Centre yet to notify crucial FEMA amendments

The delay may have implications for foreign exchange violation cases, including those involving Lalit Modi

The Union government has not yet notified the amendments to the Foreign Exchange Management Act (FEMA) that were incorporated into the legislation after President Pranab Mukherjee’s assent in May.

The delay may have implications for the pending cases of foreign exchange violations, including those allegedly involving the former IPL chief, Lalit Modi.

Sources in the Finance Ministry said the authorities were waiting for a financial limit to be fixed in the provisions to bring them into force through a gazette notification.

Cases against Modi Until last year, the Enforcement Directorate was pursuing about 4,500 cases under the FEMA. Sixteen cases are pending against Mr. Modi and other former office-bearers of BCCI-IPL. The probe in 15 of them was completed, and these cases are now at the adjudication stage.

In March, the government proposed amendments to the FEMA and the Prevention of Money Laundering Act (PMLA). The Special Investigation Team on black money had also come up with similar suggestions. After being passed by Parliament, the Finance Act received the President’s assent on May 14. However, as provided in the law itself, the amendments to the FEMA do not come into force automatically.

The Act states that the provisions “shall come into force on such [a] date as the Central government may, by notification, appoint, and different dates may be appointed for different provisions…”

The amendments have been made to Sections 2, 6, 13, 18, 46, and 47 and introduction of Section 37A of the FEMA. An important introduction is that of Section 37A, which empowers an authorised officer to seize assets equivalent in value to the foreign exchange, foreign security or immovable property held abroad in violation of the law.

The comprehensive provision states that within a month, the seizure order has to be submitted to the competent authority, an officer not below the rank of Joint Secretary. The authority will either confirm or set aside the order within the next six months after hearing both sides. If confirmed, the matter will go to the Appellate Tribunal. The amended Section 13 empowers the investigation agency to levy a penalty of up to three times the sum involved in contravention of the law and confiscate property equivalent to the assets created abroad.

The adjudicating authority may recommend prosecution against the accused in fit cases.

Under the same provision, the Enforcement Director may also, after recording reasons, order prosecution by filing a criminal complaint against the guilty person. In case of violation, the guilty can be, in addition to the penalty, punished with imprisonment of up to five years and a fine.

“The guilty person would be liable to face both civil and criminal action under the provision, which makes it very stringent. It can help enforcement agencies make seizures in many cases where earlier the assets in question were found to be located abroad,” a government official said.