DIRECTORATE

OF

ENFORCEMENT

FOREIGN EXCHANGE MANAGEMENT, 1999 [42 of 1999]

The Parliament has enacted the Foreign Exchange Management Act,1999 to replace the Foreign Exchange Regulation Act, 1973. This Act came into force on the 1st day of June,2000. To investigate provisions of the Act, the Central Govt. have established the Directorate of Enforcement with Director and other officers as officers of the Enforcement.

The object of the Act is to consolidate and amend the law relating to foreign exchange with objective of facilitating external trade and payments and for promoting the orderly developnent and maintenance of foreign exchange market in India.

This Act extends to the whole of India and will also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India. It will also be applicable to any contravention committed outside India by any person to whom this Act is applicable.

BROAD SCHEME OF THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999—

SECTION 3 - Prohibits dealings in foreign exchange except through an authorised person. This Section says that no person can, without general or special permission of the RBI—

(a) Deal in or transfer any foreign exchange or foreign securities to any persc4~iot being an author ised person (corresponding to sections 8 and 19 of FERA).

(b) Make any payment to or for the credit of any person resident outside India in any manner (corresponding to section 9(l)(a) of FERA).

(c) Receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner (corresponding to section 9(1)(b) of FERA) and

(d) Enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person (corresponding to sections9(l)(f) & (g) ofFERA).

SECTION 4 - restrains any person resident in India from acquiring, holding, owning, possessing or transferring any foreign exchange, foreign security or any immovable property situated outside India except as specifically provided in the Act. The terms “foreign exchange” and “foreign security” are defined in sections 2(n) and 2(o) respectively of the Act. The Central Govt. has made Foreign Exchange Management (Current Account Transactions) Rules, 2000.

SECTION 6 - deals with capital account transactions. This section allows a person to draw or sell foreign exchange from or to an authorised person for a capital account transaction. RBI in consultation with Central Govt. has issued various regulations on capital account transactions in terms of sub—sect ion (2)and (3 )f section 6.

SECTION 7 deals with export of goods and services. Every exporter is required to furnish to the RBI or any other authority, a declaration etc. etc. regarding full export value.

SECTION 8 - casts the responsibility on the persons resident in India who have any amount of foreign exchange due or accured in their favour to get same realised and repatriated to India within the specific period and the manner specified by RBI.

SECTIONS 10 and 12 - deals with duties and liabilities of the Authorized persons.Authorised person has been defined in Sec.2(c) of the Act which means an authorised dealer, money changer, off lshore banking unit or any other person for the time being authorized to deal in foreign exchange or foreign securities.

SECTIONS 13 and 15 - of the Act with penalties and enforcement of the orders of Adjudicating Authority as well power to compound contravent ions under the Act.

SECTION 36 to 37 - pertains to the establishment of Directorate of Enforcement and the powers to investigate the violation of any provisions of Act, rule, regulation, notifications, directions or order issued in exercise of the powers under this Act. The Director of Enforcement and other officer of Enforcement not below the rank of Asstt. Director have been empowered to take up investigations.

ENFORCEMENT DIRECTORATE

The Directorate of Enforcement is mainly concerned with the enforcement of the provisions of the Foreign Exchange Management Act to prevent leakage of foreign exchange which generally occurs through the following malpractices

1) Remittances of Indians abroad otherwise than through normal banking channels, i.e. through compensatory payments.

2) Acquisition of foreign currency illegally by person in India.

3) Non—repatriation of the proceeds of the exported goods.

4) Unauthorised maintenance of accounts in foreign countries.

5) Under—invoicing of exports and over—invoicing of imports and any other type of invoice manipulation.

6) Siphoning off of foreign exchange against fictitious and bogus imports land by

7) Illegal acquisition of foreign exchange through Hawala.

8) Secreting of commission abroad.

Directorate has to detect cases of violation and also perform substantial adjudicatory functions to curb such malpract ices.

ORGANISATION SET-UP

The Enforcement Directorate, with its Headquarters at New Delhi has seven zonal offices at Bombay, Calcutta, Delhi, Jalandhar, Madras, Ahmedabad and Bangalore. The zonal offices are headed by the Deputy Directors. The Directorate has nine sub—zonal offices at Agra, Srinagar, Jaipur, Varanasi, Trivandrum, Calicut, Hyderabad, Guwahati and Goa, which are headed by the Assistant Directors. The Directorate has also a Unit at Madurai, which is headed by a Chief Enforcement Officer. Besides, there are three Special Directors of Enforcement and one Additional Director of Enforcement,

STAFF

The total sanctioned strength of staff of all categories is 813 - The breaking up is as under:—

Category “A” Officers— 54

(Class I officers)

Category “B” Officers— l53

(Class II officers)

Category “C” Off icers— 440

(CLASS—III)

Category “D” Officers— 166

(Class IV officers)

FUNCTIONS

The main functions of the Directorate are as under:—

a) To collect and develop intelligence relating to violation of the provisions of Foreign Exchange Regulation Act and while working out the same, depending upon the circumstances of the case:

(i) to conduct searches of suspected persons, conveyances and premises for seizing incriminating materials (including Indian and foreign currencies involved) and/or.

(ii) to enquire into and investigate suspected violations of provisions of the Foreign Exchange Management Act.

b) to adjudicate cases of violations of Foreign Exchange Management Act for levying penalties departmentally and also for confiscating the amounts involved in contravent ions;

c) to realise the penalties imposed in departmental adjudication;

In addition to the above functions relating to the Foreign Exchange Management Act, the Directorate also processes and recommends cases for detention of habitual offenders under the Conservation of Foreign Exchange and Prevention of smuggling Activities Act, 1974 (52 of 1974), which provides inter—alia for detention of a person with a view to preventing him from acting in a manner prejudicial to the conservation and augmentation of foreign exchange.

PROCEDURAL PROVISIONS

For enforcing the provisions of various sections of FEMA,l999, the officers of Enforcement Directorate of the level of Assistant Director and above will have to undertake the following functions:

1) Collection and development of intelligence/information.

2) Keeping surveillance over suspects.

3) Searches of persons/vehicles as per provisions of Income—tax Act,1961.

4) Searches of premises as per provisions of Income—tax Act,1961.

5) Summoning of persons for giving evidence and producing of documents as per provisions of Income—tax Act,l96l.

6) Power to examine persons as per provisions of Income—tax Act,196l.

7) Power to lcall for any information/document as per provisions of Income—tax Act , 1961.

8) Power to seize documents etc. as per provisions of Income—tax Act,196l.

9) Custody of documents as per Income—tax Act,196l.

10) Adjudication and appeals- Officers of and above the rank of Dy Director of Enforcement, are empowered to adjudicate cases of contravention of the provisions of the Act; these proceedings which are quasi—judicial in nature, start with the issuance of show cause notice; in the event of cause tshown by the Notice—not being found satisfactory, further proceedings are held, vis. personal hearing, in which the noticee has a further right to present his defence, either in person or through any authorised representative; on conclusion of these proceedings, the adjudicating authority has to examine and consider the evidence on record, in its entirety and in case the charges not being found proved, the noticee is acquitted, and in the event of charges being found substantiated, such penalty, as is considered appropriate as per provisions of section 13 of the Act can be imposed, besides confiscation of amount involved in these contraventions.

The penalty imposed has to be deposited in the concerned office of the Dy. Director within 45 days of the date of receipt of the Adjudication order. In case the party feels aggrieved by the orders of the adjudicating authority, he/she/they can refer appeal, before the Appellate Tribunal/Special Director (Appeal), Foreign Exchange. Whereas, another appeal lies to the High Court, against the order of the Appellate Tribunal, however, only in the matters involving question/points of Law.

PUBLIC GRIEVANCES MACHINERY

The Directorate keeps a constant vigil over its officers/staff and strict action is taken against anybody found/suspected to be involved in any undesirable activity. The Vigilance Cell of the Directorate works under the direct supervision of the Director of Enforcement, and, at present, it includes two very senior officers. Any person having any genuine grievance/comp1aint~ can contact any of these officers, whose addresses/telephone numbers are as under:—

1. S.S.Dawra,

Director of Enforcement,

Enforcement Directorate, 6th floor, Lok Nayak Bhawan,

Khan Market, New Delhi-110003.

Tel : 4693577

2. Shri S.S.Bajpai,

Special Director, Enforcement Directorate,

6th floor, Lok Nayak Bhawan,

Khan Market,

New Delhi

Tel: 4690615

3. Shri Abhijit Chakraverty,