ETRMServices India Pvt. Ltd

In exercise of the powers under Section 15(1) of Foreign Exchange Management Act, 1999 and the Regulations/ Rules/ Notifications/ Orders made thereunder, I pass the following Order. ORDER The applicant has filed the compounding application dated July 31, 2019 (received at Reserve Bank of India, New Delhi on August 2, 2019) and addendum dated August 22, 2019 for compounding of contraventions of the provisions of the Foreign Exchange Management Act, 1999 (hereinafter referred to as FEMA) and the regulations issued thereunder. The contraventions sought to be compounded are those of (i) delay in reporting foreign inward remittances received for issue of shares, (ii) delay in filing Form FC-GPR after issue of shares, and (iii) issue of shares to person resident outside India prior to receipt of the amount of consideration, in terms of paragraphs 9(1)(A), 9(1)(B) and 8 respectively of Schedule 1 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 3, 2000 (hereinafter referred to as FEMA 20/2000-RB), as amended from time to time.

ETRMServices India Private Limited CA No. NDL 517/2019

2. The relevant facts of the case are as follows: (a) The applicant company, incorporated on January 11, 2016, is engaged in other professional, scientific and technical activities n.e.c. (b) The applicant had received foreign inward remittances on two occasions during the year 2016. On both the occasions, the applicant had reported the remittances received from the subscriber to its Memorandum of Association, M/s ETRMSERVICES.COM INC., U.S.A., with delay of 2 years, 1 month & 11 days and 1 year, 10 months & 12 days beyond the prescribed period, as detailed below, in contravention of paragraph 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, as then applicable. Sl. No. Date of Receipt Amount (₹) Date of Reporting 1 20.06.2016 99,612.50 14.07.2019 2 19.09.2016 377.50 14.07.2019 Total 99,990.00

Whereas, in terms of paragraph 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, an Indian company issuing shares or convertible debentures or warrants in accordance with these Regulations shall submit through AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, not later than 30 days from the date of receipt of the amount of consideration received by Indian company for issue of shares or convertible debentures or warrants, a report in Advance Reporting Form as specified by Reserve Bank from time to time along with documents prescribed therein. Reporting of receipt of foreign inward remittance for issue of capital instruments was dispensed with in terms of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Second Amendment) Regulations, 2018 with effect from September 1, 2018. Delay in reporting of foreign inward remittance has, therefore, been taken up to August 31, 2018. (c) The applicant had issued 9,999 equity shares to M/s ETRMSERVICES.COM INC., U.S.A. on August 12, 2016 for a consideration of ₹99,990/- and reported the same on July 14, 2019 with a delay of 2 years, 10 months and 3 days beyond the prescribed period, in contravention of paragraph 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, as then applicable. Whereas, in terms of paragraph 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, an Indian company issuing shares or convertible debentures or warrants in accordance with these Regulations shall submit through AD bank to the Regional

ETRMServices India Private Limited CA No. NDL 517/2019

Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, not later than 30 days from the date of issue of shares or convertible debentures or warrants, a report in Form FC-GPR as specified by the Reserve Bank from time to time together with documents prescribed therein. (d) The applicant had received the inward remittance of ₹377.50 on September 19, 2016, being the shortfall amount for 9,999 equity shares issued to M/s ETRMSERVICES.COM INC., U.S.A., on August 12, 2016 with a delay of 1 month and 7 days, in contravention of paragraph 8 of Schedule 1 to FEMA 20/2000-RB, as then applicable. Whereas, in terms of paragraph 8 of Schedule 1 to FEMA 20/2000-RB, an Indian company accepting FDI has to receive the share application money from the non-resident investor prior to the issue of shares, and the shares have to be issued/ amount to be refunded, in case shares have not been issued, within 180 days from the date of receipt of inward remittance. (e) Thus, there are contraventions of paragraphs 9(1)(A), 9(1)(B) and 8 of Schedule 1 to FEMA 20/2000-RB, as then applicable.

3. The applicant was given an opportunity for personal hearing for further submission in person and/ or by producing documents, if any, in support of the application. Shri L. N. Bansal, Chartered Accountant, appeared for personal hearing on December 13, 2019 on behalf of the applicant. The representative admitted the contraventions committed by the applicant for which compounding has been sought. During the personal hearing, he submitted that the contraventions were without any malafide or wilful intention but were mainly due to resignation of person concerned looking after FEMA compliances and delay in receipt of FIRC from their AD bank. He requested for a lenient view in the matter. The application for compounding is, therefore, being considered on the basis of averments made in the application as well as other documents and submissions made during the personal hearing.

4. I have given my careful consideration to the documents on record and submissions made by the applicant during the personal hearing. Accordingly, I hold that the applicant has contravened the following FEMA provisions: (a) Paragraph 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, as then applicable, on account of delay in reporting foreign inward remittance received for issue of shares as detailed in paragraph 2(b) above. The contraventions relate to an amount of ₹99,990/-

ETRMServices India Private Limited CA No. NDL 517/2019 (Rupees Ninety Nine Thousand Nine Hundred and Ninety only) and the period of delays are 2 years, 1 month & 11 days and 1 year, 10 months & 12 days. (b) Paragraph 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, as then applicable, on account of delay in filing Form FC-GPR after issue of shares as detailed in paragraph 2(c) above. The contravention relates to an amount of ₹99,990/- (Rupees Ninety Nine Thousand Nine Hundred and Ninety only) and the period of delay is 2 years, 10 months and 3 days. (c) Paragraph 8 of Schedule 1 to FEMA 20/2000-RB, as then applicable, on account of issue of shares to person resident outside India prior to receipt of the amount of consideration as detailed in paragraph 2(d) above. The contravention relates to an amount of ₹377.50 (Rupees Three Hundred Seventy Seven and Paise Fifty only) and the period of contravention is 1 month and 7 days.

5. It has been declared in the compounding application dated July 31, 2019 that the particulars given by the applicant in the application are true and correct to the best of their knowledge and belief. It has also been declared in the declaration dated August 20, 2019 furnished as part of the compounding application that the applicant was not under any enquiry/ investigation/ adjudication by any agency as on the date of the application and has, in this regard, not informed of initiation of any such enquiry/ investigation/ adjudication proceedings against it, thereafter. It has further been declared that the applicant has not filed any appeal under Section 17 or Section 19 of FEMA. Accordingly, the above contraventions which are being compounded in this Order are subject to the veracity of the above declarations made by the applicant and this Order is without prejudice to any other action which may be taken by any authority under the extant laws if the said declarations are subsequently discovered to be false and/ or incorrect.

6. In terms of Section 13 of 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. After considering the submissions made by the applicant and the entire facts and circumstances of the case I am persuaded to compound the contraventions, in line with the Guidance Note on Computation Matrix prescribed as part of Master Direction – Compounding of Contraventions, framed in accordance with the Foreign Exchange (Compounding Proceedings) Rules 2000. Accordingly, it stands to reason

ETRMServices India Private Limited CA No. NDL 517/2019 that payment of an amount of ₹25,449/- (Rupees Twenty Five Thousand Four Hundred and Forty Nine only) will meet the ends of justice in the circumstances of this case.

7. Accordingly, I compound the admitted contraventions of paragraphs 9(1)(A), 9(1)(B) and 8 of Schedule 1 to FEMA 20/2000-RB, as then applicable, by the applicant based on the facts detailed above in terms of the Foreign Exchange (Compounding Proceedings) Rules, 2000, on payment of an amount of ₹25,449/- (Rupees Twenty Five Thousand Four Hundred and Forty Nine only) which shall be deposited by the applicant with the Reserve Bank of India, Foreign Exchange Department, 6, Sansad Marg, New Delhi - 110001 by a demand draft drawn in favour of the “Reserve Bank of India” and payable at New Delhi within a period of 15 days from the date of this Order. In case of failure to deposit the compounded amount within the above mentioned period, Rule 10 of the Foreign Exchange (Compounding Proceedings) Rules, 2000 dated May 3, 2000 shall apply.

The application is disposed accordingly.

Dated this the 18th day of December 2019.

Sd/- (Md. Shakir Hasan) Assistant General Manager