Did RBI Issue a Compounding Order for FEMA Violations in Kakinada Seaports?
Synopsis
In a significant move, the RBI has issued a compounding order for Kakinada Seaports Limited under FEMA, effectively halting all legal proceedings against the company. This showcases the RBI's commitment to resolving issues while ensuring compliance with foreign exchange regulations.
Key Takeaways
RBI's compounding order halts legal proceedings against Kakinada Seaports.
Compounding reflects the RBI's commitment to compliance with FEMA.
ED's investigation revealed multiple contraventions by the company.
One-time payment of Rs 21.68 lakh was required for resolution.
Key lesson for businesses: adherence to financial regulations is essential.
New Delhi, Jan 9 (NationPress) The Reserve Bank of India (RBI) has issued a compounding order on December 12, 2025, under section 15 of the Foreign Exchange Management Act (FEMA), 1999, concerning Kakinada Seaports Limited. This action has led to the cessation of legal proceedings against the company for alleged violations of FEMA provisions, as stated by the Enforcement Directorate (ED) on Friday.
The RBI's order came after the ED issued a “no objection” certificate, as indicated in the statement.
Following credible information, the ED initiated an investigation into the company under FEMA regulations. Upon concluding the investigation, the ED filed a complaint with the adjudicating authority on September 5, 2024, citing various FEMA contraventions that have now been addressed through compounding.
The reported contraventions include delays in reporting foreign inward payments totaling Rs. 22.88 crore, tardiness in submitting Form FCGPR after share issuance worth Rs. 23.31 crore, and delays in share allotments under specific FEMA schedules amounting to Rs. 7.21 crore.
The adjudicating authority sent a show cause notice on September 30, 2024, under section 16 of FEMA to the company and its directors who were accountable during the contraventions.
The company subsequently applied to the RBI to compound these contraventions as per Section 15 of the Act. Following a reference from the RBI, the ED provided its “no objection” to the compounding in accordance with the Act's intent.
Therefore, the RBI, guided by the ED's “no objection”, has compounded the contraventions with a one-time payment of Rs 21.68 lakh. This action has led to the conclusion of adjudication proceedings and any further litigation against the company, as per the statement.
Point of View
It is crucial to recognize that the RBI's action reflects a balanced approach to enforcement and compliance. By issuing a compounding order, the RBI not only addresses violations but also promotes a culture of adherence to regulations in the business environment. This decision holds significance for other companies as a reminder of the importance of compliance with financial laws.
NationPress
7 Jul 2026
Frequently Asked Questions
What is the purpose of the compounding order issued by the RBI?
The compounding order aims to resolve alleged violations of the Foreign Exchange Management Act (FEMA) by Kakinada Seaports Limited, thereby terminating ongoing legal proceedings.
What contraventions were identified by the ED?
The Enforcement Directorate noted delays in reporting foreign inward payments, submission of Form FCGPR, and allotment of shares, totaling significant amounts.
How much was the one-time payment for compounding?
Kakinada Seaports Limited made a one-time payment of Rs 21.68 lakh as part of the compounding agreement with the RBI.
