Introduction

The Foreign Exchange Management Act, 1999 (FEMA) deals with cross-border investments, foreign exchange transactions and transactions between residents and non-residents. It has come into force from June 1, 2000.

The operation of FEMA is akin to any other commercial law. However as compared to most other commercial laws FEMA is one of the smallest, having only 49 Sections. If guidelines, rules etc. are followed, then the person can undertake most transactions without any approvals. If proposed transactions fall outside the guidelines, one will have to obtain necessary prior approvals. The consequence of any violation is a penalty and if the penalty is not paid within the specified time, then there can be prosecution.

FEMA extends to the whole of India. It also applies to all branches, offices and agencies outside India, which are owned or controlled by a person resident in India, in this respect FEMA can be said to acquire extra-territorial jurisdiction.

It is important to note that RBI/GOI issues various Notifications, Directions, Press Notes, Guidance, etc. from time-to-time to administer FEMA. However, in case of conflict between any of them, the relevant FEMA Notification will prevail.

What FEMA tries to govern?

A Person includes:

1. An individual
2. A Hindu Undivided Family (HUF)
3. A Company
4. A Firm
5. An association of persons or body of individuals, whether incorporated or not
6. Every artificial juridical person not falling in any of the above sub-clauses
7. Any agency, office or branch owned or controlled by such person.