SAFEMA Tribunal reduces penalty for educational trust's FEMA loan rule breach, citing absence of profit motive and prompt compliance efforts.
FEMA Loan Rule Breach by Educational Trust: SAFEMA Reduces Penalty
The SAFEMA Tribunal has reduced the penalty imposed on an educational trust for contravening FEMA’s borrowing framework, acknowledging its non-commercial nature and lack of profit motive.
The trust had availed of a loan from a foreign director without prior RBI approval, violating Regulation 5 of FEMA Notification No. 120. While the breach was admitted, the Tribunal exercised discretion under Section 15 of FEMA to reduce the penalty, factoring in the charitable purpose, no fund diversion, and cooperation during inquiry.
This precedent supports proportionality in enforcement actions against not-for-profit entities. Practitioners should highlight institutional character and remedial conduct when negotiating penalties under FEMA, especially for technical non-compliance in social sector organizations.
Citations
- FEMA, 1999, Regulation 5
- FEMA, 1999, Section 15
