ED okays compounding of FEMA violation case against online platform

In a move aimed at facilitating 'ease of doing business', the Enforcement Directorate has given green signal to a compounding order issued by the Reserve Bank of India in a year-long FEMA violation case against a company that hosts an online platform.

A compounding order in the regulatory context means a formal decision taken by an authority to settle an offence by allowing the defaulter to pay a monetary penalty instead of facing prosecution.

The Reserve Bank of India (RBI) issued a compounding order on October 12 under Section 15 of the Foreign Exchange Management Act, 1999 (FEMA) in the case against Nearbuy India Private Limited, a statement from the Enforcement Directorate (ED) statement said.


As a result, proceedings against the company for alleged contravention of the FEMA law was terminated after it made a one-time payment of Rs 4.28 lakh, the federal probe agency said.

"The RBI passed the said order after issuance of a No Objection by the ED," it said.

There was no immediate comment from the company on the ED statement.

ED Director Rahul Navin, while speaking during an 'ED Day' event in May, had said that in order to promote the Union government's policy of 'ease of doing business' and to reduce litigation, the agency will encourage defaulters of this civil law to file applications for "compounding" of the offence, in cases it deemed appropriate.

Officials told PTI that cases of "petty or technical" FEMA violations will be allowed for compounding so that "frivolous" litigations end.

The ED had filed a complaint against Nearbuy India in December 2024 for alleged FEMA violations of over Rs 100 crore on account of certain "late filing and reporting" by the firm.

After completion of the probe, the ED issued a show cause notice in February this year to the company and its promoters.

The company subsequently filed an application before the RBI for compounding of the said contraventions and on reference from the RBI, the ED issued No Objection "in line with the true spirit of the Act," the agency said.

The RBI then issued an order of compounding in favour of the company with a one-time payment of Rs 4.28 lakh. This has resulted in the termination of FEMA adjudication proceedings against the company and its office-bearers and further litigation, ED said.