New Delhi: The Reserve Bank of India (RBI) has issued a compounding order in the case of Apothecon Pharmaceuticals Private Limited’s violations of the provisions of the Foreign Exchange Management Act (FEMA), which resulted in the closure of the ED investigation against the company with a one-time payment of Rs 40.52 lakh, according to a statement issued by the Directorate of Enforcement (ED) on Thursday.
The RBI’s order compounding the violations under Section 15 of FEMA has been issued after a “No Objection” certificate given by the ED.
In this case, based on credible information received, the investigation was taken up by ED following the company’s delay in reporting of ‘Form ARF’ for the receipt of foreign inward remittance to the tune of Rs 9.91 crore.
There was also a delay by the company in filing of form FCGPR covering a sum of Rs 29.97 crore.
Besides, the company issued shares worth Rs 18.48 lakh prior to remittance in contravention of FEMA norms and also issued shares valued at around Rs 2.25 crore beyond 180 days after receipt of funds in a breach of rules.
There were also three instances of the company allotting shares without prior approval of the government of India, which constitutes a contravention of FEMA rules.
While the case was under investigation by ED, the company filed an application before the RBI for compounding these contraventions under FEMA as per the provisions of Section 15 of the Act.
On reference from RBI, the ED issued no objection for such compounding in line with the true spirit of the Act. Accordingly, the RBI, on the basis of no objection issued by ED, has compounded the said contraventions vide compounding order dated July 6, 2026.
As a matter of policy, the Enforcement Directorate issues an NOC where the contravention is eligible for compounding, the prescribed conditions are fulfilled and no investigation or other legal impediment exists. This facilitates voluntary compliance, reduces avoidable litigation and promotes ease of doing business, the statement explained.
As FEMA is primarily a civil legislation, vide Section 15, it provides for compounding of contraventions punishable under Section 13 to facilitate voluntary compliance, reduce litigation and ensure expeditious disposal of cases. The procedure for compounding is prescribed under the Foreign Exchange (Compounding Proceedings) Rules, 2024, notified under Section 46 read with Section 15 of FEMA, which lay down the manner of filing applications, examination of cases and passing of compounding orders.
As per the Rules, certain contraventions are not compoundable which include the contraventions related to a serious contravention suspected of money-laundering, terror financing or affecting the sovereignty and integrity of the nation.
Under Rule 3 of the Foreign Exchange (Compounding Proceedings) Rules, 2024, the Reserve Bank of India (RBI) is the competent authority to compound eligible contraventions falling within its jurisdiction. RBI has also issued Master Directions on Compounding of Contraventions under FEMA, prescribing a compounding matrix for determining the compounding amount based on factors such as the nature, gravity, duration and amount involved in the contravention.
(IANS)
