In India, all transactions that embody exchange were Foreign Exchange Regulation Act (FERA), 1973. The most objective of FERA was conservation of the exchange resources of the country. It conjointly wanted to manage sure aspects of the conduct of business outside the country by Indian corporations (i.e. Business Consultants) and in India by foreign corporations. It absolutely was a criminal legislation that meant that its violation would cause imprisonment and payment of significant fine. It had several restrictive clauses that deterred foreign investments.
In the lightweight of economic reforms and also the liberalized situation, FERA was replaced by a brand new Act referred to as the Foreign Exchange Management Act (FEMA), 1999.The Act applies to any or all branches, offices and agencies outside India, in hand or controlled by an individual resident in India. FEMA emerged as capitalist friendly legislation that is only a civil legislation within the sense that its violation implies only payment of financial penalties and fines. However, under it, an individual are at risk of civil imprisonment provided that he doesn't pay the prescribed fine at intervals ninety days from the date of notice however that too happens when formalities of show cause notice and private hearing. FEMA conjointly provides for a two year sunset clause for offences committed underneath FERA which can be taken because the transition amount granted for moving from one 'harsh' law to the opposite 'industry friendly' legislation.
Broadly, the objectives of Foreign Exchange Management Act are: (I) to facilitate external trade and payments; and (ii) to market the orderly development and maintenance of exchange market. The Act has assigned a vital role to the Reserve Bank of India (RBI) within the administration of FEMA. The rules, regulations and norms bearing on many sections of the Act are set down by the RBI, in consultation with the Central Government. The Act needs the Government to appoint as several officers of the Government as Adjudicating Authorities for holding inquiries bearing on resistance of the Act. There’s conjointly a provision for appointing one or a lot of Special to appeals against the order of the Adjudicating authorities. The Central Government conjointly establishes legal proceeding court for exchange to listen to appeals against the orders of the Adjudicating Authorities and also the Special Director (Appeals). The FEMA provides for the institution, by the Central Government, of a Director of social control with a Director and such different officers or category of officers because it thinks appropriate taking on for investigation of the contraventions underneath this Act.