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GROUP NO:03

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Acknowledgement

W
form.

e would like to express our profound gratitude to our project guide Prof .KAMAL ROHRA , who has so ably guided our research project with his vast fund of knowledge, advice and constant

encouragement, which made us think past the difficulties and lead us to successful completion of the project. We have tried to cover all the aspects of the project & every care has been taken to make the project faultless. We have tried to write the project in our words as far as possible and simplified all the concepts by presenting it in a different

Well be looking forward in future for such type of project. We are eagerly waiting for fruitful comments & constructive suggestions.

Thank you
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SR.NO

TOPICS

PAGE NO 5 6 8 9 10 11

1. 2. 3. 4. 5. 6. 7. 8.

INTRODUCTION SWITCH FROM FERA NEED FOR ITS MANAGEMENT MAIN FEATURES OBJECTIVES DEFINITION UNDER ACT

TYPES OF FOREIGN EXCHANGE TRANSACTION 13 SALIENT FEATURES OF FROM MASTER CIRCULR 18 ON IMPORT OF GOODS AND SERVICES SALIENT FEATURES OF FROM MASTER CIRCULR 21 ON EXPORT OF GOODS AND SERVICES

9.

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10 11. 12.

ARTICLES ON FEMA REGULATIONS 2000 CONCLUSION REFERENCE

24 28 29

INTRODUCTION

The Foreign Exchange Management Act (FEMA) was an act passed in the winter session of Parliament in 1999 which replaced Foreign Exchange Regulation Act. This act seeks to make offenses related to foreign exchange civil offenses. It extends to the whole of India. FEMA, which replaced Foreign Exchange Regulation Act (FERA), had become the need of the hour since FERA had become incompatible with the pro-liberalisation policies of the Government of India. FEMA has brought a new management
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regime of Foreign Exchange consistent with the emerging framework of the World Trade Organisation (WTO). Unlike other laws where everything is permitted unless specifically prohibited, under this act everything was prohibited unless specifically permitted. Hence the tenor and tone of the Act was very drastic. It required imprisonment even for minor offences. Under FERA a person was presumed guilty unless he proved himself innocent, whereas under other laws a person is presumed innocent unless he is proven guilty.

SWITCH FROM FERA

In India, all transactions that include foreign exchange were regulated by Foreign Exchange Regulations Act (FERA), 1973. The main objective of FERA was conservation and proper utilisation of the foreign exchange resources of the country. It also sought to control certain aspects of the conduct of business outside the country by Indian companies and in India by foreign companies. It was a criminal legislation which meant that its violation would lead to imprisonment
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and payment of heavy fine. It had many restrictive clauses which deterred foreign invest The introduction of Foreign Exchange Regulation Act was done in 1974, a period when India s foreign exchange reserve position wasn t at its best. A new control in place to improve this position was the need of the hour. FERA did not succeed in restricting activities, especially the expansion of TNCs (Transnational Corporations). The concessions made to FERA in 1991-1993 showed that FERA was on the verge of becoming redundant. After the amendment of FERA in 1993, it was decided that the act would become the FEMA. This was done in order to relax the controls on foreign exchange in India, as a result of economic liberalization. FEMA served to make transactions for external trade (exports and imports) easier transactions involving current account for external trade no longer required RBI s permission. The deals in Foreign Exchange were to be managed instead of regulated .

The switch to FEMA shows the change on the part of the government in terms of foreign capital. The Act applies to all branches, offices and agencies outside India, owned or controlled by a person resident in India. FEMA emerged as an investor friendly legislation which is purely a civil legislation in the sense that its violation implies only payment of monetary penalties and fines. However, under it, a person will be liable to civil imprisonment only if he does not pay the prescribed fine within 90 days from the date of notice but that too happens after formalities of show cause notice and personal hearing. FEMA also provides for a two year sunset clause for offences committed under FERA which may be taken as the transition period granted for moving from one 'harsh' law to the other 'industry friendly' legislation.

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NEED FOR ITS MANAGEMENT

The buying and selling of foreign currency and other debt instruments by businesses, individuals and governments happens in the foreign exchange market. Apart from being very competitive, this market is also the largest and most liquid market in the world as well as in India]. It constantly undergoes changes and innovations, which can either be beneficial to a country or expose them to greater risks. The management of foreign exchange market becomes necessary in order to mitigate and avoid the risks. Central banks would work towards an orderly functioning of the transactions which can also develop their foreign exchange market.

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Whether under FERA or FEMA s control, the need for the management of foreign exchange is important. It is necessary to keep adequate amount of foreign exchange reserves, especially when India has to go in for imports of certain goods. By maintaining sufficient reserves, India s foreign exchange policy marked a shift from Import Substitution to Export Promotion.

MAIN FEATURES

- Activities such as payments made to any person outside India or receipts from them, along with the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central government the power to impose the restrictions. - Restrictions are imposed on people living in India who carry out transactions in foreign exchange, foreign security or who own or hold immovable property abroad. - Without general or specific permission of the Reserve Bank of India, FEMA restricts the transactions involving foreign exchange or foreign security and payments from outside the country to India the transactions should be made only through an authorised person.

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- Deals in foreign exchange under the current account by an authorised person can be restricted by the Central Government, based on public interest. - Although selling or drawing of foreign exchange is done through an authorised person, the RBI is empowered by this Act to subject the capital account transactions to a number of restrictions. - People living in India will be permitted to carry out transactions in foreign exchange, foreign security or to own or hold immovable property abroad if the currency, security or property was owned or acquired when he/she was living outside India, or when it was inherited to him/her by someone living outside India. - Exporters are needed to furnish their export details to RBI. To ensure that the transactions are carried out properly, RBI may ask the exporters to comply to its necessary requirements.

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OBJECTIVES

Broadly, the objectives of FEMA are: (i) To facilitate external trade and payments; and (ii) To promote the orderly development and maintenance of foreign exchange market. The Act has assigned an important role to the Reserve Bank of India (RBI) in the administration of FEMA. The rules, regulations and norms pertaining to several sections of the Act are laid down by the Reserve Bank of India, in consultation
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with the Central Government. The Act requires the Central Government to appoint as many officers of the Central Government as Adjudicating Authorities for holding inquiries pertaining to contravention of the Act. There is also a provision for appointing one or more Special Directors (Appeals) to hear appeals against the order of the Adjudicating authorities. The Central Government also establish an Appellate Tribunal for Foreign Exchange to hear appeals against the orders of the Adjudicating Authorities and the Special Director (Appeals). FEMA permits only authorised person to deal in foreign exchange or foreign security. Such an authorised person, under the Act, means authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised by Reserve Bank.

The Act thus prohibits any person who:(a) Deal in or transfer any foreign exchange or foreign security to any person not being an authorized person; (b) Make any payment to or for the credit of any person resident outside India in any manner; (c) Receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner; (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 is resident in India which acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

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DEFINITIONS UNDER ACT

FEMA Contains Definition of Certain Terms which have been used Throughout the ACT Authorized Person: It includes an authorized dealer, money changer, off-shore banking unit or any other person for the time being authorized to deal in foreign exchange, Capital Account Transaction: It means a transaction which alters the assets or liabilities outside India of persons resident in India. It also includes transactions that alter assets or liabilities in India of persons resident outside India. Currency: It is an assortment of currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers cheques, letter of credit, bills of exchange and promissory notes. Currency Notes: It includes cash in the form of coins and bank notes. Current Account Transactions : It means a transaction other than capital account transaction. Export : It simply means exporting of any goods or provision of services from India to any person outside India. Financial Transaction : It means making any payment to, or for the credit of any person, or receiving any payment for, by order or on behalf of any person, or drawing, issuing or negotiating any bill of exchange or promissory note, or transferring any security or acknowledging any debt.
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Foreign Currency : It denotes any currency other than the Indian currency. Foreign Exchange :Money instruments used to make payments between countries. Foreign Security : Any security in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency . It is only applicable where redemption or any form of return such as interest or dividends is payable in Indian currency. Import : It simply defines a process that facilitates bringing of goods or services into India. Indian Currency : Currency expressed in Indian rupee. Person : It includes an individual, a Hindu undivided family, a company, a firm, an association of persons or a body of individuals, whether incorporated or not, every artificial juridical person and any agency, office or branch owned or controlled by such person. Person Resident in India : He is a person who lives a minimum of 182 days in India during the preceding financial year. Repatriate to India : It means bringing into India the realized foreign exchange and selling of such foreign exchange to an authorized person in India. Security : It means shares, stocks, bonds and debentures, Government securities, savings certificates, deposit receipts in respect of deposits of securities and units of the Unit Trust of India or of any mutual fund and includes certificates of title to securities, but does not include bills of exchange or promissory notes other than Government promissory notes or any other instruments which may be notified by the Reserve Bank as security for the purposes of this Act . Service : It means service of any description which is made available to potential users and includes the provision of facilities in all terms. Transfer : It includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
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TYPES OF FOREIGN EXCHANGE TRANSACTIONS

The Act deals with two types of foreign exchange transactions: A) Capital account transactions B) Current account transactions

A) Capital account transactions can be defined as:

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(1) Alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India. In other words, it includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased). For example: - (i) a resident of India acquire an immovable property outside India or acquire shares of a foreign company. This way his/her overseas assets are increased; or (ii) a resident of India borrows from a non-resident through External commercial Borrowings (ECBs). This way he/she has created a liability outside India.

(2) Alters the assets or liabilities in India of persons resident outside the India. In other words, it includes those transactions which are undertaken by a nonresident such that his/her assets or liabilities in India are altered (either increased or decreased). For example, (i) a non-resident acquires immovable property in India or acquires shares of an Indian company or invest in a Wholly Owned Subsidiary or a Joint Venture with a resident of India. This way his/her assets in India are increased; or (ii) a non-resident borrows from Indian housing finance institute for acquiring a house in India. This way he/she has created a liability in India. The Act also contains a list of some of the most common capital account transactions:1. 2. 3. 4. 5. Transfer or issue of any foreign security by a person resident in India; Transfer or issue of any security by a person resident outside India; Transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India; Any borrowing or lending in rupees in whatever form or by whatever name called; Any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India;
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6. 7. 8. 9. 10.

Deposits between persons resident in India and persons resident outside India; Export, import or holding of currency or currency notes; Transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India; Acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India; Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred(i) By a person resident in India and owed to a person resident outside India; or (ii) By a person resident outside India.

The Act has empowered the Reserve Bank of India (RBI) to specify, in consultation with the Central Government, the permissible capital account transactions and the limits upto which foreign exchange may be drawn for these such transactions. But it shall not impose any restriction on the drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business.

Accordingly, the RBI has issued notifications governing capital account transaction. The FEMA Notification No. 1/2000 dated 3-5-2000 contains the list of permissible capital account transactions as well as list of prohibited capital account transactions:

The permitted capital account transactions have been classified into two categories:(1) Capital account transactions by persons resident in India includes, 1. 2. 3. Investment in foreign securities; Foreign currency loans raised in India and abroad; Acquisition and transfer of immovable property outside India;
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4. 5. 6. 7. 8. 9. 10.

Guarantees issued in favour of a person resident outside India; Export, import and holding of currency or currency notes; Loans and overdrafts (borrowings) from a person resident outside India; Maintenance of foreign currency accounts in India and outside India; Taking out the insurance policy from an insurance company outside India; Remittance outside India of capital assets of a person resident in India Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad.

(2) Capital account transactions by non- residents includes, 1. Investment in India such as

(i) Issue of security by a body corporate or an entity in India and investment therein by a non-resident and (ii) Investment by way of contribution to the capital of a firm or a proprietary concern or an association of persons in India; 2. 3. 4. 5. 6. 7. Acquisition and transfer of immovable property in India; Guarantee in favour of, or on behalf of, a person resident in India; Import and export of currency/currency notes into/from India; Deposits between a person resident in India and a person resident outside India; Foreign currency accounts in India of a non-resident; Remittance of the assets in India held by a non-resident

There are generally two types of prohibitions on capital account transactions:1. General Prohibition:- A person shall not undertake or sell or draw foreign exchange to or from an authorized person for any capital account transaction. This prohibition is subjected to the conditions specified by Reserve Bank in its circulars and notifications. For example, Reserve Bank of India has issued an AP (DIR) Circular, wherein a resident individual can draw from an authorized person foreign exchange up to US$ 25,000 per calendar year for a capital account transaction specified in Schedule I to the Notification.

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1.

Special Prohibition:- A non resident person shall not make investment in India in any form, in any company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage:(i) in the business of chit fund, or (ii) as Nidhi Company, or (iii) in agricultural or plantation activities or (iv) in real estate business, or construction of farm houses or (v) in trading in Transferable Development Rights (TDRs).

B) Current account transactions: The Act defines the term 'current account transaction' as a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes: (i) Payments due in connection with 2. 3. 4. 5. Foreign trade, Other current business Services, and Short-term banking and credit facilities in the ordinary course of business;

(ii) Payments due as 1. 2. Interest on loans and Net income from investments,

(iii) Remittances for living expenses of parents, spouse and children residing abroad, and (iv) Expenses in connection with 1. 2. Foreign travel, Education and
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3.

Medical care of parents, spouse and children.

In the above definition, the words without prejudice to the generality of the foregoing such transaction includes imply that even if the transactions listed above may fit into the definition of capital account transactions, such transactions shall be treated current account transactions. For example, resident of India imports goods from outside India on a short term credit (for a period of less than 6 months), he is creating a liability outside India and thus, it can be treated a capital account transaction but, it is specifically included in the above definition as a current account transaction.

As a general rule, any person may sell or draw foreign exchange if such sale or drawal is a current account transaction. Under the Act, Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed. Accordingly, the Central Government has issued the Foreign Exchange Management (Current Account Transaction) Rules, 2000.It contains the list of current account transactions for which drawal of foreign exchange is:1. 2. 3. 4. Totally prohibited; Permitted, subject to the prior approval of concerned Ministry, Central Government; Permitted, subject to prior approval of the Reserve Bank of India; No restrictions or limits are applicable for undertaking the transactions that are not covered by the above rules and the authorized dealers are free to release foreign exchange upon the satisfaction that the transactions will not involve and is not designed for the purpose of, violation of the Act, or any rules, regulations made there under.

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SALIENT FEATURES OF FROM MASTER CIRCULAR ON IMPORT OF GOODS AND SERVICES

Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry .Imports into India are in conformity with the Foreign Trade Policy, Foreign Exchange Management (Current Account Transactions) Rules, 2000, Government of India Notification No. G.S.R.381 (E) dated May 3, 2000, Provisions of Uniform Customs and Practices for Documentary Credits (UCPDC), for LCs, Provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and design. Compliance with the provisions of Income Tax Act, wherever applicable adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Operations & Development). 1. Import Licenses: Excepting for goods included in the negative list requiring licence under the Foreign Trade Policy no Licence is required.
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While opening letters of credit, the For Exchange Control purposes copy of the licence should be called for and special conditions, if any, attached to such licences should be adhered to. Banks preserve the Licence copies for verification by the internal auditors or inspectors.

2.

Obligation of Purchaser of Foreign Exchange: Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an AD bank under Section 10(5) of the Act or to use it for any other purpose for which acquisition of foreign exchange is permissible under the said Act Where foreign exchange acquired has been utilised for import of goods into India, the AD should ensure that the importer furnishes evidence of import viz., Exchange Control copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., and that value of goods are equivalent to the value of remittance. Time Limit for Settlement of Import Payments: (i) Remittances against imports should be completed not later than six months from the date of shipment, except in cases where amounts are withheld towards guarantee of performance, banks may permit settlement of import dues delayed due to disputes, financial difficulties, (ii) Deferred payment arrangements, including suppliers and buyers credit, providing for payments beyond a period of six months from date of shipment up to a period of less than three years, are treated as trade credits for which the procedural guidelines laid down in the Master Circular for External Commercial Borrowings and Trade Credits may be followed.

3.

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(iii) Remittances against import of books may be allowed without restriction as to time limit, (iv) Bank may allow payment of interest on usance bills or overdue interest at maximum of 6 months LIBOR 50 / 125 basis points. 1. Import of Foreign Exchange / Indian Rupees: No person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Importing currency, including cheques, is governed by clause (g) of sub-section (3) of Section 6 of the Foreign Exchange Management Act, 1999. (a) Import of Indian currency and currency notes: Person resident in India who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank notes up to an amount not exceeding Rs.5,000/- per person. Person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank notes other than notes of denominations of above Rs.100 in either case. (b) Import of foreign exchange into India A person may :(i) send into India without limit foreign exchange in any form other than currency notes, bank notes and travelers cheques; (ii) bring into India from any place outside India, without limit foreign exchange (other than unissued notes), which shall be subject to the condition that such person makes, on arrival in India, a declaration to the Custom authorities in Currency Declaration Form (CDF) (shall not be necessary to make such Declaration by such person if aggregate value of the foreign exchange at
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any one time does not exceed USD10,000 and/or the aggregate value of foreign currency does not exceed USD 5,000 ) 2. Remittances against Replacement Imports: Where goods are short-supplied, damaged, short-landed or lost in transit and the Exchange Control copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the original endorsement to the extent of the value of the lost goods may be cancelled by the AD bank and fresh remittance for replacement imports may be permitted without reference to Reserve Bank, provided the insurance claim relating to the lost goods has been settled in favour of the importer and ensure that the consignment being replaced is shipped within the validity period of the license.

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SALIENT FEATURES OF FROM MASTER CIRCULAR ON EXPORT OF GOODS AND SERVICES

1. 2.

The Directorate General of Foreign Trade (DGFT) regulates export trade. AD Banks may conduct export transactions in conformity with the Foreign Trade Policy in vogue and the Rules framed by the Government of India and the Directions issued by Reserve Bank from time to time. Rules notified by the Government of India, Ministry of Finance. Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000 There is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act 1999. Full export value of the goods exported shall be received through an AD
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3. 4. 5.

6.

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Banks in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2000. 7. GR Exemption: Grant of GR waiver export of goods free of cost, for export promotion up to 2 per cent of the annual average Max 5 lakhs (Rs 10 lac for status holders ).Export of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of GR/PP procedure from the Reserve Bank. Participants in international exhibition/trade fair have been granted general permission vide Regulation 7(7) of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 for opening a temporary foreign currency account abroad. Reserve Bank may consider applications in Form EFC from exporters having good track record for opening a foreign currency account with banks in India and outside India. An Indian entity can also open, hold and maintain a foreign currency account with a bank outside India, in the name of its overseas office/branch, by making remittance for the purpose of normal business operations of the said office / branch or representative subject to conditions stipulated in Regulation 7 of Notification No. FEMA 10/2000-RB dated May 3rd, 2000. A unit located in a Special Economic Zone (SEZ) may open, hold and maintain a Foreign Currency Account with an AD Banks in India subject to conditions stipulated in Regulation 6 (A) of Notification No. FEMA 10/2000. A person resident in India may open with, an AD Banks in India, an account in foreign currency called the Exchange Earners Foreign Currency (EEFC) Account, in terms of Regulation 4 of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000. Account maintained only in the form of non-interest bearing current account
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8.

9.

10.

11.

12.

13.

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and no credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held. 14. Eligible credits represent inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder, Payments received in foreign exchange by a unit in Domestic Tariff Area (DTA) for supplying goods to a unit in Special Economic Zone out of its foreign currency account. Setting up Offices Abroad and Acquisition of Immovable Property for Overseas Offices. AD Banks may allow remittances towards initial expenses up to fifteen per cent of the average annual sales/income or turnover during the last two financial years or up to twenty-five per cent of the net worth, whichever is higher and For recurring expenses, remittances up to ten per cent of the average annual sales/income, subject to certain terms conditions and obligations. Remittances also allowed to acquire immovable property outside India for its business and for residential purpose of its staff. Advance Payments against Exports Regulation 16 of FEMA 23 dated May 3, 2000, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall ensure that, shipment of goods is made within one year from the date of receipt, interest, if any, payable on the advance payment does not exceed LIBOR+ 100 basis points, documents covering the shipment are routed through the AD Bank through whom the advance payment is received; In the event of the exporter's inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilised portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one
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15. 16.

17.

18.

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year, without the prior approval of the Reserve Bank. Where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment, the exporter shall require the prior approval of the Reserve Bank. 19. Allowed to purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilising the entire balances held in the exporters EEFC accounts maintained at different branches/banks. GR Approval for Trade Fair: Organisations participating in Trade Fair/Exhibition abroad can take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank of India. Permissible to `gift' unsold goods up to the value of USD 5000 per exporter, per exhibition/trade fair. Exporter shall produce relative Bill of Entry within one month of re-import into India of the unsold items. Sale proceeds of the items sold arerepatriated to India in accordance with the Foreign Exchange Management (Realisation, Repatriation, and Surrenderof Foreign Exchange) Regulations, 2000.

20.

21.

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ARTICLES ON FEMA REGULATIONS,2000

'Adnan can travel abroad, but must deposit 1.5 c Adnan Sami has been sent a show cause notice by the Enforcement Directorate (ED) for declaring that he was an Indian while seeking a Rs 1.5 crore loan from a bank to help him buy eight flats in Mumbai. The Bombay high court on Tuesday allowed Pakistani singer and music director Adnan Sami to travel abroad, provided he submitted sureties of Rs 1.50 crore. The court was hearing an appeal by Sami seeking permission to travel to Dubai, Australia, New Zealand and South Africa to perform at various shows. The Enforcement Directorate (ED) had in December 2010 confiscated Sami's eight
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flats and five parking spaces in the city. As Pakistani nationals are banned from buying properties in India without the permission of the Reserve Bank of India (RBI), Sami acquiring property in Mumbai was an offence under the Foreign Exchange Management Act (FEMA). Sami told the court of Justice B R Gavai that he would return to India and appear before the court conducting the trial. "Make sure he (Sami) complies with the order or else he will have to give company to the people lodged in Arthur Road jail. He can perform for them then," Justice Gavai remarked while granting the permission. The high court accepted the argument of Sami's lawyer Vibhav Krishna that though Sami is a Pakistani, his career has potential only in India and hence he would return. "The organizer of the show, Rajendra Lodhia and his wife Mital Lodhia, will be the two sureties for Sami and would file an affidavit assuring that the singer comes back to India and faces trial," the court was informed. Apart from FEMA, Sami is also facing a case of domestic violence registered against him by his estranged wife, Sabah Galadari. Last week, a sessions court had rejected his plea seeking permission to travel abroad.

ED SERVES NOTICE TO NTR TRUST

November 23, 2011 | TNN HYDERABAD: The Enforcement Directorate has issued notices to NTR Trust and others under Foreign Exchange Management Act (Fema). NTR Trust which receives donations from NRIs is asked to explain whether any of these funds being spent for political purposes. If any part of the funds received by the Trust are diverted to TDP, which is also being run from the same NTR Trust Bhavan, then it amounts to violation of Fema rules. N Sridhar, joint director of Hyderabad ED, confirmed sending notices to the Trust and others. The recepients of such notices have to furnish the relevant documents within 10 days and the ED will examine whether a Fema case can be made out against the parties .
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The ED too was directed by the A P High Court to inquire into the allegations made by YSR Congress legislator Y S Vijayamma against Chandrababu Naidu and his associates. Nara Lokesh, son of TDP chief Chandrababu Naidu too was served with an ED notice to explain the source of funds for his education in foreign varsities. Satyam founder B Ramalinga Raju had allegedly paid Rs 22 crore for Lokesh's study in the US. Ritvik Projects chief C M Ramesh, Sujana Chowdary and others too were served ED notices.

LUCKNOW
Another million Euro fraud, three nabbed November 26, 2010 | TNN LUCKNOW: In a case similar to the Euro fraud in February, Kaiserbagh police have arrested three persons under Foreign Exchange Management Act (FEMA) and fraud for trying to dupe gullible targets and recovered one million Euro bank notables along with a million Euro golden plate and an authority certificate. Interestingly, unlike in the Aliganj case, the Kaiserbagh police have booked the three under FEMA. The three were identified as Ravi Singh , Ankur Srivastava, both residents of Aashiana area and Virendra Tiwari, a resident of Faizabad district. Strangely, Aliganj police had nabbed the accused, who was identified as Vijay Kumar, a resident of Faizabad district, on February 10 this year for fraud after coming to know that since it is a collectors' item, the miscreant can't be booked under FEMA. The investigation officer had filed the chargesheet in the matter on March 9 also this year only for fraud. Meaning hereby that the accused was not booked under FEMA charges. Reason: One million euro notes are basically commemorative notes and are not legal tender. The note was issued to commemorate one currency of Euro for 15 European Union countries at that time. The bank notables were issued in January, 2002. DIG DK Thakur said that a letter has been sent to Reserve Bank of India (RBI) requesting them to throw some light on the bank notable.
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SHO Kaiserbagh, when contacted, said that they have been booked under FEMA as they did not have the right to keep the bank notable. About fraud, the SHO said that they had planned to identify gullible targets and dupe them by selling them one million bank notables at a decent price. The police said that they acted on a tip-off that three persons were sitting near a petrol pump in front of Vidhan Sabha with some foreign currency and were waiting for gullible targets in this regard. A team reached at the spot and nabbed the three persons and recovered one million Euro bank notables, one million Euro golden plate and an illegal authority certificate. The police claimed that the source of the one million Euro bank notable was being traced.

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CONCLUSION

Thus from the above study we conclude that The Foreign Exchange Management Act(FEMA) was an act passed in the winter session of Parliament in 1999 which replaced Foreign Exchange Regulation Act. This act seeks to make offenses related to foreign exchange civil offenses. It extends to the whole of India. FEMA, which replaced Foreign Exchange Regulation Act(FERA), had become the need of the hour since FERA had become incompatible with the pro-liberalisation policies of the Government of India.

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ROLE OF FEMA ACT

REFERENCE

1. e www.deloitte.com/assets/.../FEMA%20alerts/FEMA-04-2010.pdf 2. n.wikipedia.org/wiki/Foreign_Exchange_Management_Act 3. www.rashminsanghvi.com/fera2fema.htm 4. www.netlawman.co.in Acts of Parliament Financial services and tax 5. www.eximguru.com/exim/reserve-bank/fema.aspx

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