FEMA Compounding Orders - A Comprehensive Analysis

Contents at a glance About the authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v About the technical editors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv List of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xxxi SECTION I

LEARNINGS DERIVED FROM ANALYSIS OF FEMA COMPOUNDING ORDERS L earnings derived f rom analysis of FEMA Compounding Orders . . . . . . . . . . . . . . . 1.3 SECTION II

ANALYSIS OF FEMA COMPOUNDING ORDERS Foreign Exc hange Management Ac t , 19

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3

FEMA ( Current Ac c ount T ransac t ions) R ules, 20

. . . . . . . . . . . . . . . . . . . . . . . . . 3.1

Notification No. FEMA 3/2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Notification No. FEMA 4/2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Notification No. FEMA 5/2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Notification No. FEMA 9/2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Notification No. FEMA 10/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . 8.1 Notification No. FEMA 14/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . 9.1 Notification No. FEMA 19/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . 10.

Notification No. FEMA 20/ 2000-RBI dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . 1 1.

Notification No. FEMA 20(R)/2017-RB dated 07.11.2017 . . . . . . . . . . . . . . . . . . . 12.

Notification No. FEMA 21/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . 13.

Notification No. FEMA 22/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . 14.

Notification No. FEMA 23/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . 15.

Notification No. FEMA 24/2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . . . 16.

Notification No. FEMA 120/2004-RB dated 07.07.2004 . . . . . . . . . . . . . . . . . . . . . 17.

Notification No. FEMA 348/ 2015-RB, dated 25.09.2015 . . . . . . . . . . . . . . . . . . . . 18. xi ii

Table of contents About the authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v About the technical editors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Contents at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii List of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xxxi SECTION I

LEARNINGS DERIVED FROM ANALYSIS OF FEMA COMPOUNDING ORDERS Learnings derived from analysis of FEMA Compounding Orders 1.

G eneral I nsight s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2 FEMA 3/ 20R B dat ed 03.52 . . . . . . . . . . . . . . . . . . . .

1.3 FEMA 4/ 20 0- R B dat ed 03.52 . . . . . . . . . . . . . . . . . . . .

1.4 FEMA 20/ 20R B dat ed 03.52 . . . . . . . . . . . . . . . . . . .

1.5 FEMA 20( R ) / 2017R B dat ed 07.1 1.207 . . . . . . . . . . . . . . . .

1.6 FEMA 120/ 204R B dat ed 07.24 . . . . . . . . . . . . . . . . . .

........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 . . . . . . . . . . 1.5

1.3 1.3 1.7 1.8 1.9

SECTION II

ANALYSIS OF FEMA COMPOUNDING ORDERS Foreign Exchange Management Act, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1 S ec t ion 3( b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1 P urc hase of shares of I ndian c ompany f rom overseas invest or using f unds remit t ed under L R S held in resident ’ s overseas ac c ount s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

S ec t ion 3( c ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1 Collec t ion of f unds by t he applic ant in it s ba nk a c c ount in I ndia on be half of t he overseas merc hant s f or sale of produc t s/ servic es t o I ndian c ust omers . . . . . . . . . . . . . . . . . . . . . . .

2.3 S ec t ion 6( 3) ( b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.31 S ummary R eport ing of orders on S ec t ion 6( 3) ( b) . . . . . . . . . . . . . .

2.4 S ec t ion 10( 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.41 P urc hase of shares of I ndian c ompany f rom overseas invest or using f unds remit t ed under L R S held in resident ’ s overseas ac c ount s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3 2.3

2.3 2.5

2.5 2.7 2.7

2.7

2.8 xv

FEMA Compounding Orders – A Comprehensive Analysis

FEMA (Current Account Transactions) Rules, 2000 . . . . . . . . . . . . . . . . . . . . . . .

3.1 P ara 2( iii) of S c hedule I I I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 .1 N ot ob t aining prior approval of R B I f or remit t anc es ex c eeding t he permissib le limit of U S D 1 , 0 0 0 , 0 0 0 per proj ec t f or ot her c onsult anc y servic es proc ured f rom out side I ndia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2 R ule 4 r ead w it h it em 6( a) of S c hedule I I t o Foreign Exc hange Management ( Current Ac c ount T ransac t ion) R ules, 20 . . . . . . . . . . . . . .

3.21 S ummary R eport ing of order on R ule 4 r ead w it h it em 6( a) of S c hedule I I t o Foreign Exc hange Management ( Current Ac c ount T ransac t ion) R ules, 20 . . . . . . . . . . . . . . . . . . . . . . . . . .

Notification No. FEMA 3/2000-RB dated 03.05.2000. . . . . . . . . . . . . . . . . . . . . . .

4.1 R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1 Foreign f unding availed in t he f orm of debt w it hout prior approval of R B I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.12 L ending in f oreign exc hange t o a person resident out side I ndia . . .

4.13 R epayment of loan t o ent it y ot her t han original lender . . . . . . . . . .

4.2 R egulat ion 3 r ead w it h S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.21 D eemed B orrow ing in f oreign exc hange f rom it s group c ompanies abr oad w it hout meet ing t he st ipulat ed c ondit ions . . . . .

4.2 S ummary R eport ing of ot her orders on R egulat ion 3 r ead w it h S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10 4.3 R egulat ion 5( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12 4.31 L ending in f oreign exc hange by a resident individual t o a non- resident ent it y f rom t he ba nk a c c ount s held out side I ndia . . . 4.12 4.

R egulat ion 5( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13 4.1 S ummary R eport ing of orders on R egulat ion 5( 3) . . . . . . . . . . . . 4.1 4.5 R egulat ion 6( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16 4.51 S ummary R eport ing of order on R egulat ion 6( 1) . . . . . . . . . . . . . 4.16 4.52 P aragraph 1( i) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.17 4.521 Applic ant be ing a non- eligib le bor row er. . . . . . . .. .....

4.17 4.52 S ummary R eport ing of ot her orders on P aragraph 1( i) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . 4.18 4.53 P aragraph 1( iii) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.21 4.531 Availing ECB f rom a non- rec ogniz ed lender . . . . . . . . . . 4.21 4.532 S ummary R eport ing of ot her orders on P aragraph 1( iii) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23 4.5 P aragraph 1( iv) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 4.51 S ummary R eport ing of orders on P aragraph 1( iv) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.25 xvi

3.1 3.1

3.2 3.

3.4 4.1

4.8

4.8

4.6

4.

4.3

4.3

T abl e of c ont ent s

4.5

4.6

P aragraph 1( v) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . .

4.51 S ummary R eport ing of orders on P aragraph 1( v) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.56 P aragraph 1( vi) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . .

4.561 S ummary R eport ing of orders on P aragraph 1( vi) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.57 P aragraph 1( viii) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . .

4.571 N ot obt aining prior approval of t he R eserve B ank of I ndia f or prepayment of ECB . . . . . . . . . . . . . . . . . . . .

4.572 S ummary R eport ing of ot her orders on P aragraph 1( viii) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . .

4.58 P aragraph 1( ix) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . .

4.581 R ec eipt of ECB proc eeds int o EEFC ac c ount . . . . .

4.5.8.2 Parking a portion of the ECB proceeds in the fixed deposit w it h a ba nk . . . . . . . .......................

4.59 P aragraph 1( xi ) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . .

4.591 S ummary R eport ing of orders on P aragraph 1( xi ) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.510 P aragraph 1( xi i) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . .

4.510 S ummary R eport ing of orders on P aragraph 1( xi i) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

R egulat ion 6( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.61 P aragraph 3( i) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . . .

4.61 S ummary R eport ing of order on P aragraph 3( i) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.62 P aragraph 3( iii) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . .

4.621 S ummary R eport ing of order on P aragraph 3( iii) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.63 P aragraph 3( x) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . .

4.631 S ummary R eport ing of order on P aragraph 3( x) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.6 P aragraph 3( xi ) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . .

4.61 S ummary R eport ing of order on P aragraph 3( xi ) of S c hedule I I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

R egulat ion 6( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.71 S ummary R eport ing of orders on R egulat ion 6( 3) . . . . . . . .

Comparison b et w een FEMA 3/ 20R B dat ed 3- 5- 20 a nd FEMA 3( R ) / 2018R B dat ed 17- 12- 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.8

4.7

. . . . 4.28 . . . . .284 . . . . .294 . . . . .294 . . . . .304 4.30 . . . . .314 . . . . .324 . . . . 4.32 4.3

. . . . 4.35 . . . . .354 . . . . .394 . . . . .394 . . . . .42 . . . . .42 . . . . .43 . . . . .43 . . . . .43 . . . . .43 . . . . .4 . . . . .4 . . . . .4 . . . . .4 . . . . .45 . . . . 4.5

Notification No. FEMA 4/2000-RB dated 03.05.2000. . . . . . . . . . . . . . . . . . . . . . . 5.1 5.1 R egulat ion 4( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 5.1 S ummary R eport ing of orders on R egulat ion 4( ii) . . . . . . . . . . . . . 5.2 xvi i

FEMA Compounding Orders – A Comprehensive Analysis

5.2

R egulat ion 5( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

R aising loan f rom N on- R esident I ndian ( N R I ) promot er shareholder t hrough unsec ured bor row ings and w it hout using the requisite public offer route involving investment in non- c onvert ibl e debe nt ures ( N CD s) . . . . . . . . . . . . . . . .

5.2 R aising loan f rom N on- R esident I ndian ( N R I ) promot er shareholders t hrough bor row ings and w it hout using t he requisite public offer route by issue of non-convertible debe nt ures ( N CD s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.23 R aising loan f rom N R I maj orit y shareholder t hrough borrowings and without using the requisite public offer rout e of issuing of non- c onvert ibl e debe nt ures ( N CD s) . . .

5.24 S ummary R eport ing of ot her orders on R egulat ion 5( 1) . . .

R egulat ion 6( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.31 S ummary R eport ing of orders on R egulat ion 6( 2) . . . . . . .

Comparison- FEMA 4/ 20R B dat ed 3- 5- 20 a nd FEMA 3( R ) / 2 018R B dat ed 17- 12- 2018 . . . . . . . . . . . . . . . . . . . . . .

5.21

5.3 5.4

. . . . . . 5.2

. . . . . . 5.2

. . . . . . 5.4

. . . . . . . .

. . . . . . . .

. . . . . . . .

5.6 5.8 5.8 5.8

. . . . . . 5.9

Notification No. FEMA 5/2000-RB dated 03.05.2000. . . . . . . . . . . . . . . . . . . . . . .

6.1 P aragraph 8( a) of S c hedule 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.1 P ayment of c onsiderat ion t ow ards invest ment in I ndian c ompany by a n N R I t hrough a resident ac c ount . . . . . . . . . . . . . . .

6.2 Comparison be t w een FEMA 5/ 20R B dat ed 3.520 a nd FEMA 5( R ) / 2016R B dat ed 1.4206 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.1 6.1 6.1

Notification No. FEMA 9/2000-RB dated 03.05.2000. . . . . . . . . . . . . . . . . . . . . . .

7.1 R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.1 S ummary R eport ing of orders on R egulat ion 3 . . . . . . . . . . . . . . . .

7.2 Comparison be t w een FEMA 9/ 20R B dat ed 3.520 a nd FEMA 9( R ) / 2015R B dat ed 29.105 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.3

Notification No. FEMA 10/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . .

8.1 R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.1 S ummary R eport ing of orders on R egulat ion 3 . . . . . . . . . . . . . . . .

8.2 R egulat ion 4 r ead w it h P ara 2 of t he S c hedule I . . . . . . . . . . . . . . . . . . . . . .

8.21 S ummary R eport ing of order on R egulat ion 4 r ead w it h P ara 2 of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.3 R egulat ion 7( 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.31 Maint enanc e of f oreign c urrenc y ac c ount s w it h a ba nk out side I ndia af t er ret urn t o I ndia . . . . . . . . . . . . . . . . . . . . . . . . . .

8.4 R egulat ion 7( 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.41 S ummary R eport ing of order on R egulat ion 7( 9) . . . . . . . . . . . . . . xvi ii

7.1 7.1 7.1 7.2 8.1 8.1 8.2

8.5

8.5

8.3

8.3

8.3

8.2

8.5

T abl e of c ont ent s

Comparison be t w een FEMA 10/ FEMA 10( R ) / 2015R B dat ed 21.06

20-

R B dat ed 3.520 a nd . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5

Notification No. FEMA 14/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . . .

9.1 R egulat ion 3, 4 & 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.1.1 Set-off of import services payables against export services rec eivabl es f rom group ent it ies w it hout prior approval f rom R eserve B ank of I ndia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.2 Comparison b et w een FEMA 14/ 20R B dat ed 3.520 a nd FEMA 14( R ) / 2016R B dat ed 2.5016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.1 9.1

9.1 9.3

Notification No. FEMA 19/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . .

10.

R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

S ummary R eport ing of order on R egulat ion 3 . . . . . . . . . . . . . . .

10.2 R egulat ion 15( i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.2 S ummary R eport ing of order on R egulat ion 15( i) . . . . . . . . . . . . .

10.3 R egulat ion 15( iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.3 S ummary R eport ing of orders on R egulat ion 15( iii) . . . . . . . . . . .

10.4 R egulat ion 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.4 S ummary R eport ing of orders on R egulat ion 16 . . . . . . . . . . . . . .

10.5 Comparison be t w een FEMA 19/ 20R B dat ed 3.520 a nd FEMA 120 / 2 04R B dat ed 7.2 04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1

Notification No. FEMA 20/ 2000-RBI dated 03.05.2000 . . . . . . . . . . . . . . . . . . .

1 1.

R egulat ion 2( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.

I ssue of ineligibl e inst rument s . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.2 D elay in rec eipt of a part of t he c onsiderat ion f or t he partly-paid equity shares issued to a non-resident beyond t he presc ribe d t ime limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.3 S ummary R eport ing of ot her orders on R egulat ion 2( ii) . . . . . . . .

1 1.2 R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.2 P ledging of Compulsorily Convert ibl e P ref erenc e S hares by o verseas W OS of t he applic ant t o overseas lender, w it hout t he prior permission of R eserve B ank of I ndia. . . . . . . . 1 1 1.2 U ndert aki ng t ransac t ion on t he st oc k e xc hanges in I ndia through broker without specific permission of the RBI. . . . . . . . 1 11.2.3 Acquisition of the shares of an Indian Company from its resident shareholders on def erred payment ba sis ot herw ise t han t hrough t he permit t ed met hods of payment . . . . . . . . . . . . . 1 1 1.24 S ummary R eport ing of ot her orders on R egulat ion 3 . . . . . . . . . 1 1 1.3 R egulat ion 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.3 R ec ording t he t ransf er of non- repat riabl e shares of N R I s in company’s books without certified form FC-TRS. . . . . . . . . . . . 1

11.1 1 1.6 1 1.6

10.

10.2 10.2 10.2 10.2 10.3 10.3 10.3 10.4

1 1.7 1 1.9 1.0

1 .1 1 1.3

1.4 1.6 1.7 1.7 xi x

FEMA Compounding Orders – A Comprehensive Analysis

1 1.32

1

1

1 1.4

1 R 1

1

1 1

1 1.5

R 1

1 1.6

R 1

1 1.7

R 1

1 1.8

R 1

1 1.9

1 1.

R 1

0

x

1

R R

I ssue of shares of a dormant c ompany under primary and right s issue t o N on- R esident I nvest or c ompany w it hout prior approval of Foreign I nvest ment P romot ion B oard ( FI P B 1.3 Allot ment of shares against t he f unds payabl e by t he applic ant f or asset s t ransf erred by t he invest or on c losure of Liaison Office of the investor in India. . . . . . . . . . . . . . . . .

1.34 R ec eipt of c onsiderat ion t ow ards invest ment by a n I ndian c ompany f rom an N R I t hrough a resident ac c ount . . . . . . . . . .

1.35 S ummary R eport ing of ot her orders on R egulat ion 4 . . . . . . . egulat ion 5( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.4 U ndert aki ng t he ac t ivit ies of mut ual f und dist ribut ion and ref erral servic es even af t er t he applic ant be c ame a f oreign ow ned c ompany. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.42 N on- adherenc e t o t he c ondit ions w hic h w ere st ipulat ed f or rec eiving f oreign invest ment s and f ailure t o br ing t he shareholding in line w it h t he FD I P olic y w it hin t he t ime period given by F oreign I nvest ment P romot ion B oard ( FI P B ) , M inist ry of Financ e, G overnment of I ndia. . . . . . . . .

1.43 Allot ment of shares t o t he non- resident invest or under w rong c at egory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.4 S ummary R eport ing of ot her orders on R egulat ion 5( 1) . . . . . egulat ion 5( 2) read w it h R egulat ion 5( 3) . . . . . . . . . . . . . . . . . . . . . .

1.5 S ummary R eport ing of orders on R egulat ion 5( 2) read w it h R egulat ion 5( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . egulat ion 5( 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.6 S ummary R eport ing of orders on R egulat ion 5( 9) . . . . . . . . . egulat ion 5( 9) read w it h P aragraph 4 of S c hedule 9 . . . . . . . . . . ......

1.7 S ummary R eport ing of orders on R egulat ion 5( 9) read w it h P aragraph 4 of S c hedule 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . egulat ion 7( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.8 S ummary R eport ing of orders on R egulat ion 7( 1) . . . . . . . . . egulat ion 7( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.9 I ssuanc e of Opt ionally Convert ibl e P ref erenc e S hares and R edeemabl e P ref erenc e S hares, upon a malgamat ion of t w o I ndian c ompanies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . egulat ion 8( 2) [ f rom 1 1.0625 t o 23.01 17] & Erst w hile egulat ion 8( 3) [ f rom 24.10 t o 10.625] . . . . . . . . . . . . . . . .

1.0 S ummary R eport ing of orders on R egulat ion 8( 2) ( f rom 1 1.06 .2015 t o 23.017) & R egulat ion 8( 3) ( f rom 24.10 t o 10.625) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

) . 1 1.20

. . 1 1.2 . . 1 .231 . . 1 .241 . . 1 .31

. . 1 1.3

. . 1 1.3 . . 1 .361 . . 1 .381 . . 1 .391 . . 1 .401 . . 1 .401 . . 1 .41 1 1.4 . . 1 . . 1 . . 1 . . 1

. . 1 1.4

1.4

1.43

1.42

1.4

. . 1 1.46

. . 1 1.46

T abl e of c ont ent s

1 1 .1 1

1 1.

2

1 1.

3

1 1.

4

1 1.

5

1 1.

6

1 1.

7

1 1.

1 1.

9

1 1.2

0

8

1 1.2

1

R egulat ion 9( 1) read w it h P ara 3( b) of S c hedule 1 . . . . . . . . . . . . . . . .

1 .1 1.

S ummary R eport ing of orders on R egulat ion 9( 1) read w it h P ara 3( b) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

R egulat ion 9( 2) ( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.2 S ummary R eport ing of orders on R egulat ion 9( 2) ( ii) . . . . . . .

R egulat ion 10 ( A) ( a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.3 S ummary R eport ing of orders on R egulat ion 10( A) ( a) . . . . . .

R egulat ion 10 A( b) ( i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.4 D elay in report ing t he t ransf er of shares by R esident t o N on- R esident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.42 S ummary R eport ing of ot her orders on R egulat ion 10A ( b) ( i) R egulat ion 10 A( b) ( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.15.1 Recording in the books, the transfer of equity shares from resident individual t o non- resident w it hout G overnment approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.52 S ummary R eport ing of ot her orders on R egulat ion 10A ( b) ( ii) R egulat ion 10A ( b) ( iii) [ As it read be f ore 04.1 1.20 1] . . . . . . . . . . . . .

1 1.6 T ransf er of shares of an I ndian c ompany by a person resident in I ndia t o a person resident out side I ndia w it hout filing the necessary declaration in Form FC-TRS with the Aut horiz ed D ealer ( AD ) ba nk. . . . . . . . . . . . . . . . . . . . . . . . .

R egulat ion 10A ( b) ( v) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.7 S ummary R eport ing of orders on R egulat ion 10A ( b) ( v) . . . . .

R egulat ion 10B ( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.8 D elay in subm ission of f orm FC- T R S on t ransf er of shares f rom non- resident t o resident . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.82 S ummary R eport ing of ot her orders on R egulat ion 10B ( 2) . .

R egulat ion 14( 6) ( i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.9 S ummary R eport ing of orders on R egulat ion 14( 6) ( i) . . . . . .

R egulat ion 14( 6) ( i) and R egulat ion 14( 6) ( ii) ( a) . . . . . . . . . . . . . . . . . .

1 1.20 Exc eeding t he sec t oral c ap on f oreign invest ment as applic abl e t o t he sec t or w hile maki ng indirec t f oreign invest ment w it hout t he prior approval of t he G overnment / R eserve B ank of I ndia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.20 S ummary R eport ing of orders on R egulat ion 14( 6) ( ii) ( a) . . . .

R egulat ion 14( 6) ( ii) ( d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.2 N on- c omplianc e w it h c ondit ions applic abl e t o dow nst ream invest ment s by I ndian c ompanies . . . . . . . . . . . . . . . . . . . . . .

1 1.2 S ummary R eport ing of orders on R egulat ion 14( 6) ( ii) ( d) . . . .

. . 1 1.46 . . . . . . . . . . . .

1 .471 1 1.48 1 1.49 1 1.50 1 1.50 1 1.50

. . 1 .51 . . 1 .531 . . 1 .571

. . 1 .571 . . 1 .601 . . 1 .601

. . 1 . . 1 . . 1 . . 1

1.60 1.63 1.63

. . 1 . . 1 . . 1 . . 1 . . 1

1.63 1.63 1.65 1.65 1.6 1.67

. . 1 .671 . . 1 .701 . . 1 .71 . . 1 .721 . . 1 .741

xi

FEMA Compounding Orders – A Comprehensive Analysis

1 1.2

2

1 1.2

3

1 1.2

4

1 1.2

5

1 1.2

6

1 1.2

7

1 1.2

8

xi

i

P aragraph 2 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.22.1 Receiving foreign investment in brownfield pharmaceutical sec t or at a t ime w hen t he sec t or w as under 10% G overnment R out e w it hout obt aining f resh approval f rom Foreign I nvest ment P romot ion B oard ( FI P B ) , G overnment of I ndia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.2 S ummary R eport ing of ot her orders on P aragraph 2 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 2 S ub P ara 4( v) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . .

1 1.23 S ummary R eport ing of orders on P aragraph 2 S ub P ara 4( v) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 2( 1) of S c hedule 1 r ead w it h R egulat ion 8( 1) ( c ) . . . . . . . .

1 1.24 P roc urement of f oreign invest ment in t erms of Employee S t oc k O pt ions ( ES OP s) grant ed t o non- resident employees, w it hout prior FI P B approval . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.24 S ummary R eport ing of ot her orders on P aragraph 2( 1) of S c hedule 1 r ead w it h R egulat ion 8( 1) ( c ) . . . . . . . . . . . . . . . .

P aragraph 3 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.25 I ssuanc e of part ly paid shares t o a resident invest or having indirec t f oreign invest ment , w it hout t he prior approval of t he FI P B , G overnment of I ndia. . . . . . . . . . . . . . . . . . . . . . .

11.25.2 (a) Issue of equity shares in lieu of technology transfer t o P R OI , ( b) R edeeming of pref erenc e shares issued t o a PROI prior to lock in period of five years without obtaining prior approval of t he FI P B , ( c ) T aki ng on rec ord t ransf er of shares by w ay of sw ap be t w een non- resident invest ors and resident invest ors w it hout obt aining prior approval of FI P B 11.25.3 Failure to obtain specific and prior Government approval f or issue of shares t o person resident out side I ndia against pre- operat ive/ pre- inc orporat ion expe nses. . . . . . . . . . . . . . .

1 1.254 S ummary R eport ing of ot her orders on P aragraph 3 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P ara 3 of S c hedule 1 r ead w it h P ara 4 of S c hedule 9 . . . . . . . . . . . . .

1 1.26 S ummary R eport ing of ot her order on P aragraph 3 of S c hedule 1 r ead w it h P ara 4 of S c hedule 9 . . . . . . . . . . . . . .

P aragraph 5 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.27 S ummary R eport ing of ot her orders on P aragraph 5 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 5 of A.P ( D I R S eries) Circ ular N o. 20 da t ed 14.207 read w it h P ara 8 of S c h 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . 1 1.74

. . . 1 1.75 . . . 1 .71 . . . 1 .781 . . . 1 .781 . . . 1 .791

. . . 1 1.80 . . . 1 .81 . . . 1 .821

. . . 1 1.82

. . . 1 1.84

. . . 1 1.86 . . . 1 .81 . . . 1 .931 . . . 1 .931 . . . 1 .931 . . . 1 1.94 1 1.94

T abl e of c ont ent s

1 1.2

9

1 1.3

0

1 1.3

1

1 1.3

2

1 1.3

3

1 1.3

4

1 1.3

5

1 1.3

6

1 1.3

1 1.3

8

7

P aragraph 8 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 .291 Allot ment of shares against remit t anc e rec eived in t he ac c ount of a t hird part y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.29 D elay in ref und of inw ard remit t anc e rec eived t ow ards subs c ript ion t o shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.29.3 Non-issuance of equity instruments and non-refund of c onsiderat ion t o f oreign invest or w it hin 180 da ys of t he rec eipt of t he inw ard remit t anc e. . . . . . . . . . . . . . . . . . . . . . .

11.29.4 Non-issuance of equity instruments and non-refund of c onsiderat ion t o f oreign invest or w it hin 180 da ys of t he rec eipt of t he inw ard remit t anc e. . . . . . . . . . . . . . . . . . . . . . .

1 1.295 S ummary R eport ing of ot her orders on P aragraph 8 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 9( 1) ( A) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.30 S ummary R eport ing of orders on P aragraph 9( 1) ( A) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 9( 1) ( B ) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.3 S ummary R eport ing of ot her orders on P aragraph 9( 1) ( B ) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 9( 2) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.32 S ummary R eport ing of orders on P aragraph 9 ( 2 ) of S c hedule 1 P aragraph 10 of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.3 S ummary R eport ing of orders on P aragraph 1 0 of S c hedule 1 .

P aragraph 10 ( iv) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.34 S ummary R eport ing of orders on P aragraph 10 ( iv) of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph F.8.1 of Annex B of sc hedule 1 . . . . . . . . . . . . . . . . . . . . .

1 1.35 S ummary R eport ing of order on P aragraph F.8.1 of Annex B of sc hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph F.8.2( 1) ( iii) of Annex B of S c hedule 1 . . . . . . . . . . . . . . . .

1 1.36 S ummary R eport ing of orders on P aragraph F.8.2( 1) ( iii) of Annex B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 15 .12 ( d) of Annex B of S c hedule 1 . . . . . . . . . . . . . . . . .

1 1.37 S ummary R eport ing of orders on P aragraph 15.2 ( d) of Annex B of S c hedule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P aragraph 3 o f S c hedule 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1.38 P ayment of c onsiderat ion t ow ards invest ment in I ndian c ompany by a n N R I t hrough a resident ac c ount . . . . . . . . . . .

1 1.382 S ummary R eport ing of ot her orders on P aragraph 3 of S c hedule 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . 1 1.97 . . . 1 1.97 . . . 1 1.9

. . 1 1.0

. . 1 1.02 . . 1 .104 1 1.5 . . 1 .15 . . 1 .2631 . . . . . . . . . . . .

1 1.264 1 1.37 1 1.374 1 1.376

1 .371 1 1.37

. . 1 .371 . . 1 .3781 . . 1 .3781 . . 1 .3781 . . 1 .3781 . . 1 .3791 . . 1 .3791 . . 1 .3791 . . 1 1.379 . . 1 1.38

xi

ii

FEMA Compounding Orders – A Comprehensive Analysis

1 1.3

9

1 1.4

0

P aragraph 7( i) of S c hedule 9 . .

1 .391 S ummary R eport ing of Comparison be t w een FEMA 20/ FEMA 20( R ) / 2017R B dat ed 7-

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.38 orders on P aragraph 7( i) of S c hedule 9 1 .381 20R B dat ed 3- 5- 20 a nd 1 1- 2017 . . . . . . . . . . . . . . . . . . . . . . . . . 1 .3821

Notification No. FEMA 20(R)/2017-RB dated 07.11.2017 . . . . . . . . . . . . . . . . . .

12.

R egulat ion 13 .1( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.

S ummary R eport ing of order on R egulat ion 13.( 1) . . . . . . . . . . .

12.

R egulat ion 13 .1( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.

S ummary R eport ing of orders on R egulat ion 13.( 2) . . . . . . . . . .

12.3 R egulat ion 13 .1( 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.3 D elay in subm ission of f orm FC- T R S on t ransf er of shares in an I ndian c ompany. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.4 R egulat ion 16 B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.4 S ummary R eport ing of order on R egulat ion 16B . . . . . . . . . . . . .

12.5 P aragraph 2( 2 ) of S c hedule I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.5 S ummary R eport ing of order on P aragraph 2( 2) of S c hedule I . . .

12.1

Notification No. FEMA 21/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . .

13.

R egulat ion 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.1.1 Acquisition of immovable property in India by Sri Lankan Cit iz en w it hout R B I permission . . . . . . . . . . . . . . . . . . . . . . . . . .

13.2 R egulat ion 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.2.1 Acquisition of immovable property in India without obt aining prior permission of t he R eserve B ank of I ndia . . . . . . .

13.2 N ot obt ained prior permission f rom R eserve B ank of I ndia f or t ransf er by w ay of sale of immovabl e propert y in I ndia . . . . .

13.

Comparison b et w een FEMA 21/ 20R B dat ed 3- 5- 20 a nd FEMA 21( R ) / 2018R B dat ed 26 - 3- 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.1

Notification No. FEMA 22/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . .

14.

R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.

S ummary R eport ing of order on R egulat ion 3 . . . . . . . . . . . . . . .

14.2 R egulat ion 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.2 T ransf er of f unds int er- se be t w een proj ec t s and t o br anc h office of the applicant without obtaining specific prior approval of t he R eserve B ank . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.2 S ummary R eport ing of ot her orders on R egulat ion 5 . . . . . . . . . .

14.3 R egulat ion 6( i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3.1 Transfer of assets by a Branch Office . . . . . . . . . . . . . . . . . . . . . .

14.32 Carrying on ac t ivit ies ot her t han permit t ed ac t ivit ies by Branch Office in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3 S ummary R eport ing of ot her order on R egulat ion 6( i) . . . . . . . . 14.

14.1

xi

v

12.

12.

12.

12.

12.3 12.3 12.4 12.4 12.5 12.5 13.

13.

13.

13.4 13.6 13.7 14.

14.2 14.2

14.3 14.

14.7

14.9

14.7

1

T abl e of c ont ent s

14.

14.5

14.

R egulat ion 6( ii) . . . . . . . . . . . . .

S ummary R eport ing of Comparison be t w een FEMA 2/ FEMA 2( R ) / 2016R B dat ed 31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 order on R egulat ion 6( ii) . . . . . . . . . . . . 4.1 20R B dat ed 3- 5- 20 a nd - 3- 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2

1 1

Notification No. FEMA 23/ 2000-RB dated 03.05.2000 . . . . . . . . . . . . . . . . . . . .

15.

R egulat ion 3( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.

S ummary R eport ing of order on R egulat ion 3( 3) . . . . . . . . . . . . .

15.2 Comparison b et w een FEMA 23/ 20R B dat ed 3- 5- 20 a nd FEMA 23( R ) / 2015R B dat ed 12 - 1- 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.1

Notification No. FEMA 24/2000-RB dated 03.05.2000. . . . . . . . . . . . . . . . . . . . .

16.

R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.

S ummary R eport ing of orders on R egulat ion 3 . . . . . . . . . . . . . . .

16.2 Comparison be t w een FEMA 24/ 20R B dat ed 3- 5- 20 a nd FEMA 20( R ) / 2017R B dat ed 7- 1 1- 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.1

Notification No. FEMA 120/2004-RB dated 07.07.2004. . . . . . . . . . . . . . . . . . . .

17.

R egulat ion 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.

T ransf er of sec urit ies held in an overseas ent it y by a resident I ndian w hic h t he applic ant w as not permit t ed t o acquire or hold in the first place. . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2 T ransf er of sec urit ies held in an overseas ent it y by a resident I ndian w hic h t he applic ant w as not permit t ed t o acquire or hold in the first place. . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2 R egulat ion 5( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2 Overseas D irec t I nvest ment by r esident individuals at a t ime w hen t he same w as not permit t ed under t hen FEMA regulat ions by w ay of sw ap of shares. . . . . . . . . . . . . . . . . . . . . . .

17.2 S w ap of shares by a resident individuals of shares held under Overseas D irec t I nvest ment w it h shares of anot her f oreign c ompany w it hout prior approval of t he R B I . . . . . . . . . . 17.

17.23 Overseas D irec t I nvest ment by a resident individual at a t ime w hen t he same w as not permit t ed under t hen FEMA regulat ions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.3 17.24 Overseas D irec t I nvest ment ( OD I ) by a resident individual at a t ime w hen t he same w as not permit t ed under t hen FEMA regulat ions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4 17.25 S ummary R eport ing of ot her orders on R egulat ion 5( 1) . . . . . . . 17.6 17.3 R egulat ion 5( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.20 17.3 Maki ng overseas direc t invest ment in an ent it y ( indirec t ly S t ep D ow n S ubs idiary) engaged in real est at e bus iness. . . . . . . . 17.2

15.

15.

15.2 16.

16.

16.2 17.1 17.5

17.6

17.

17.8

17.9

1

xv

FEMA Compounding Orders – A Comprehensive Analysis

17.4

17.5

17.6

17.

17.8

17.9 17.0 xvi

R egulat ion 6( 2) ( i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2 17.4.1 Making total financial commitment in excess of the presc ribe d perc ent age of net - w ort h . . . . . . . . . . . . . . . . . . . . . . . 17.2 17.42 Maki ng overseas invest ment in exc ess of 40% of net w ort h. . . 17.23 17.43 S ummary R eport ing of ot her orders on R egulat ion 6( 2) ( i) . . . . . 17.24 R egulat ion 6( 2) ( i) ( g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.25 17.5.1 Issuance of SBLC on behalf of first level step down subs idiary w it hout prior permission f rom R B I . . . . . . . . . . . . . . 17.25 17.52 S ummary R eport ing of ot her orders on R egulat ion 6( 2) ( i) ( g) . . . 17.26 R egulat ion 6( 2) ( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.26 17.6 U ndert aki ng f oreign direc t invest ment ( FD I ) t hrough t he overseas direc t invest ment ( OD I ) rout e [ R ound t ripping of invest ment ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.26 17.62 U ndert aki ng f oreign direc t invest ment ( FD I ) t hrough t he overseas direc t invest ment ( OD I ) rout e [ R ound t ripping of invest ment ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.28 17.63 I nvest ment made in W OS out side I ndia f or raising loans and maki ng invest ment in I ndia . . . . . . . . . . . . . . . . . . . . . . . . . . 17.30 17.6.4 Investment as FDI after ODI not considered as bonafide activity 17.32 17.6.5 Investment as FDI after ODI not considered as bonafide activity 17.3 17.6 U t iliz at ion of a port ion of t he amount remit t ed abr oad int o an esc row ac c ount f or providing loan t o ot her W OS out side I ndia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.35 17.6 U ndert aki ng Foreign D irec t I nvest ment ( FD I ) under Overseas D irec t I nvest ment ( OD I ) rout e . . . . . . . . . . . . . . . . . . . 17.36 17.68 N on- ut ilisat ion of f unds remit t ed f or t he purpose of invest ment in proposed J V c oupled w it h non- repat riat ion of t he f unds ba c k t o I ndia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.38 17.69 S ummary R eport ing of ot her orders on R egulat ion 6( 2) ( ii) . . . . 17.40 R egulat ion 6( 2) ( iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.40 17.

Mak ing out w ard remit t anc es t o t he overseas ent it y under t he aut omat ic rout e w hen t he same w as permit t ed only w it h prior approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.40 17.2 S ummary R eport ing of ot her orders on R egulat ion 6( 2) ( iii) . . . . 17.42 R egulat ion 6( 2) ( iv) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.43 17.8 Mak ing of Overseas D irec t I nvest ment in W OS by w ay of S t andby L et t er of Credit ( S B L C) w it hout subm it t ing Annual P erf ormanc e R eport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.43 R egulat ion 6( 2) ( v) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.45 17.9 S ummary R eport ing of orders on R egulat ion 6( 2) ( v) . . . . . . . . . 17.45 R egulat ion 6( 2) ( vi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.46

T abl e of c ont ent s

17.0

17.

17.2

1

17.3

17.

17.6

17.5

17.4

D elayed report ing f or Overseas D irec t I nvest ment t o R B I in Form OD I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.46 17.02 S ubm ission of Form OD A ( viz . e rst w hile Form OD I ) t o AD Bank but not filed onward by AD Bank to RBI. . . . . . . . . . . 17.48 17.10.3 Non-filing of Form ODI for making investments as quasi share c apit al in t he overseas subs idiary . . . . . . . . . . . . . . . . . . . . 17.49 17.04 D elay in subm ission of Form OD I - P art I be yond t he st ipulat ed t ime period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.50 17.05 S ummary R eport ing of ot her orders on R egulat ion 6( 2) ( vi) . . . . 17.52 R egulat ion 6( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.60 17.11.1 Offering Standby Letter of Credit (SBLC) to overseas lending bank on behalf of first level step down subsidiary (SDS) 17.60 17.

1.2 P ayment made t o vendors on be half of overseas J V and rec orded as a loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.6 17.

1.3 Funding of overseas invest ment t hrough a mode ot her t han t he permit t ed modes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.62 17.

1.4 S ummary R eport ing of ot her orders on R egulat ion 6( 3) . . . . . . . 17.64 R egulat ion 6( 3) ( ii) ( c ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.65 17.2 I ssuanc e of open ended c orporat e and personal guarant ees on b ehalf of t he overseas ent it y . . . . . . . . . . . . . . . . . . . . . . . . . . 17.65 17.2 S ummary R eport ing of orders on R egulat ion 6( 3) ( ii) ( c ) . . . . . . . 17.6 R egulat ion 6( 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.6 17.3 I ssuanc e of S t andby L et t er of Credit ( S B L C) by t he applicant on behalf of its first level step down subsidiary ( S D S ) overseas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.6 17.32 Ext ending loan t o st ep dow n subs idiary t hrough overseas branch office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.68 17.3 S ummary R eport ing of orders on R egulat ion 6( 4) (Corresponding Regulation 6(5) of Notification No. FEMA 19/ 20R B dat ed 03.52) . . . . . . . . . . . . . . . . . . . . . . . . . . 17.0 R egulat ion 6( 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2 17.4 S ummary R eport ing of orders on R egulat ion 6( 6) . . . . . . . . . . . 17.2 R egulat ion 6 and R egulat ion 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.3 17.5 S ummary R eport ing of orders on R egulat ion 6 a nd R egulat ion 9 17.3 R egulat ion 7 ( 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4 17.6 U ndert aki ng overseas invest ment w it hout earning a net profit during preceding three financial years from financial servic es ac t ivit ies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4 17.62 S ummary R eport ing of orders on R egulat ion 7( 1) . . . . . . . . . . . 17.5 R egulat ion 1 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.6 17.

S ummary R eport ing of orders on R egulat ion 1 1 . . . . . . . . . . . . . 17.6 xvi

i

FEMA Compounding Orders – A Comprehensive Analysis

17.8

R egulat ion 12( 1) & R egulat ion 12( 3) . . . . . . . . . . . . . . . . . . . . . . . . .

Capit aliz at ion of sof t w are expor t s made t o W OS w it hout submission of SOFTEX Form . . . . . . . . . . . . . . . . . . . . . . . .

R egulat ion 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.9 S ummary R eport ing of orders on R egulat ion 13 . . . . . . . . . .

R egulat ion 15 ( i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.20 D elayed ret urn of share applic at ion money be yond 180 days f rom t he dat e of remit t anc e. . . . . . . . . . . . . . . . . . . . . .

17.20.2 Failure to submit share certificates in time. . . . . . . . . . . . . . .

17.203 S ummary R eport ing of ot her orders on R egulat ion 15( i) . . .

R egulat ion 15( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2 S ummary R eport ing of orders on R egulat ion 15( ii) . . . . . . .

R egulat ion 15( iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2 D elayed subm ission of Annual P erf ormanc e R eport s ( AP R ) be yond t he st ipulat ed t ime period. . . . . . . . . . . . . . . .

17.2 D elayed subm ission/ non subm ission of AP R s. . . . . . . . . . . .

17.23 S ummary R eport ing of ot her orders on R egulat ion 15( iii) . .

R egulat ion 15( iv) ( As it read be f ore 15.032 1 1) . . . . . . . . . . . . . . . .

17.23 S ummary R eport ing of orders on R egulat ion 15( iv) . . . . . . .

R egulat ion 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.24 R ec eipt of disinvest ment proc eeds in t he f orm of c ash and ot her physic al asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.24 S ummary R eport ing of ot her orders on R egulat ion 16 . . . . .

R egulat ion 16 ( 1) ( iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.25 Amount repat riat ed on disinvest ment is less t han t he f air value of t he J V under aut omat ic rout e . . . . . . . . . . . . . . . . . .

17.25 S ummary R eport ing of ot her orders on R egulat ion 16( 1) ( iii) R egulat ion 16 ( 1) ( iv) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.26 S ummary R eport ing of orders on R egulat ion 16( 1) ( iv) . . . .

R egulat ion 16 ( 1) ( v) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.2 D isinvest ment of st ake in f rom overseas ent it y w it hout be ing in operat ion f or one f ull year. . . . . . . . . . . . . . . . . . . . .

17.2 D isinvest ment f rom overseas ent it y w it hout subm it t ing Form AP R s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.23 S ummary R eport ing of ot her orders on R egulat ion 16( 1) ( v) R egulat ion 16 ( 1A ) ( i) ( c ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.28 S ummary R eport ing of orders on R egulat ion 16( 1A ) ( i) ( c ) . .

R egulat ion 16 ( 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.29 N on- repat riat ion of disinvest ment proc eeds post liquidation, but taking over the remaining assets and liabi lit ies of t he W OS in t he books of t he applic ant . . . . . . .

17.29 S ummary R eport ing of ot her orders on R egulat ion 16( 2) . . .

17.8

17.9 17.20

17.2 17.2

17.23 17.24

17.25

17.26 17.2

17.28 17.29

xvi

ii

. . . 17. . . . . . . . .

. 7.1 . 17.9 . 17.9 . 17.8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.8 17.83 17.85 17.9 17.9 17.93 . 17.93

. 7.951 . 17.96 17.08 17.08 17.08

. . 7.109 . . 7.1 . . 7.1 . . . . . . . . . .

10

17.

17.

1 1 1 1

17.

13

12

17.

. . 17.

15

. . 7.1 . . 17. . . 17.2 . . 17.2 . . 17.23

16

15

14 17.

. . 7.123 . . 17.25

18

17.30

T abl e of c ont ent s

R egulat ion 16( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

S ummary R eport ing of orders on R egulat ion 16( 3) . . . . . .

R egulat ion 16A ( 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.3 S ummary R eport ing of orders on R egulat ion 16A ( 3) . . . . .

R egulat ion 18A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.32 S ummary R eport ing of orders on R egulat ion 18A . . . . . . .

R egulat ion 19( A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.3 S ummary R eport ing of orders on R egulat ion 19( A) . . . . . .

R egulat ion 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.34.1 Acquisition of shares in overseas entity in lieu of prof essional servic es w it hout prior approval of t he R B I . . .

R egulat ion 20A r.w . S c hedule V . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.35 S ummary R eport ing of orders on R egulat ion 20A r.w .

S c hedule V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

R egulat ion 2( 2) ( ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17.36.1 Delay in filing of annual returns in relation to the issuance of shares t o t he I ndian R esident employees under ES OP P lan by a f oreign parent ent it y. . . . . . . . . . . . . . . . . . . . . . .

17.36

17.35

17.34

17.3

17.32

17.3

17.30

. . . . . . . . . . . . . . . . . . . . . . . . . . .

17.28 17.28 17.28 17.29 17.29 17.29 17.30 17.30 17.30

. . . 7.13 . . . 7.132 . . . 7.13 . . . 7.136

. . . 17.36

Notification No. FEMA 348/ 2015-RB, dated 25.09.2015. . . . . . . . . . . . . . . . . . . 18.1 18.

R egulat ion 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.

18.

S ummary R eport ing of order on R egulat ion 4 . . . . . . . . . . . . . . . 18.2

xi

x

List of abbreviations Sr. No. 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

1 1 .

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

2.

23.

24.

25.

26.

27.

29.

28.

Abbreviation

Full Form

AAC

Annual Activity Certificate

AD

Aut horised D ealer

AG M

Assist ant G eneral Manager

AP R

Annual P erf ormanc e R eport

AR F

Advanc e R emit t anc e Form

C.A .

Compounding Aut horit y

CA

Chart ered Ac c ount ant

CCD s

Compulsorily Convert ibl e D ebe nt ures

CCP S

Compulsorily Convert ib le P ref erenc e S hares

CG M

Chief G eneral Manager

CP A

Certified Public Accountant

D G M

D eput y G eneral Manager

D IP P

D epart ment of I ndust rial P olic y &

D oE/ ED

D irec t orat e of Enf orc ement / Enf orc ement D irec t orat e

P romot ion

ECB

Ext ernal Commerc ial B orrow ing

ECL

Ext ernal Commerc ial L ending

ED P MS

Expor t D at a P roc essing and Monit oring S yst em

EEFC

Exc hange Earner’ s Foreign Currenc y Ac c ount

ES OP

Employee S t oc k O pt ion P lan

FAT F

Financ ial Ac t ion T ask Forc e

FCA

Foreign Currenc y Ac c ount

FCN R Ac c ount

Foreign Currenc y N on R esident Ac c ount

FD I

Foreign D irec t I nvest ment

FED

Foreign Exc hange D epart ment

FEMA

Foreign Exc hange Management Ac t

FER A

Foreign Exc hange R egulat ion Ac t

FI I s

Foreign I nst it ut ional I nvest ors

FI P B

Foreign I nvest ment P romot ion B oard

FI R C

Foreign Inward Remittance Certificate xi

FEMA Compounding Orders – A Comprehensive Analysis

Sr. No. 30.

31.

32.

3.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

4.

45.

46.

47.

48.

49.

50.

51.

52.

53.

54.

5.

56.

57.

58.

59.

60.

61. xi

i

Abbreviation

Full Form

FL A

Foreign L iabi lit ies and Asset s

FP I

Foreign P ort f olio I nvest or

FV CI

Foreign V ent ure Capit al I nvest or

G M

G eneral Manager

I EC

I mport er Expor t er Code

I OS CO

I nt ernat ional Organiz at ion of S ec urit ies Commissions

IP

I ndian P art y

JV

J oint V ent ure

K Y C

K now Y our Cust omer

L L P

L imit ed L iabi lit y P art nership

L O

Liaison Office

L R N

L oan R egist rat ion N umbe r

L R S

L ibe ralised R emit t anc e S c heme

MAM

Minimum Average Mat urit y

MOA

Memorandum of Assoc iat ion

N B FC

N on- B anki ng Financ ial Company

N CD s

N on Convert ibl e D ebe nt ures

N OC

No Objection Certificate

N R

N on R esident

N R E

N on R esident R upee Ac c ount

N R I

N on R esident I ndian

N R O

N on- R esident Ordinary Ac c ount

OCB s

Overseas Corporat e B odies

OCP S

Opt ionally Convert ibl e P ref erenc e S hares

OD I

Overseas D irec t I nvest ment

OI D

Overseas I nvest ment D ivision

P R OI

P erson R esiding Out side I ndia

R B I

R eserve B ank of

I ndia

R D

R egional D irec t or

R FC

R esident Foreign Currenc y Ac c ount

S B I P L R

S t at e B ank of

S B L C

S t and by L

I ndia P rime L ending R at e

et t er of Credit

L ist of abbr

Sr. No. 62.

63.

64.

65.

67.

6.

Abbreviation

eviat ions

Full Form

S D S

S t ep D ow n S ubs idiary

S EB I

S ec urit y Exc hange B oard of I ndia

S EZ s

S pec ial Ec onomic Z one

U IN

Unique Identification Number

W OS

W holly Ow ned S ubs idiary

r. w

read w it h

xi

ii