NEW DELHI, MAY 31: The draconian Foreign Exchange Regulation Act (FERA) will lapse into history on Thursday bringing relief to the corporate world. Enacted in 1973 in the backdrop of acute shortage of foreign exchange in the country, FERA had a controversial run for 27 years during which many big names in the Indian corporate world found themselves at the receiving end in the hands of the Enforcement Directorate (ED).But even today some feel that FERA was necessary to deal with those who have stashed money abroad. The Foreign Exchange Management Act (FEMA), which will replace FERA, was enacted by the Government as it became incompatible with its pro-liberalisation policies.The most significant change brought in by FEMA is that forex law violators would no longer be treated as criminals but as civil offenders. Sections three to nine of FEMA spells out the do's and don'ts for those dealing in foreign exchange but contravention of these provisions would invite a monetary penalty amounting to a maximum of three times the sum involved, in contrast to five times prescribed in FERA. While specifying that there would be no prosecution in the forex violation cases, the law provides that in case an offender fails to pay the penalty the ED could move the court, which could send him to jail.In jail also the offender would be treated like a civil prisoner, who has to pay for his stay behind bars. The cases already under FERA purview would have to be settled within a time period of two years, that is May 31, 2001, beyond which it would lapse. However, if the FERA cases were in court, it would end with the verdict given by the judicial officer.There are around 4,000 cases which are before the courts under FERA and another 3,000, in which investigation is almost complete and the same ready for filing before the competent courts, said ED Chief Sot S Dawra. He said the ED might not be in a position to pursue 346 cases which are still in nascent stage and added these cases would automatically move under FEMA.FEMA provides for a number of appellate authorities who could be approached by a person against whom the Directorate officials have adjudicated and levied penalty. Section five and six of the Act provides for freer convertibility of Rupee into other currencies with regard to `current account transactions' as compared to the same in `capital account transactions'. FEMA has been welcomed by the industrial chambers with ASSOCHAM saying that the introduction of the new law was in tune with economic liberalisation which has proved beyond doubt that stringent laws of the early seventies need to be done away with.It advocated transfer of all pending cases under FERA to FEMA saying "Government may provide for compounding of all offences pending under FERA as provided under the new law."
