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(i) a person residing in India for more than one hundred and eighty-two days during the course of
the preceding financial year but does not include-
(A) a person who has gone out of India or who stays outside India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside
India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India,
or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India
for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India;
(w) "person resident outside India" means a person who is not resident in India;
(x) "prescribed" means prescribed by rules made under this Act;
(y) "repatriate to India" means bringing into India the realized foreign exchange and-
(i) the selling of such foreign exchange to an authorized person in India in exchange for rupees, or
(ii) the holding of realized amount in an account with an authorized person in India to the extent
notified by the Reserve Bank, and includes use of the realized amount for discharge of a debt or
liability denominated in foreign exchange and the expression "repatriation" shall be construed
accordingly;
(z) "Reserve Bank" means the Reserve Bank of India constituted under sub-section (1) of section 3 of
the Reserve Bank of India Act, 1934 (2 of 1934);
(za) "security" means shares, stocks, bonds and debentures, Government securities as defined in he
Public Debt Act, 1944 (18 of 1944), savings certificates to which the Government Savings
Certificates Act, 1959 (46 of 1959) applies, deposit receipts in respect of deposits of securities and
units of the Unit Trust of India established under sub-section (1) of section 3 of the Unit Trust of
India Act, 1963 (52 of 1963) or of any mutual fund and includes certificates of title to securities, but
does not include bills of exchange or promissory notes other than Government promissory notes or
any other instruments which may be notified by the Reserve Bank as security for the purposes of this
Act;
(zb) "service" means service of any description which is made available to potential users and
includes the provision of facilities in connection with banking, financing, insurance, medical
assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other
energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other
information, but does not include the rendering of any service free of charge or under a contract of
personal service ;
(zc) "Special Director (Appeals)" means an officer appointed under section 18;
37
(zd) "specify" means to specify by regulations made under this Act and the expression "specified"
shall be construed accordingly;
(ze) "Transfer" includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of
transfer of right, title, possession or lien.
CHAPTER II
REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE
3. Dealing in foreign exchange, etc.- Save as otherwise provided in this Act, rules or regulations
made there under, or with the general or special permission of the Reserve Bank, no person shall-
(a) deal in or transfer any foreign exchange or foreign security to any person not being an
authorized person;
(b) make any payment to or for the credit of any person resident outside India in any manner;
(c) receive otherwise through an authorized person, any payment by order or on behalf of any
person resident outside India in any manner.
Explanation.- For the purpose of this clause, where any person in, or resident in, India receives any
payment by order or on behalf of any person resident outside India through any other person
(including an authorized person) without a corresponding inward remittance from any place outside
India, then, such person shall be deemed to have received such payment otherwise than through an
authorized person;
(d) enter into any financial transaction in India as consideration for or in association with acquisition
or creation or transfer of a right to acquire, any asset outside India by any person.
explanation.-For the purpose of this clause, "financial transaction" means making any payment to, or
for the credit of any person, or receiving any payment for, by order or on behalf of any person, or
drawing, issuing or negotiating any bill of exchange or promissory note, or transferring any security
or acknowledging any debt.
4. Holding of foreign exchange, etc.- Save as otherwise provided in this Act, no person resident in
India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any
immovable property situated outside India.
5. Current account transactions.- Any person may sell or draw foreign exchange to or from an
authorized person if such sale or drawl is a current account transaction: Provided that the Central
Government may, in public interest and in consultation with the Reserve Bank, impose such
reasonable restrictions for current account transactions as may be prescribed.
6. Capital account transactions. - (1) Subject to the provisions of sub-section (2), any person may
sell or draw foreign exchange to or from an authorized person for a capital account transaction.
(2) The Reserve Bank may, in consultation with the Central Government, specify-
(a) any class or classes of capital account transactions which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such transactions: Provided that
the Reserve Bank shall not impose any restriction on the drawl of foreign exchange for payments
38
due on account of amortization of loans or for depreciation of direct investments in the ordinary
courts of business.
(3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may,
by regulations, prohibit, restrict or regulate the following-
(a) transfer or issue of any foreign security by a person resident in India;
(b) transfer or issue of any security by a person resident outside India;
(c) transfer or issue of any security or foreign security by any branch, office or agency in India of a
person resident outside India;
(d) any borrowing or lending in rupees in whatever form or by whatever name called;
(e) any borrowing or lending in rupees in whatever form or by whatever name called between a
person resident in India and a person resident outside India;
(f) deposits between persons resident in India and persons resident outside India;
(g) export, import or holding of currency or currency notes;
(h) transfer of immovable property outside India, other than a lease not exceeding five years, by a
person resident in India;
(i) acquisition or transfer of immovable property in India, other than a lease not exceeding five
years, by a person resident outside India;
(j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred-
(i) by a person resident in India and owed to a person resident outside India; or
(ii)by a person resident outside India.
(4) A person resident in India may hold, own, transfer or invest in foreign currency, foreign security
or any immovable property situated outside India if such currency, security or property was
acquired, held or owned by such person when he was resident outside India or inherited from a
person who was resident outside India.
(5) A person resident outside India may hold, own, transfer or invest in Indian currency, security or
any immovable property situated in India if such currency, security or property was acquired, held or
owned by such person when he was resident in India or inherited from a person who was resident in
India.
(6) Without prejudice to the provisions of this section, the Reserve Bank may, by regulation, prohibit,
restrict, or regulate establishment in India of a branch, office or other place of business by a person
resident outside India, for carrying on any activity relating to such branch, office or other place of
business.
7. Export of goods and services.- (1) Every exporter of goods shall-
(a) furnish to the Reserve Bank or to such other authority a declaration in such form and in such
manner as may be specified, containing true and correct material particulars, including the
amount representing the full export value or, if the full export value of the goods is not ascertainable
at the time of export, the value which the exporter, having regard to the prevailing market
conditions, expects to receive on the sale of the goods in a market outside India;
35
(b) furnish to the Reserve Bank such other information as may be required by the Reserve Bank for
the purpose of ensuring the realization of the export proceeds by such exporter.
(2) The Reserve Bank may, for the purpose of ensuring that the full export value of the goods or
such reduced value of the goods as the Reserve Bank determines, having regard to the prevailing
market conditions, is received without any delay, direct any exporter to comply with such
requirements as it deems fit.
(3) Every exporter of services shall furnish to the Reserve Bank or to such other authorities a
declaration in such form and in such manner as may be specified, containing the true and correct
material particulars in relation to payment for such services.
8. Realization and repatriation of foreign exchange.- Save as otherwise provided in this Act, where
any amount of foreign exchange is due or has accrued to any person resident in India, such person
shall take all reasonable steps to realize and repatriate to India such foreign exchange within such
period and in such manner as may be specified by the Reserve Bank.
9. Exemption from realization and repatriation in certain cases.- The provisions of sections 4 and 8
shall not apply to the following, namely:-
(a) possession of foreign currency or foreign coins by any person up to such limit as the Reserve
Bank may specify;
(b) foreign currency account held or operated by such person or class of persons and the limit up
to which the Reserve Bank may specify;
(c) foreign exchange acquired or received before the 8th day of July, 1947 or any income arising or
accruing thereon which is held outside India by any person in pursuance of a general or special
permission granted by the Reserve Bank;
(d) foreign exchange held by a person resident in India up to such limit as the Reserve Bank may
specify, if such foreign exchange was acquired by way of gift or inheritance from a person
referred to in clause (c), including any income arising there from;
(e) foreign exchange acquired from employment, business, trade, vocation, services, honorarium,
gifts, inheritance or any other legitimate means up to such limit as the Reserve Bank may specify;
and
(f) such other receipts in foreign exchange as the Reserve Bank may specify.
CHAPTER III
AUTHORISED PERSON
10. Authorised person.-(1) The Reserve Bank may, on an application made to it in this behalf,
authorize any person to be known as authorized person to deal in foreign exchange or in foreign
securities, as an authorized dealer, money changer or off-shore banking unit or in any other manner
as it deems fit.
37
(2) An authorization under this section shall be in writing and shall be subject to the conditions laid
down therein.
(3) An authorization granted under sub-section (1) may be revoked by the Reserve Bank at any time
if the Reserve Bank is satisfied that-
(a) it is in public interest so to do; or
(b) the authorized person has failed to comply with the condition subject to which the authorization
was granted or has contravened any of the provisions of the Act or any rule, regulation, notification,
direction or order made there under:
Provided that no such authorization shall be revoked on any ground referred to in clause (b) unless
the authorized person has been given a reasonable opportunity of making a representation in the
matter
(4) An authorized person shall, in all his dealings in foreign exchange or foreign security, comply with
such general or special directions or orders as the Reserve Bank may, from time to time, think fit to
give, and, except with the previous permission f the Reserve Bank, an authorized person shall not
engage in any transaction involving any foreign exchange or foreign security which is not in
conformity with the terms of his authorization under this section.
(5) An authorized person shall, before undertaking any transaction in foreign exchange on behalf of
any person, require that person to make such declaration and to give such information as will
reasonably satisfy him that the transaction will not involve and is not designed for the purpose of
any contravention or evasion of the provisions of this Act or of any rule, regulation, notification,
direction or order made there under, and where the said person refuses to comply with any such
requirement or make only unsatisfactory compliance therewith, the authorized person shall refuse
in writing to undertake the transaction and shall, if he has reason to believe that any such
contravention or evasion as aforesaid is contemplated by the person, report the matter to the
Reserve Bank.
(6) Any person, other than an authorized person, who has acquired or purchased foreign exchange
for any purpose mentioned in the declaration made by him to authorized person under sub-section
(5) does not use it for such purpose or does not surrender it to authorized person within the
specified period or uses the foreign exchange so acquired or purchased for any other purpose for
which purchase or acquisition or foreign exchange is not permissible under the provisions of the Act
or the rules or regulations or direction or order made there under shall be deemed to have
committed contravention of the provisions of the Act for the purpose of this section.
11. Reserve Bank's powers to issue directions to authorised person.-(1) The reserve Bank may, for
the purpose of securing compliance with the provisions of this Act and of any rules, regulations,
notifications or directions made there under, give to the authorised persons any direction in regard
to making of payment or the doing or desist from doing any act relating to foreign exchange or
foreign security.
38
(2) The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act
or of any rule, regulation, notification, direction or order made there under, direct any authorised
person to furnish such information, in such manner, as it deems fit.
(3) Where any authorised person contravenes any direction given by the Reserve Bank under this
Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank may, after giving
reasonable opportunity of being heard, impose on the authorized person a penalty which may
extend to ten thousand rupees and in the case of continuing contravention with an additional
penalty which may extend to two thousand rupees for every day during which such contravention
continues.
12. Power of Reserve Bank to inspect authorised person.-(1) The Reserve Bank may, at any time,
cause an inspection to be made, by any officer of the Reserve Bank specially authorised in writing by
the Reserve Bank in this behalf, of the business of any a authorised person as may appear to it to be
necessary or expedient for the purpose of-
(a) verifying the correctness of any statement, information or particulars furnished to the Reserve
Bank;
(b) obtaining any information or particulars which such authorised person has failed to furnish on
being called upon to do so;
(c) securing compliance with the provisions of this Act or of any rules, regulations, directions or
orders made there under.
(2) It shall be the duty of every authorised person, and where such person is a company or a firm,
every director, partner or other officer of such company or firm, as the case may be, to produce to
any officer making an inspection under sub-section (1), such books, accounts and other documents
in his custody or power and to furnish any statement or information relating to the affairs of such
person, company or firm as the said officer may require within such time and in such manner as
the said officer my direct.
CHAPTER IV
CONTRAVENTION AND PENALTIES
13. Penalties.-(1) If any person contravenes any provision of this Act, or contravenes any rule,
regulation, notification, direction or order issued in exercise of the powers under this Act, or
contravenes any condition subject to which an authorization s issued by the Reserve Bank, he shall,
upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where
such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and
where such contravention is a continuing one, further penalty which may extend to five thousand
rupees for every day after the first day during which the contravention continues.
(2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks
fit in addition to any penalty which he may impose for such contravention direct that any currency,
security or any other money or property in respect of which the contravention has taken place shall
be confiscated to the Central Government and further direct that the foreign exchange holdings, if
33
any, of the persons committing the contraventions or any part thereof, shall be brought back into
India or she l be retained outside India in accordance with the directions made in this behalf.
Explanation.- For the purposes of this sub-section, "property" in respect of which contravention has
taken place, shall include-
(a) deposits in a bank, where the said property is converted into such deposits;
(b) Indian currency, where the said property is converted into that currency; and
(c) any other property which has resulted out of the conversion of that property.
14. Enforcement of the orders of Adjudicating Authority.-(1) Subject to the provisions of sub-
section (2) of section 19, if any person fails to make full payment of the penalty imposed on him
under section 13 within a period of ninety days from the date on which the notice for payment of
such penalty is served on him, he shall be liable to civil imprisonment under this section.
(2) No order for the arrest and detention in civil prison of a defaulter shall be made unless the
Adjudication Authority has issued and served a notice upon the defaulter calling upon him to appear
before him on the date specified in the notice and to show cause why he should not be committed
to the civil prison, and unless the Adjudicating Authority, for reasons in writing, is satisfied-
(a) that the defaulter, with the object or effect of obstructing the recovery of penalty, has after the
issue of notice by the Adjudicating Authority, dishonestly transferred, concealed, or removed any
part of his property, or
(b) that the defaulter has, or has had since the issuing of notice by the Adjudicating Authority, the
means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or
neglected to pay the same.
(3) Notwithstanding anything contained in sub-section (1), a warrant for the arrest of the defaulter
may be issued by the Adjudicating Authority if the Adjudicating Authority is satisfied, by affidavit or
otherwise, that with the object or effect of delaying the execution of the certificate the defaulter is
likely to abscond or leave the local limits of the jurisdiction of the Adjudicating Authority.
(4) Where appearance is not made pursuant to a notice issued and served under sub-section (1), the
Adjudicating Authority may issue a warrant for the arrest of the defaulter.
(5) A warrant of arrest issued by the Adjudicating Authority under sub-section (3) or sub-section (4)
may also be executed by any other Adjudicating Authority within whose jurisdiction the defaulter
may for the time being be found.
(6) Every person arrested in pursuance of a warrant of arrest under this section shall be brought
before the Adjudicating Authority issuing the warrant as soon as practicable and in any event within
twenty-four hours of his arrest (exclusive of the time enquired for the journey):
33
Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the
costs of the arrest to the officer arresting him, such officer shall at once release him.
Explanation.-For the purposes of this sub-section, where the defaulter is a Hindu undivided family,
the karta thereof shall be deemed to be the defaulter.
(7) When a defaulter appears before the Adjudicating Authority pursuant to a notice to show cause
or is brought before the Adjudicating Authority under this section, the Adjudicating Authority shall
give the defaulter an opportunity showing cause why he should not be committed to the civil prison.
(8) Pending the conclusion of the inquiry, the Adjudicating Authority may, in his discretion, order the
defaulter to be detained in the custody of such officer as the Adjudicating Authority may think fit or
release him on his furnishing the security to t e satisfaction of the Adjudicating Authority for his
appearance as and when required.
(9) Upon the conclusion of the inquiry, the Adjudicating authority may make an order for the
detention of the defaulter in the civil prison and shall in that event cause him to be arrested if he is
not already under arrest: Provide that in order to give a defaulter an opportunity of satisfying the
arrears, the Adjudicating Authority may, before making the order of detention, leave the defaulter in
the custody of the officer arresting him or of any other officer for a specified period not exceeding
fifteen days, or release him on his furnishing security to the satisfaction of the Adjudicating
Authority for his appearance at the expiration of the specified period if the arrears are not satisfied.
(10) When the Adjudicating Authority does not make an order of detention under sub-section (9),
he shall, if the defaulter is under arrest, direct his release.
(11) Every person detained in the civil prison in execution of the certificate may be so detained,-
(a) where the certificate is for a demand of an amount exceeding rupees one crore, up to three
years, and
(b) in any other case, up to six months:
Provided that he shall be released from such detention on the amount mentioned in the warrant
for his detention being paid to the officer-in-charge of the civil prison.
(12) A defaulter released from detention under this section shall not, merely by reason of his
release, be discharged from his liability for the arrears, but he shall not be liable to be arrested
under the certificate in execution of which he was detained in the civil prison.
(13) A detention order may be executed at any place in India in the manner provided for the
execution of warrant of arrest under the Code of Criminal Procedure, 1973 (2 of 1974).
15. Power to compound contravention.-(1) Any contravention under section 13 may, on an
application made by the person committing such contravention, be compounded within one
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