Section 15 FEMA 1999 - Power to Compound Contraventions
Section 15 of the Foreign Exchange Management Act, 1999 provides a statutory mechanism for compounding a contravention covered by Section 13. In practical terms, an eligible person may voluntarily seek settlement of an admitted FEMA contravention through the competent compounding authority instead of allowing proceedings for that contravention to continue through the ordinary adjudication route.
Updated: 27 September 2026 | Current framework: Foreign Exchange (Compounding Proceedings) Rules, 2024 and RBI directions on compounding.
Key point: Section 15 requires an eligible compounding application to be dealt with within 180 days from the date of receipt of the application. Once the contravention is compounded, no proceeding or further proceeding under Section 13 may be initiated or continued against that person in respect of the contravention so compounded.
Section 15 of FEMA: Power to Compound Contravention
Section 15(1): Any contravention under Section 13 may, on an application made by the person committing the contravention, be compounded within 180 days from the date of receipt of the application by the Director of Enforcement, authorised officers of the Directorate of Enforcement, or officers of the Reserve Bank, as authorised by the Central Government, in the prescribed manner.
Section 15(2): Where a contravention has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be initiated or continued against the person under Section 13 in respect of that compounded contravention.
The statutory provision should be read with Section 13 of FEMA, which deals with penalties for contravention of FEMA and instruments issued under the Act.
What Does Compounding Mean Under FEMA?
Compounding is a voluntary statutory process for resolving an admitted FEMA contravention on payment of the amount determined by the competent compounding authority. It is not the same as a declaration that no contravention occurred. The process is based on the applicant approaching the competent authority and seeking compounding in accordance with Section 15, the applicable rules and RBI directions.
RBI describes compounding as a process in which a person voluntarily admits a contravention and seeks its resolution. For RBI-administered cases, the current procedure is governed by the Foreign Exchange (Compounding Proceedings) Rules, 2024 and the RBI Directions - Compounding of Contraventions under FEMA, 1999.
Foreign Exchange Compounding Proceedings Rules 2024
The Central Government notified the Foreign Exchange (Compounding Proceedings) Rules, 2024 on 12 September 2024. These rules superseded the Foreign Exchange (Compounding Proceedings) Rules, 2000, except in relation to things already done or omitted before the supersession.
The 2024 Rules prescribe the present procedural framework, including the authorised compounding officers, application process, compounding orders and circumstances in which a matter is not eligible to be compounded by the relevant authority. Accordingly, references to the 2000 Rules in older articles or guidance should be checked against the 2024 Rules before being relied upon.
Important: Not every FEMA matter can be compounded by RBI. RBI states that Section 3(a) contraventions are dealt with by the Directorate of Enforcement for compounding. Cases falling within Rule 9 of the 2024 Rules are also not eligible for compounding by RBI.
Who Can Apply for Compounding?
A person who has committed an eligible FEMA contravention may apply for compounding. RBI guidance states that an application may be made when the person becomes aware of a contravention through RBI, another statutory authority, an auditor or otherwise, and may be made suo motu or on the basis of a Memorandum of Contraventions issued by RBI.
RBI and Directorate of Enforcement
Under the current administrative framework, RBI compounds eligible contraventions within its authorised jurisdiction. A contravention of Section 3(a), which concerns dealing in or transferring foreign exchange or foreign security to a person other than an authorised person, is outside RBI's compounding jurisdiction and applications concerning Section 3(a) are to be made to the Directorate of Enforcement.
Applicants should also examine the exclusions and restrictions in the 2024 Rules and current RBI directions. Sensitive or otherwise ineligible matters may be outside the RBI compounding process.
How to Apply for FEMA Compounding
- Identify and regularise the contravention: determine the FEMA provision, rule, regulation, notification, direction, order or authorisation condition involved and complete required administrative compliance or approvals before applying where applicable.
- Prepare the prescribed application: provide the application and relevant documents, declarations and transaction-specific annexures required by the current RBI directions.
- Submit to RBI where RBI has jurisdiction: RBI permits submission physically or through its PRAVAAH portal, subject to the applicable directions.
- Pay the prescribed application fee: RBI's published FAQ states that the application fee is Rs. 10,000 plus applicable GST. The applicant should verify the current fee and payment instructions on RBI's website when filing.
- Respond to information requests: the compounding authority may seek records, explanations or additional documents necessary to process the application.
- Personal hearing: RBI guidance states that a hearing may be physical or virtual and that attendance is not mandatory if the applicant elects not to attend in writing.
- Compounding order and payment: the order identifies the contravention and the compounding amount. RBI's current FAQ requires payment of the amount stated in its compounding order within 15 days of the order.
RBI amended its compounding directions on 22 April 2025. Among other changes, RBI deleted the earlier provision linking the compounding amount in specified repeat-application circumstances to an earlier compounding order and added payment-identification details intended to improve reconciliation and processing.
Effect of Compounding Under Section 15(2)
The principal legal consequence is finality for the specific contravention that has been compounded. Section 15(2) bars initiation or continuation of proceedings under Section 13 against the person in respect of that compounded contravention.
For an RBI compounding matter, the process is brought to conclusion after payment of the amount specified in the compounding order. RBI states that it then issues a certificate recording compliance with the compounding order. If the amount is not paid within the prescribed period, the consequences stated in the applicable rules and directions apply.
Section 15 and Section 13: How They Work Together
| Provision | Purpose |
|---|---|
| Section 13 | Creates the penalty framework for contraventions of FEMA, rules, regulations, notifications, directions, orders and specified authorisation conditions. |
| Section 15 | Allows an eligible contravention under Section 13 to be compounded on application, in the prescribed manner. |
| Section 15(2) | Prevents initiation or continuation of Section 13 proceedings for the contravention after it has been compounded. |
Official FEMA Compounding Resources
For an actual compounding application, always check the latest official text and filing directions before submission:
- India Code - Foreign Exchange Management Act, 1999
- Department of Economic Affairs - Foreign Exchange (Compounding Proceedings) Rules, 2024
- Reserve Bank of India - Directions on Compounding of Contraventions under FEMA
- Reserve Bank of India - 22 April 2025 amendment to compounding directions
- Reserve Bank of India - FAQs on Compounding of Contraventions under FEMA
- Directorate of Enforcement - FEMA Acts and Rules
This page is a general legal information resource. For a specific transaction or pending proceeding, the applicable FEMA provision, rules, regulations, directions, approvals, facts and current official instructions should be examined together.