Bank of India what are the
obligations of authorized person that
also was discussed and then the
mechanism for entertaining any complaint
due to the contraventions of the same
act and 3-tier appeal mechanism namely
adjudicating authorities a special
director and Appellate Tribunal their
Constitution and responsibilities and
powers were discussed thank you
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you