Foreign Exchange Regulation Act

(FERA), 1973

Foreign Exchange Regulation Act (FERA)

FERA, 1973 was enacted in wake of acute foreign
exchange shortage faced by the country at that point of
time.
Accordingly, in 1973 the Foreign Exchange Regulation Act
was amended.
FERA consists of 81 complex sections
Under FERA, any offence was a criminal one which
included imprisonment as per code of criminal procedure,
1973.

OBJECTIVES
Prevent the outflow of Indian currency
To regulate dealings in foreign exchange
and securities
To regulate the transaction indirectly
affecting foreign exchange
To regulate import and export of currency
and bullion

 Restriction on appointment of certain persons

and companies as agents or technical or
management advisers in India
Restriction on establishment of place of
business in India
Prior permission of Reserve Bank required for
taking up employment in India by nationals of
foreign state
Restrictions on immovable property

FERA, 1973 (continued)

Under FERA, 1973, it was necessary to take necessary

permission from the government in respect of transactions
those involved foreign exchange dealings.
The Enforcement Directorate, under FERA had unlimited
powers to search, arrest and seize.
FERA (1973) categorized foreign exchange law violators as
criminals and actions against them were very strict. It was
replaced by FEMA (1999) which aimed at facilitating
external trade and payment. Also law violators under FEMA
were treated as civic offenders rather than as criminals 5as
under FERA.

Foreign Exchange Management Act

(FEMA), 1999

Foreign Exchange Management Act (FEMA),1999

Enacted in 1999, replaced the earlier Foreign

Exchange Regulation Act (FERA), 1973.
Came into force on the 1st day of June, 2000;

Objectives of FEMA:
1. To facilitate external trade and payments; and
2. To promote orderly development and maintenance of
foreign exchange market in India.

FEMA (continued) -

To investigate into violations of the Act, the Central

Govt. has established a department called Enforcement
Directorate.
This Act extends to the whole of India and also applies
on all branches, offices and agencies outside India
owned or controlled by a person resident in India. It is
also applicable on any contravention committed outside
India by any person to whom this Act is applicable.

Major provisions under FEMA

No restriction on possession of coins by a person in
India.
Any Indian resident is permitted to retain in aggregate
foreign currency not exceeding US $ 2000 or its
equivalent.
No limit to possession of foreign currency, if it is
earned when the person was resident outside India.
Any Indian resident is permitted to open RFC (Resident
Foreign Currency) account out of foreign exchange.

 Section 4 provides that no person can, without a general or special

permission of the RBI(a) Deal in or transfer any foreign exchange or foreign securities;
(b) Make / receive any payment to/from any person resident outside India;
(c) Enter into any financial transaction for acquiring any asset outside India.

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ENFORCEMENT DIRECTORATE (ED)

The ED is mainly concerned with enforcing the provisions of the FEMA for
preventing the leakage of foreign exchange. Such leakage of foreign
exchange generally occurs through following malpractices (contraventions
of FEMA):- Prohibited activities
1) Foreign exchange remittances by Indians otherwise than through normal
banking channels;
2) Acquisition of foreign currency illegally by a person in India;
3) Non-repatriation of export proceeds;
4) Under-invoicing of exports and over-invoicing of imports and any other
type of invoice manipulation;
5) Unauthorised maintenance of accounts in foreign countries;
6) Illegal acquisition of foreign exchange through Hawala.
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MRTP ACT
The Monopolies And Restrictive Trade Practices Act, 1969 is an
important piece of economic legislation designed to ensure
that the operation of the economic system does not result in
the concentration of economic power to the common
detriment.
The act came into force from 1st June, 1970, and has been
amended in 1991.
It is designed to ensure that the operation of the economic
system does not result in concentration of the economic
power to the common detriment.
The act also provides for probation of monopolistic, unfair
and restrictive trade practices.
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OBJECTIVES
Before Amendment
in1991:-

After Amendment in
1991:-

Regulation of monopolies
and prevention of
concentration of
economic power.
Prohibit monopolistic,
restrictive and unfair trade
practices.

Controlling monopolistic
trade practices.
Regulating restrictive and
unfair trade practices.

Monopolistic Trade Practices

Any trade practice which seeks to
prevent competition and which
results in high price Such as
Unreasonably high prices
Limiting technical development
Limiting capital investment
Lower quality of good and services
Preventing or lessening competition

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RESTRICTIVE TRADE PRACTICES

Any trade practice that that tend to block the flow of
capital into production and also bring in conditions of
delivery to affect the flow of supplies leading to
unjustified costs. Such as
Refusal to deal with persons or classes of persons
Tie in sales or full line forcing
Exclusive dealing agreements
Collective price distribution and tendering
Discriminatory dealing
Restriction on output or supply of goods
Price control agreements

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UNFAIR TRADE PRACTICES

Misleading representation regarding usefulness, need, quality,
standard, style etc of goods and services
Supplying unsafe and hazardous products
Hoarding or destroying of goods
Refusal to sell goods , resulting in a price rise
Giving false facts regarding sponsorship, affiliation etc. of
goods and services.
Giving false guarantee or warranty on goods and services
without adequate tests.

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FILLING OF COMPLAINT
UNDER MRTP ACT
In case of any unfair trade practice, monopolistic trade practice or
restrictive trade practice, a complaint can be filed against such
practices to the MRTP commission. The procedure for filing a
complaint is as follows:
Complaint is filed either by the individual consumer or through a
registered consumer organization.
The Director General of the MRTP commission would carry on the
investigation for finding facts of the case.
If the prima facie case is not made, the complaint is dismissed. If
the compliant is true, an order is passed to its effect.
The commission restricts and restrains the concerned party from
carrying on such practices by granting temporary injunction. Then
the final order is passed. The complainant may be compensated for
his loss.

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