Delhi High Court rules that violation of reinvestment rules under NRNR Accounts attracts penalty under FEMA, but not automatic confiscation of assets.
Delhi HC: NRNR Reinvestment Rules Violation Attracts Penalty, Not Confiscation
The Delhi High Court held that non-compliance with reinvestment conditions under Non-Resident (Ordinary) Rupee (NRNR) Accounts does not entail automatic confiscation of funds under FEMA, but may attract monetary penalty.
The petitioner had repatriated funds without adhering to reinvestment timelines under RBI guidelines. The Directorate of Enforcement sought confiscation under Section 17(1)(a) of FEMA, 1999. The Court rejected this, stating confiscation applies only to property involved in active contraband or prohibited transactions, not technical delays in compliance. The Court cited Ritu Chhabaria v. UOI to emphasize proportionality in enforcement actions.
For practitioners, this underscores that FEMA penalties must be commensurate with the nature of breach. Mere delay or procedural deviation without mala fide intent cannot lead to asset seizure, guiding defense strategies in FEMA adjudication proceedings.
Citations
- Ritu Chhabaria v. UOI (2016) 4 SCC 596
- FEMA, 1999, Section 17(1)(a)
