The Enforcement Directorate has resolved more than 150 cases under the Foreign Exchange Management Act through the compounding process after obtaining approval from the Reserve Bank of India. The initiative is intended to reduce prolonged legal proceedings and facilitate the timely resolution of regulatory matters involving foreign exchange compliance.
According to official information, the cases were settled over the past 15 months after the Reserve Bank of India accepted applications for compounding based on No Objection Certificates issued by the Enforcement Directorate. Once the required penalties were paid, the adjudication proceedings in these matters were formally terminated.
The Foreign Exchange Management Act provides a legal framework under which certain violations can be settled through compounding. This mechanism allows individuals or companies to voluntarily resolve eligible contraventions by paying a monetary penalty instead of continuing with lengthy adjudication or litigation. The process is governed by the applicable provisions of the Act and the regulations framed by the Reserve Bank of India.
Several cases that had remained pending for years have been concluded through this mechanism. One of the significant cases involved Apollo Hospitals and its directors over alleged violations of foreign exchange regulations. Following the payment of the prescribed compounding amount, the Reserve Bank of India closed the proceedings in accordance with the applicable rules.
Other companies have also resolved long pending matters through the same process. Reports indicate that Myntra, Kakinada Seaports Limited, and Genpact India Private Limited completed the compounding procedure after paying the penalties determined by the Reserve Bank of India, leading to the closure of proceedings under the Foreign Exchange Management Act.
Under the established procedure, a person or company seeking to settle a Foreign Exchange Management Act violation submits an application to the Reserve Bank of India. The application is examined in consultation with the Enforcement Directorate wherever required. After the Enforcement Directorate issues a No Objection Certificate and the applicant pays the approved compounding amount, the Reserve Bank formally concludes the proceedings.
Officials have stated that the objective of the process is to encourage voluntary compliance while ensuring that regulatory violations are addressed in accordance with the law. The mechanism is intended to provide an efficient alternative for resolving eligible cases without unnecessary delays, while maintaining accountability under the Foreign Exchange Management Act.
Enforcement Directorate Director Rahul Navin stated that the shift from a purely punitive approach to a more facilitative regulatory framework can contribute to improving the ease of doing business in India. He noted that timely settlement of eligible cases allows regulatory authorities to focus resources on more serious violations while encouraging voluntary compliance among businesses.
Legal experts observe that compounding does not amount to an acquittal or a declaration that no violation occurred. Instead, it is a statutory mechanism available under the law for resolving specified contraventions through payment of prescribed penalties, subject to regulatory approval.
The Reserve Bank of India and the Enforcement Directorate are expected to continue using the compounding mechanism in appropriate cases where the law permits. The approach is aimed at ensuring faster disposal of pending matters while maintaining compliance with India's foreign exchange regulations.