VM Pvt. Ltd. engaged in wholesale trading, received ₹5,00,000 from a foreign investor in April and October 2016. As per the Foreign Exchange Management Act (FEMA) regulations, the Company was required to allot shares wit

In the matter of M/s Candor View India Private Limited, Compounding order dated October 30, 2018 Reserve Bank of India, Bengaluru. Delay in allotment of shares to the foreign investors (i.e beyond 180 days of receipt of the inward remittances), person's resident outside India. The applicant, M/s Candor View India Private Limited (applicant), was incorporated on December 01, 2015, under the Companies Act, 2013, as per the Certificate of Incorporation issued by the Registrar of Companies, Karnataka. The company is engaged in the business of aluminum metal & metal alloys as cash and carry wholesale trading. The applicant has filed a compounding application dated July 06, 2018, for compounding of contraventions of the provisions of the Foreign Exchange Management Act, 1999, (the FEMA) and the regulations issued there under. The contravention sought to be compounded is delay in allotment of shares to the foreign investors, persons resident outside India, beyond 180 days of receipt of the inward remittances, in terms of Paragraph 8 of Schedule I to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000- RB dated May 03, 2000, and as amended from time to time (hereinafter referred to as Notification No. FEMA 20/2000-RB). The company received inward remittances of ₹4,96,321.58, and ₹3,678.84, amounting to ₹5,00,000.42, from the foreign investor in USA, on April 05, 2016, and October 13, 2016, respectively. Company allotted 50,000 equity shares for a total consideration of ₹5,00,000.00, on May 26, 2017, to the foreign investor, which is beyond 180 days from the date of receipt of inward remittances, with prior approval of Reserve Bank of India. The application was considered and the contraventions were compounded. In terms of Section 13 of the FEMA, any person contravening any provision of the Act, shall be liable to a penalty up to thrice the sum involved, in such contravention upon adjudication. However, taking into account the relevant facts and circumstances of the case, a lenient view were taken on the amount for which the contravention are to be compounded and an amount of ₹31,500.00 (Rupees Thirty One Thousand and Five Hundred only) was imposed under Compounding. In view of above leading case, VM Pvt. Ltd. has taken correct action by filing a compounding application.