Kalmadi others face FEMA charges in CWG case

On 24^th July 2014, Enforcement Directorate (ED) has issued show cause notices under the Foreign Exchange Management Act (FEMA) to former MP and the then chairman of the Commom Wealth Games (CWG) Organizing Committee (OC) Suresh Kalmadi, , the then secretary general Lalit Bhanot, the then treasurer A K Matoo, director general V K Verma, joint DG M Jeychandran, deputy DG Sanjay Mahindroo and other officials of the OC.

 The agency has filed FEMA contravention charges on three counts –

• Illegal dealing of foreign exchange (forex).
• Illegal acquisition of forex in violation of RBI norms and
• False declarations filed by the accused during documentation of the financial transactions pertaining to this event.

ED has slapped charges of Rs 4.64 crore forex violations in the Queen's Baton Relay (QBR) event against former CWG organizing committee chief Kalmadi and six others. They have been given 30 days' time to reply to ED's notice after which adjudication proceedings under FEMA would begin. 

Case 

This case pertains to the 2009 QBR event held in London in the presence of former President Pratibha Patil, in the run-up to the October 2010 CWG in Delhi. 

The ED probe in the last five years found that 1,60,425.47 pounds (about Rs 1.2 crore) was "illegally paid to AM Car and Van Hire Ltd, UK, showing hire of services which was not in accordance with RBI permission, besides being highly inflated in nature. ED in its notice mentioned that the accused, including Kalmadi, were signatories to these decisions and hence they stood charged. 

The agency let off CWG joint DG T S Darbari in the case as no evidence was found against him as "no approvals" were sought from him by the OC before taking decisions related to the QBR.

Foreign Exchange Management Act, 1999 

The Foreign Exchange Management Act, 1999 (FEMA) is an Act "to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India". 

It was passed by the Parliament in 1999 and replaced the Foreign Exchange Regulation Act (FERA), 1975. 

This act seeks to make offenses related to foreign exchange as civil offenses. It extends to the whole of India.

 By replacing FERA, it enabled a new foreign exchange management regime consistent with the emerging framework of the World Trade Organisation (WTO). 

As FERA, had become incompatible with the pro-liberalisation policies of the Government of India. It also paved way to Prevention of Money Laundering Act 2002, which was effected from 1 July 2005.

Unlike other laws where everything is permitted unless specifically prohibited, under this act everything was prohibited unless specifically permitted. Hence the tenor and tone of the Act was very drastic. It required imprisonment even for minor offences. 

Under FERA a person was presumed guilty unless he proved himself innocent, whereas under other laws a person is presumed innocent unless he is proven guilty. 

Main Features of FEMA

• Activities such as payments made to any person outside India or receipts from them, along with the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central government the power to impose the restrictions.
• Restrictions are imposed on people living in India who carry out transactions in foreign exchange, foreign security or who own or hold immovable property abroad.
• Without general or specific permission of the, FEMA restricts the transactions involving foreign exchange or foreign security and payments from outside the country to India. The transactions should be made only through an authorised person.
• Deals in foreign exchange under the current account by an authorised person can be restricted by the Central Government, based on public interest.
• Although selling or drawing of foreign exchange is done through an authorised person, the RBI is empowered by this Act to subject the capital account transactions to a number of restrictions.
• People living in India will be permitted to carry out transactions in foreign exchange, foreign security or to own or hold immovable property abroad if the currency, security or property was owned or acquired when he/she was living outside India, or when it was inherited by him/her from someone living outside India.
• Exporters are needed to furnish their export details to RBI. To ensure that the transactions are carried out properly, RBI may ask the exporters to comply with its necessary requirements.[/box]