Violated Foreign Exchange laws: on becoming aware of the contravention, disclose it to RBI to save huge penalty of 2 lakhs or 3 times the amount involved in transaction [Compounding Master Circular]

It has been decided to put in place an updated procedure for compounding of contravention/s under FEMA on the basis of observations made over the last few years on the compounding process on a continuous basis and the experience gained in dealing with compounding applications. The objective is rationalization and streamlining of the process and the procedure for compounding and to enhance transparency and effect smooth implementation of the compounding process. The directions contained in the compounding of contravention/s issued vide A.P. (DIR Series) Circular No.31 dated February 1, 2005 are superseded by this circular vide A.P. (DIR Series) Circular No. 56 dated 28th June 2010 and as provided in Master Circular on Compounding of Contraventions under FEMA, 1999 read with Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules).  Further, Operational checkpoints for submission of a compounding application and the related matters are also given.

 

When an application is made for compounding of a contravention, the RBI would examine the nature of contravention in the following manner:
• whether the contravention is technical and/or minor in nature and needs only an administrative cautionary advice;
• whether the contravention is serious and warrants compounding of the contravention; and
• whether the contravention, prima facie, involves money-laundering, national and security concerns involving serious infringements of the regulatory framework. In such a case, RBI may order necessary investigation.

Investigation by Enforcement Directorate (ED)
If RBI finds that it is necessary for further investigation, it may recommend the matter to the Directorate of Enforcement (DoE) for further investigation. Such action may be initiated under FEMA, 1999 by the Enforcement Directorate or the Anti Money Laundering Authority instituted under the Prevention of Money Laundering Act, 2002 or to any other agencies, as RBI may deem fit.

Time Frame for Disposing of Compounding Application
RBI states that applications for compounding will be disposed of in 180 days. If investigation as aforesaid is necessary, compounding will not take place. The application will be returned to the Applicant.

Factors Considered for determining the compounding fee
• The amount of gain or unfair advantage;
• The amount of loss caused to the exchequer;
• The economic benefits accruing to the contravener due to delayed compliance;
• The repetitive nature of contravention by the contravener;
• The conduct of contravener in disclosure of information; and
• Such other matter in the opinion of RBI will be the factors on the basis of which the application will be examined.

Time Frame for Payment of Compounding Fee
The amount payable by the contravener as per the compounding order should be paid within 15 days from the date of the order. If the contravener fails to pay the said amount then it will be deemed that the contravener has never applied for compounding of offence.

Repeated Offences <= 3years
A similar offence within 3 years of the compounding of the earlier offence shall not be compoundable.  Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.

Certificate after Compounding
RBI will issue a certificate to the contravener subject to the conditions of the compounding order after realization of the amount paid as per the compounding order.

Within 12 months of Export of Goods and Software, Realise & Repatriate export Proceeds till 31st March 2011 now with Master Circular

Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation as per A.P. (DIR Series) Circular No.57 dated 29th June 2010

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P.(DIR Series) Circular No.70 dated June 30, 2009 increasing the period of realisation and repatriation to India of the amount representing the full export value of goods or software exported, from six months to twelve months from the date of export, subject to review after one year.

The issue has since been reviewed and it has been decided, in consultation with the Government of India, to extend the above relaxation up to March 31, 2011.

To understand the updated version in this regard: Master Circular on Export of Goods and Services

Money Laundering Amendment 2010 with insertion of explanation along with updated Master Circular

Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Second Amendment Rules, 2010- Obligation of banks as per DBOD. AML. BC. No. 113 /14 .01.001/2009-10 dated 29th June 2010.

In the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005:-

An explanation is added to "suspicious transaction" definition: In rule 2 in sub-rule (1), after clause (g), the following Explanation shall be inserted, namely:-
"Explanation:- Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist act or by a terrorist.

 

Further, in Rule 9, the existing sub-rules (1A,B,C,D) are replaced and some Explanation in added in Rule 10.

For full details, kindly refer the Updated Master Circular – Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002

No surrender of the proportionate export incentives under FTP Export Schemes even if proceeds are not realised within 6/12 months

Export of Goods and Services - Unrealised export bills –Write-off - Surrender of export incentives
Attention of Authorised Dealer Category – I (AD Category –I) banks is invited to A.P. (DIR Series) Circular No. 12 dated September 09, 2000, A.P. (DIR Series) Circular No. 30 dated April 04, 2001, A.P. (DIR Series) Circular No. 61 dated December 14, 2002, A.P. (DIR Series) Circular No. 40 dated December 05, 2003 and A.P. (DIR Series) Circular No. 33 dated February 28, 2007, in terms of which the AD Category –I banks have been permitted to accede to the requests for "write-off" made by the exporters, subject to the conditions, inter alia, that the exporter had to surrender proportionate export incentives, if availed of, in respect of the relative shipments.

 

It has since been announced in the Foreign Trade Policy (FTP) 2009-14 and specified in Para. 2.25.4 of Handbook of Procedures – Vol. I (2009-2014) (extracts annexed), issued by the Department of Commerce, Ministry of Commerce and Industry that realisation of export proceeds shall not be insisted upon, under any of the Export Promotion Schemes under the Foreign Trade Policy (FTP), subject to the following conditions:-
i) the write-off on the basis of merits is allowed by the Reserve Bank or by the AD Category – I banks on behalf of the Reserve Bank, as per the extant guidelines;
ii) the exporter produces a certificate from the Foreign Mission of India concerned, about the fact of non-recovery of export proceeds from the buyer; and
iii) this would not be applicable in self-write-off cases.
The above relaxation is applicable for the exports made with effect from August 27, 2009.

It is clarified that since the Drawback scheme is governed by the provisions of the Customs Act, 1962 and the Rules made there under, the provisions contained in para. 2.25.4 of the Handbook of Procedure – Vol. I. of the Foreign Trade Policy (FTP) (2009-2014) would not be applicable to the Duty Drawback scheme. Therefore, the drawback amount has to be recovered even if the claim is settled by the Export Credit Guarantee Corporation of India Limited (ECGC) or the write –off is allowed by the Reserve Bank.

Accordingly, the AD Category –I banks are advised not to insist on the surrender of the proportionate export incentives, other than under the Duty Drawback scheme, if availed of, by the exporter under any of the Export Promotion Schemes under the FTP 2009-14, subject to the fulfilment of conditions as stated above.

 

Source: A.P. (DIR Series) Circular No.03 dated 22nd July 2010

Takeout Financing: refinancing of domestic Rupee loans with ECB under RBI approval route

As per the extant norms, refinancing of domestic Rupee loans with External Commercial Borrowing (ECB) is not permitted. However, keeping in view the special funding needs of the infrastructure sector, it has been decided to review the ECB policy and put in place a scheme of take-out finance. Accordingly, it has been decided to permit take-out financing arrangement through ECB, under the approval route, for refinancing of Rupee loans availed of from the domestic banks by eligible borrowers in the sea port and airport, roads including bridges and power sectors for the development of new projects, subject to the following conditions:

1. The corporate developing the infrastructure project should have a tripartite agreement with domestic banks and overseas recognized lenders for take-out of the loan within three years of the scheduled Commercial Operation Date (COD). The scheduled date of occurrence of the take-out should be clearly mentioned in the agreement.
2. The loan should have a minimum average maturity period of 7 years.
3. The domestic bank financing the infrastructure project should comply with the extant prudential norms relating to take-out financing.
4. The fee payable to the overseas lender until the take-out shall not exceed 100 bps per annum.
5. On take-out, the residual loan agreed to be taken- out by the overseas lender would be considered as ECB and the loan should be designated in a convertible foreign currency and all extant norms relating to ECB should be complied with, including the reporting arrangements.
6. Domestic banks / Financial Institutions will not be permitted to guarantee the take-out finance and further it will not be allowed to carry any obligation on its balance sheet after the occurrence of the take-out event.

Source: A.P.(DIR Series) Circular No.04 dated 22nd July 2010

Demat Account Suspension for Debit & Credit without PAN - SEBI mandates & enforces strictly now for all electronic shareholdings

Sub: Mandatory requirement of Permanent Account Number (PAN)

1. Please refer to SEBI circular No.MRD/DoP/Cir-05/2007 dated April 27, 2007 making PAN mandatory for all transactions in the securities market.

2. As you are aware, the demat accounts for which PAN details have not been verified are “suspended for debit” until the same is verified with the Depository Participant (DP). However, it has come to our notice that despite follow up, investors are not furnishing the PAN details.

3. In order to ensure better compliance with the Know Your Client (KYC) norms it has been decided that with effect from August 16, 2010 such PAN non-compliant demat accounts shall also be "suspended for credit" other than the credits arising out of automatic corporate actions. It is clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions shall not be allowed into such accounts.

Source: CIR/MRD/DP/ 22 /2010 dated 29th July 2010

Mutual Fund (MF) ASBA mandatory from 1st October 2010 and not from 1st July

Sub: Additional mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as “ASBA”) in Mutual Funds

ASBA is already available for subscription to public  issue & rights issue of equity and now it is extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. The banks which are in SEBI’s list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents (RTA) for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. Also read [SEBI-ASBA] Lets Learn the Concept.

Please refer to circular SEBI / IMD / Cir / No 18 / 198647 / 2010 dated March 15, 2010 regarding additional mode of payments through ASBA in Mutual Funds. The circular indicated that the Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after July 01, 2010.

In partial modification of the above circular, it has been decided that Mutual Funds / AMCs shall provide ASBA facility to investors for all NFOs launched on or after October 1, 2010.

 

Source: Cir / IMD / DF / 6 / 2010 dated 28th July 2010

Lawlabz Group 2nd Year Celebrations this July 2010 with Learnlabz & OnlyThisMuch, the video way, hope you will make it

Lawlabz Biennial Day Xperiments 2010
In our 2 year long journey we have serviced more than 350 clients, 200 company secretary students passed out, 2500 copies of books sold but more importantly we enjoyed all of your support, well wishes & faith.

On this special day, commemorating Law Labz's 2nd anniversary we would like to share our joy with everyone who has made this possible.  We are also taking this opportunity to inaugurate lawlabz.com, an online portal offering corporate legal services in real-time with video based solutions. 

We have created a personalized invite for you here.

• What: Lawlabz, Learnlabz & OnlyThisMuch turns two
• When: 7pm onwards, July 28th 2010 (Wednesday)
• Where: RYA Metro (12, Saravana Mudali Street, Off South Boag Road, T.Nagar)
• Guest of Honour: Mr. K. Pandiarajan, Managing Director Mafoi Randstand
  

Agenda

1. Website & Video Release (by guest of honour)
2. Award Distribution
3. Dinner (8.30 PM onwards)
   

Looking forward to meeting you and hoping for your continued support & motivation.
A.N.S. Vijay on behalf of Lawlabz, Learnlabz & OnlyThisMuch Group

Email & Informal agreement is valid, even an Arbitration can be enforced-Supreme Court on Trimex case - Formalty not required under Contract Act

The Indian Contract Act, 1872: ss.4, 7 – Concluded contract containing arbitration clause - Valid

The  Hon’ble Supreme Court (SC) in a recent judgment in the case of “Trimex International FZE Limited, Dubai vs. Vedanta Aluminium Limited, India” in Re (2010) 3 SCC 1”. It was held that in the absence of signed agreement between the parties, it would be possible to infer from   various documents duly approved and signed by the parties in the form of exchange of emails, letter, telex, telegram and other means of communication. The Hon’ble Supreme Court has accepted the unconditional acceptance through emails and held the same to be a valid contract which satisfies the requirements of Section 4 and 7 of the Contract Act 1872 and further it satisfies Section 2(1)(b), 7 of the Arbitration and Conciliation Act 1996.  In the absence of a signed agreement inference can be from documents approved and signed by the parties in the form of exchange emails, letters, telegrams which come within Section 10 and 2(e) of the Contract Act 1972.

As per Section 4: The communication of a proposal is complete when it becomes to the knowledge of the person to whom it is made.

As per Section 7: In order to convert a proposal into a promise the acceptance must - be absolute and unqualified; and be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

If respondent accepts the offer of petitioner following a very strict time schedule, he cannot escape from the obligations that flowed from such an action -

• Arbitration clause can be inferred from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of tele-communication even in the absence of signed agreement -
• If no inference can be drawn from the facts that the parties intended to be bound only when a formal agreement had been executed, the validity of the agreement would not be affected by its lack of formality -
• On facts, the Commercial Offer carried no clause making the conclusion of the contract incumbent upon the Purchase Order -Therefore, the moment commercial offer was accepted by the respondent, the contract came into existence - Since the contract contained arbitration clause, petitioner made out case for appointment of arbitrator - Arbitration.

Petitioner's case was that on 15.10.2007, it submitted a commercial offer through e-mail for supply of Bauxite to the respondent. After exchange of several e-mails, respondent conveyed acceptance of offer through e-mail on 16.10.2007 confirming the supply of 5 shipments of Bauxite. Dispute arose and petitioner served arbitration notice on the respondent. Respondent rejected the arbitration notice stating that there was no concluded contract between them. Petitioner filed arbitration petition for appointment of arbitrator.

Click here to download the Supreme Court Judgment 2010 on Trimex case.

Thus, Once a contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialed by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initialed. The Court reiterated its stand that one of the main objectives of the Act is to
minimize the supervisory role of the courts. In holding this, the Court observed that if a number of extra requirements such as seals and originals, stamps etc. are added in considering an arbitration agreement, it would amount to increasing the role of courts and not minimizing it. Relying upon UNCITRAL Model Law, the Court concluded it would be improper and undesirable for the courts to add a number of extra formalities not envisaged
by the legislation. The court’s objective should be to achieve the legislative intent.  Accordingly, the Court held in favor of the Petitioner and appointed a former judge to arbitrate the matter.  Thus, no more stamp papers & its execution of contracts just for the purpose of enforceability!!!

Keep contractin…

Website link thru BSE/NSE to download ASBA forms online with UIN for making public issue applications - SEBI

SEBI is taking steps forward to make a public issue process completely online.

1. It has been decided to make ASBA bid-cum application forms available for download and printing, from websites of the Stock Exchanges which provide electronic interface for ASBA facility i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The ASBA forms so downloaded shall have a unique application number and can be used for making ASBA applications in public issues. A sample of the form is enclosed at Annexure A. 

Understand all about ASBA - in public issues, rights issues, by Mutual Funds, by QIB's - an alternate way of investing, SEBI

2. In order that the Stock Exchanges fill up essential details of an issue, the Merchant Banker to the issue shall ensure that the following details are provided to the Stock Exchanges at least 2 days before opening of the public issue:
a. Company Name
b. Type of issue
c. Issue opening date
d. Issue closing date
e. Price/ price band
f. Bid lot
g. Other relevant details
h. Soft copy of prospectus/abridged prospectus
3. The Stock Exchanges shall ensure the following :
a. The details furnished by the Merchant Banker to the issue are duly filled in the ASBA form for a specific public issue, before making the same available on websites.
b. The ASBA form for a specific public issue is made available on the websites of the Stock Exchanges at least one day before opening of the public issue.
c. A unique application number for an issue is generated for every ASBA form downloaded and printed from the websites.  Therefore application made using photocopy of the downloaded form shall not be accepted.
d. Investors have online access to soft copy of the abridged prospectus/prospectus of the public issue.
e. For revisions of bids, investors can take print of a bid revision form.
4. Merchant Bankers and SCSBs are directed to provide a hyperlink to BSE or NSE websites for this facility on their websites.  Links are expected in http://www.nseindia.com/content/ipo/ipo_asba_procedures.htm & http://www.bseindia.com/bookbuilding/asba.asp
5. All intermediaries are directed to comply with the instructions contained in this circular.
6. This circular shall be applicable to all public issues opening on or after July 19, 2010.

Ministry of labour turns accountable & release First Annual Report of Employment - is it a hint for labour law reforms [also contains recent updates]

Ministry of Labour & Employment presents to the People of India

the First Annual Report on Employment

with the objective of generating a healthy public debate on the issue of creating quality employment with distributive justice. We solicit valuable comments and suggestions from the people on major issues highlighted in this Report specially those relating to the employment of youth, women and the disadvantaged groups.

Though the report contains most of old statistics with few recent statistics, it was good effort by the Ministry to consolidate as Ministry is accountable to labour by all means, and it is expected that there will be regular reports released to people atleast on yearly basis.  Few excerpts from the report are under:

There are three important categories of employed persons:
1. Regular Salaried/Wage Employees are those who work in others’ farm or non-farm enterprises (both household and non household) and in turn receive salary or wage on a regular basis. This category includes not only persons getting time wage but also persons receiving piece wage or salary and paid apprentices, both full time and part-time.
2. Casual Wage Labour: A person who is casually engaged in others’ farm or non-farm enterprises (both household and non-household) and, who in return, receives wages according to the terms of the daily or periodic work contract.
3. Self Employed: Persons who operate their own farm or non-farm enterprises or are engaged independently in a profession or trade on their own account or with one or a few partners are deemed to be self-employed. Self-employed persons are further categorised as follows:
a) Own-account Workers: Those self-employed persons who operate their enterprises on their own account or with one or a few partners and who, during the reference period, by and large, run their enterprise without hiring any labour.
b) Employers: Those self-employed persons who work on their own account or with one or a few partners and, who, by and large, run their enterprise by hiring labour.
c) Helpers in household enterprises: Those self-employed persons (mostly family members) who are engaged in their household enterprises, working full or part time and who do not receive any regular salary or wages in return for the work performed. They do not run the household enterprise on their own but assist the related person living in the same household in running the household enterprise

 

Recent Amendments in Labour Laws: Promoting Equity and Welfare

• The Payment of Wages Act, 1936 amended to enhance the wage ceiling for its applicability. It is presently fixed at Rs. 10,000/- per month.
• The Payment of Bonus Act, 1965 amended to enhance the eligibility limit from Rs. 3,500/- per month to Rs. 10,000/- and calculation ceiling from Rs. 2,500 to Rs. 3,500/- per month while making employees employed through contractors on building operations eligible for payment of bonus under the Act.
• The Apprentices Act, 1961 amended, inter alia, to provide for reservation for other Backward Classes.
• The Maternity Benefit Act, 1961 amended to enhance the medical bonus from Rs. 250/- to Rs. 2,500/-and also empowering the Central Government to increase it from time to time before every three years, by way of notification in the Official Gazette, subject to a maximum of Rs. 20,000/-.
• The Employees State Insurance Act, 1948 amended to improve the quality of delivery of benefits under the scheme and also to enable ESI infrastructure to be used to provide health care to workers of the unorganised sector.
• The Payment of Gratuity Act, 1972 amended for raising the ceiling of Gratuity for employees in the private sector to Rs. 10 lakh from Rs. 3.5 lakh.
• The Plantations Labour Act, 1951 amended to provide safety and occupational health care to plantations workers.

 

VISION FOR SKILL DEVELOPMENT IN INDIA

Against the various challenges, a National Skill Development Policy has been formulated in February, 2009 which targets creating 500 million skilled people by 2022 with the following vision: Skill development should harness inclusivity and reduce economic and social divisions among Indian workforce particularly across rural-urban, male-female, organized- unorganized and traditional/ contemporary. Matching the emerging demands for skills across various industries and economic enterprises. Evolving National Vocational Qualification Framework comparable with international standards. Developing standard certification system by recognizing and including quality skills acquired through any informal system of learning. Greater and more active role for workers‟ organizations, industry, civil society, Panchayati Raj Institutions and other professional bodies. Greater reduction of poverty through enhanced earnings of skilled workers.

Download the First Report of Employment (Report to People)

Download FEMA Master Circulars on FDI/ODI, etc...issued by RBI & updated on 1st July of every year 2010 with foreign exchange law of India up to date

 Note: Master Circulars are a one-point reference of instructions issued by the Reserve Bank of India on a particular subject between July-June. These are issued on July 1 every year and automatically expire on June 30 next year. You can access the Master Circulars issued in previous years by using the Archives. For printing of these circulars please use the PDF version.

Foreign Exchange
Jul 01, 2010
	Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities	110 kb
	Master Circular on Acquisition and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals of Non-Indian Origin	97 kb
	Master Circular on Import of Goods and Services	298 kb
	Master Circular on Risk Management and Inter-Bank Dealings	346 kb
	Master Circular on Foreign Investment in India	368 kb
	Master Circular on Memorandum of Instructions governing money changing activities	324 kb
	Master Circular on External Commercial Borrowings and Trade Credits	220 kb
	Master Circular on Export of Goods and Services	351 kb
	Master Circular on Memorandum of Instructions for Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses	217 kb
	Master Circular on Money Transfer Service Scheme	123 kb
	Master Circular on Compounding of Contraventions under FEMA, 1999	65 kb
	Master Circular on Direct Investment by Residents in Joint Venture (JV) /Wholly Owned Subsidiary (WOS) Abroad	362 kb
	Master Circular on Non-Resident Ordinary Rupee (NRO) Account	95 kb
	Master Circular on Remittance Facilities for Non-Resident Indians /Persons of Indian Origin / Foreign Nationals	80 kb
	Master Circular on Miscellaneous Remittances from India – Facilities for Residents	266 kb

  

Source: Click here to download updated RBI Master Circular