RBI compounds FEMA violations by Kakinada Seaports, proceedings terminated: ED

The Reserve Bank of India (RBI) issued a compounding order on December 12, 2025, under Section 15 of the Foreign Exchange Management Act (FEMA), 1999, in the case of Kakinada Seaports Limited, which has resulted in the termination of proceedings against the company for alleged contraventions of FEMA, according to an Enforcement Directorate (ED) statement on Friday.

“The order has been passed by RBI after issuance of 'No Objection' by the Directorate of Enforcement (ED),” the official statement read. Acting upon the information received, the probe agency carried out an investigation against the firm under FEMA provisions. A complaint was filed by ED after the investigation with the adjudicating authority on September 5, 2024, citing the violations, which have now been resolved through compounding.

The identified contraventions include:

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• Late reporting of foreign inward payments under Para 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, covering Rs. 22.88 crore
• Delay in filing of Form FCGPR after issuing shares under Para 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, covering Rs. 23.31 crore
• Delay in the issue/allotment of shares under Paragraph 8 of Schedule 1 to FEMA 20, which involved an amount of Rs. 7.21 crores.

On the last day of September 2024, the governing officer issued a notice showcasing the breach under section 16 of FEMA to the company and its directors/officers, who were responsible for business dealings during the conflict period. Later on, the company submitted a compounding application to RBI under Section 15 of FEMA for these contraventions. After receiving the reference from RBI, the ED also gave its “no objection” for the compounding, which was in accordance with the true spirit of the Act.

“Accordingly, the RBI, on the basis of the ‘no objection’ issued by ED, has compounded the said contraventions vide compounding order dated December 12, 2025, with a one-time payment of Rs. 21.68 lakh. This has resulted in termination of adjudication proceedings under FEMA as well as further litigation against the company,” the ED statement added.

Also Read: RBI issues compounding order for FEMA violations by Nearbuy India Pvt. Ltd

FAQs on FEMA and compounding of violations

Q1. What is FEMA?

A: FEMA stands for the Foreign Exchange Management Act, which came into effect in 2000, replacing the older FERA law. The primary purpose of FEMA is to facilitate international trade and payments as well as to maintain the stability of the Indian forex system. It regulates all financial transactions coming in or going out of India, such as foreign investments, shares or bonds purchases by foreign investors, and loans from other countries. In a way, it guarantees that the foreign capital will be used lawfully and safely.

Q2. What do contravention and compounding mean?

A: As a result of the occurrence of a contravention, when someone breaks FEMA's rules or the related regulations. Compounding is a process by which one admits his/her mistake and pays a fee to settle the matter and get it closed. Under the RBI can allow compounding according to Section 15 of FEMA, most probably, after a personal hearing. It benefits individuals or companies by providing a quicker resolution of their violations without getting into lengthy and expensive legal battles.

Q3. Who can apply for compounding?

A: Anyone who commits a breach of the FEMA rules (excluding Section 3(a)) can petition the RBI for compounding. The violations falling under Section 3(a) are referred to the Directorate of Enforcement.

Q4. When should one apply for compounding?

A: You may apply either in a proactive manner, meaning by taking the initiative before anyone discovers the violation, or you may apply after the RBI, auditors, or any other authority recognizes it, which often happens through a “Memorandum of Contraventions.”

Q5. How does one apply for compounding?

A: You can submit applications either physically or online through the RBI’s PRAVAAH Portal. You will have to include the necessary documents as specified in the RBI’s compounding directions (Annexures I, II, and III)