In the matter of: Datamatics Global Services Ltd (Applicant Company)
Order Dated: February 24, 2020 CA No 5004/ 2019
Compounding for contraventions:
- Delay in submission of Form ODI for remittances
- Delay in submission of annual performance reports (APRs) for the years from 2007 to 2016
Regulation: Violation of Regulation 6(2)(vi) and Regulation 15(iii), respectively of Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 notified vide Notification No. FEMA 120/2004-RB dated July 7, 2004 as amended from time to time (hereinafter referred to as Notification No. FEMA 120/2004-RB).
The Applicant Company was in the business of providing Information Technology, Data Management, Business Process Management and Consulting Services to Indian and overseas clients.
The Applicant Company had made an overseas direct investment (ODI) in March 2006 to set up a wholly owned subsidiary (WOS) in Germany viz. Datamatics Global Services – GMBH (DGSG).
In this connection, the applicant company had made two remittances amounting to EUR 5,85,000 on March 01, 2006 out of which EUR 5,80,000 was towards equity and EUR 5,000 was towards loan. However, the entire remittance of EUR 5,85,000 was declared as equity by the applicant while filing the Form ODI/ODR.
The revised Form ODI was submitted with delay and was taken on record on May 17, 2019. The applicant company has subsequently disinvested on November 08, 2017, which has been reported and taken on records.
The Applicant Company had also delayed in filing APRs with respect to its WOS for 10 years (from 2007 to 2016).
The Applicant Company has filed the application dated August 22, 2019 for compounding of contraventions of the provisions of the Foreign Exchange Management Act, 1999 (the FEMA) and the regulations issued thereunder.
Contravention of the Regulatory Provision: Regulation 6(2)(vi) of Notification No.FEMA.120/2004-RB- Regulation 15(iii) of Notification No.FEMA.120/2004-RB. Indian Party has to submit to the Reserve Bank every year within 60 days from the date of expiry of the statutory period as prescribed by the respective laws of the host country for finalisation of the audited accounts of the Joint Venture/Wholly Owned Subsidiary outside India or such further period as may be allowed by Reserve Bank, an annual performance report in form APR in respect of each Joint Venture or Wholly Owned Subsidiary outside India set up or acquired by the Indian Party and other reports or documents as may be stipulated by the Reserve Bank.
Amount and Period of Contravention
The amount and period of contravention involved was as follows:
- Regulation 6(2)(vi) – Rs 3,15,90,000/- and the period of contravention is from March 01, 2006 to May 17, 2019
- Regulation 15(iii) – delayed APRs for the 10 years (2007-2016)
Compounding Penalty: a penalty of Rs.7,72,500/- (Rupees seven lakhs seventy two thousand five hundred only) was levied on the Applicant Company.
The Companies having Overseas Direct Investment need to ensure that all the filings in RBI are done as per the time stipulated in the Regulations by RBI.