DIFFERENCES BETWEEN FERA AND FEMA

Sr.No DIFFERENCES

FERA

FEMA1 PROVISIONS FERA consisted of 81sections, and was more complex FEMA is much simple, and consist of only 49sections.2 FEATURES Presumption of negative intention (Mens Rea ) andjoining hands in offence (abatement) existed in FEMAThese presumptions ofMens Rea and abatement have been excluded in FEMA3 NEW TERMS IN FEMA Termslike Capital Account Transaction, current Account Transaction, person, serviceetc. were not defined in FERA. Terms like Capital Account Transaction, currentaccount Transaction person, service etc., have been defined in detail inFEMA4 DEFINITION OF AUTHORISED PERSON Definition of "Authorised Person" inFERA was a narrow one ( 2(b) The definition of Authorised person has beenwidened to include banks, money changes, off shore banking Units etc. (2 ( c)5 MEANING OF "RESIDENT" AS COMPARED WITH INCOME TAX ACT. There was a bigdifference in the definition of "Resident", under FERA, and Income TaxAct

The provision of FEMA, are in consistent with income Tax Act, inrespect to the definition of term " Resident". Now the criteria of "In Indiafor 182 days" to make a person resident has been brought under FEMA. Thereforea person who qualifies to be a non-resident under the income Tax Act, 1961will also be considered a non-resident for the purposes of application ofFEMA, but a person who is considered to be non-resident under FEMA may notnecessarily be a non-resident under the Income Tax Act, for instance abusiness man going abroad and staying therefor a period of 182 days or more ina financial year will become a non-resident under FEMA.6 PUNISHMENT Anyoffence under FERA, was a criminal offence , punishable with imprisonment asper code of criminal procedure, 1973 Here, the offence is considered to be acivil offence only punishable with some amount of money as a penalty.Imprisonment is prescribed only when one fails to pay the penalty.7 QUANTUM

OF PENALTY. The monetary penalty payable under FERA, was nearly the five timesthe amount involved. Under FEMA the quantum of penalty has been considerablydecreased to three times the amount involved.8 APPEAL An appeal against theorder of "Adjudicating office", before " Foreign Exchange Regulation AppellateBoard went before High Court

The appellate authority under FEMA is thespecial Director ( Appeals)Appeal against the order of AdjudicatingAuthorities and special Director (appeals) lies before "Appellate Tribunal forForeign Exchange."An appeal from an order of Appellate Tribunal would lie tothe High Court. (sec 17,18,35)9 RIGHT OF ASSISTANCE DURING LEGALPROCEEDINGS. FERA did not contain any express provision on the right of onimpleaded person to take legal assistance FEMA expressly recognises the rightof appellant to take assistance of legal practitioner or chartered accountant(32)10 POWER OF SEARCH AND SEIZE FERA conferred wide powers on a policeofficer not below the rank of a Deputy Superintendent of Police to make asearch

The scope and power of search and seizure has been curtailed to agreat extent

A STEP AHEAD FROM FERA TO FEMA

Enactment of FEMA hasbrought in many changes in the dealings of Foreign Exchange, as compared toFERA. Some of them are restrictive, and some has widened the scope.

Howeversome of the relevant progress made, from FERA to FEMA, are asfollows:

RAWAL OF FOREIGN EXCHANGE

Now, the restrictions on drawal ofForeign Exchange for the purpose of current Account Transactions, has beenremoved. However, the Central Government may, in public interest inconsultation with the Reserve Bank impose such reasonable restrictions forcurrent account transactions as may be prescribed.

FEMA has also by andlarge removed the restrictions on transactions in foreign Exchange on account

of trade in goods, services except for retaining certain enabling provisionsfor the Central Government to impose reasonable restriction in publicinterest.

2. OMISSION OF CRIMINAL PROCEEDINGS

Under FERA, anycontravention was a criminal offence and the proceedings were governed by thecode of Criminal Procedure. Moreover the Enforcement Directorate had powers toarrest any person, search any premises, seize documents, initiateproceeding.

Now all these have been done away with, and contravention ofFEMA is no more a Criminal offence, and only monetary penalty, i.e. civilproceedings are applicable. Civil imprisonment is provided, only in case ofdefault to pay fine.

3. RESIDENTIAL STATUS

The definition of"Residential Status" under FEMA has gone through considerable change. It hasnow been made compatible with the definition provided under "Income Tax"Act.

The residential status is now based on the physical stay of the personin the country. The period of 182 days as provided, indicates that it is notnecessary that there should be a continuos period of stay. The period of staywould be calculated by adding up all the days of stay of the individual in thecountry.

An Indian resident becomes a non-resident when he goes abroad andtakes up a job or engages in business.

A major change in the definition ofresidential status of partnerships and firms in worth noticing. Earlier, underFERA, a branch was considered a resident of a place where it was situated.Now, under FEMA, an office, branch or agency outside India owned or controlledby a person resident in India will be considered a resident in India for thepurposes of this Act.

For example, a person residing in India has a branchin Maurtius; such branch will be considered a resident in India.

4.IMMOVABLE PROPERTY OUTSIDE INDIA

Earlier, under FERA, there was norestriction placed on foreign citizens who were residents of India, foracquiring immovable property outside India.

Now FEMA prohibits a residentto acquire, own process, hold or transfer any immovable property situatedoutside India. This restriction applies irrespective of whether the residentis an Indian citizen or foreign citizen. With this provision being effective aforeign citizen who is a resident in India has to take approval of ReserveBank of India for selling or buying any immovable property situated outsideIndia.

5. IMMOVABLE PROPERTY IN INDIA

Earlier, under FERA, a foreigncitizen could acquire or transfer immovable property in India only afterseeking permission from the Reserve Bank.

Now, under FEMA, the control ofReserve Bank is determined by the residential status of a person. Only anon-resident as defined within the meaning of FEMA would require permission ofthe Reserve Bank to acquire or transfer an immovable property in India. Thedistinction based on citizenship has been abolished and that based onresidentship has been introduced.

6. EXPORT OF SERVICES

FERA had noprovision for export of services. Now, FEMA has included payment received byan Exporter of Services in its ambit.

Every Exporter, who receives paymentfrom outside India, for his services rendered is obliged to furnish details ofpayment to the 'Reserve Bank.

For example; a Doctor, or Engineer or Lawyeror Accountant or any other professional may give opinions or consultation topeople outside India, via internet or mail, and his fees may be credited tohis credit account. Then he is obliged to furnish details of such payment toReserve Bank.

7. INCLUSION OF NEW TERMS

Some new terms like "CapitalAccount Transactions, Current Account Transactions"; have been included inFEMA. Reserve Bank has been confirmed with powers and with consultation with

central government to specify maximum permissible limit upto which exchange isadmissible for such transactions.

WHAT TYPE OF OFFENCES?

Althoughunder FEMA, offences pertain to transactions in foreign Exchange only. Howeverrelevant offences are as follows:

DETAILS IN FOREIGN EXCHANGE:

*

Only a person Authorised by Reserve Bank can deal in foreign Exchange

*

No one can make a payment to a person resident outside India,without permission of Reserve Bank.*

No one receives anypayment from a person resident outside India, without permission of ReserveBank.*

A person resident in India cannot deal in foreignexchange, foreign security or any immovable property situated outside India,without permission of Reserve Bank. (sec 4)*

Similarly a personresident outside India, cannot acquire immovable property in India withoutpermission.

EXPORTER OF GOODS AND SERVICES

Every exporter of goods andservices is under an obligation, to give details to Reserve Bank regardingvalue of export, mode of payment, amount of payment receivedetc.

REPATRIATION OF FOREIGN EXCHANGE

Where any amount of foreignexchange has become due or accrued to any person who is a resident in India,he shall realise and repatriate (Bring Back) such amount, within the timespecified by Reserve Bank.

AUTHORISED PERSON

An "Authorised Person"under FEMA, is a person who is authorised by Reserve Bank to deal in ForeignExchange.

For being registered as an "Authorised Person", necessaryapplication alongwith relevant documents has to be furnished to ReserveBank.

An "Authorised Person" is also, not given a free hand to deal inforeign Exchange. He has to furnish details and information, to Reserve Bankfrom time to time as may be required by it.

PROSECUTION OF OFFENCESCOMMITTED

Before detailing the procedure for prosecution, it is importantto mark out the Adjudicating Agencies. They are:

ADJUDICATINGAUTHORITY

The inquiry of any contravention of FEMA is conducted by anAdjudicating Authority appointed by the Central Government.

APPEAL TOSPECIAL DIRECTOR (APPEALS)

The special Director (Appeals) is authorised tohear the appeals arising out of in order of the AdjudicatingAuthority.

APPEAL TO THE APPELLATE TRIBUNAL

The Appellate Tribunal isentitled to hear appeals made in accordance, from an order made byAdjudicating Authority or special Director (Appeals).

DIRECTOR OF

ENFORCEMENT

The Director of Enforcement and other officers has power toconduct investigation, search and seize anyarticles.

PROCEDURE

INQUIRY BY ADJUDICATING AUTHORITY (14)

Theinquiry of any contravention of FEMA is conducted by an AdjudicatingAuthority.

*

When, an inquiry is to be conducted against aperson for any contravention; the Adjudicating Authority shall issue a noticeto such person.*

The notice will also indicate the date onwhich the offender is required to appear before authority, and will alsomention the nature of offence committed by him.*

Such person(offender) will have a right to give reasons or explanation, and then a datewill be fixed for his appearance. He can appear either personally or throughan Advocate or chartered accountant.*

On the date ofappearance, the Adjudicating Authority shall present its case, and explain thereason and type & implications of offence committed by offender.*

Then in turn, such person will also be given an opportunity to put up hiscase, and to produce documents and evidence.*

Finally, ifAdjudicating Authority is convinced, that the offender has committed anoffence, then it will impose such fine and penalty, as it thinks

fit.

APPEAL TO SPECIAL DIRECTOR (APPEALS) (17)

Appeal from an order of"Adjudicating Authority" lies before" special Director (appeal)"

*

The appeal shall be made in "Form No. 1", alongwith three copies of theorder appealed against and the requisite fees.*

The appealshould be filed within 45 days, from the date of receipt of receipt ofimpugned order.*

On the date of hearing the appeal theapplicant may appoint a legal practitioner or a chartered accountant toappear, plead and act on their behalf before the special Director (Appeal)

*

The order of the special Director (Appeals) made at the conclusionof the proceedings shall be in writing and shall state briefly the grounds forthe decision.

APPEAL TO THE APPELLATE TRIBUNAL (19)

"AppellateTribunal" is entitled to hear appeal arising out of an order from"Adjudicating Authority" and "special Director (appeal)."

*

The appeal shall be made in Form No. 2, alongwith three copies of the impugnedorder and requisite fees.*

The appeal shall be made within 45days, from the date on which copy of the impugned order is received.

*

A copy of the order and appeal shall be sent to the opposite party,i.e. "Director of Enforcement," and a date shall be fixed for hearing of theappeal.*

The appellant shall have the right to present his case/ appeal through a legal practitioner or chartered Accountant.*

On the fixed date of hearing, the "Appellate Tribunal" shall pass its order inwriting and the reasons therefore.

APPEAL TO HIGH COURT (35)

*

An appeal from the decision of "Appellate Tribunal" lies before HighCourt.*

The appeal shall be filed within "60 days" from thedate of communication of the decision or order of the Appellate Tribunal tohim on any question of law arising from the impugned order.

AMOUNT OFPENALTY

Any contravention, under FEMA, may invite following kinds ofpenalties:

* If, the amount against which offence is quantities, thenpenalty will be "THRICE" the sum involved in contravention.* Where theamount cannot be quantified the penalty may be imposed upto two lakh rupees.

* If, the contravention is continuing everyday, then Rs. Five Thousand forevery day after the first day during which the contraventioncontinues.

Further in addition to the penalty, any currency, security orother money or property involved in the contravention may also be confiscated.