Foreign Exchange Management Act
The Foreign Exchange Regulation Act of 1973 (FERA) in India was repealed on 1 June, 2000. It wasreplaced by the
Foreign Exchange Management Act
(FEMA), which was passed in the winter sessionof Parliament in 1999. Enacted in 1973, in the backdrop of acute shortage of Foreign Exchange in thecountry, FERA had a controversial 27 year stint during which many bosses of the Indian Corporate worldfound themselves at the mercy of the Enforcement Directorate (E.D.). Any offense under FERA was acriminal offense liable to imprisonment, whereas FEMA seeks to make offenses relating to foreignexchange civil offenses.FEMA, which has replaced FERA, had become the need of the hour since FERA had becomeincompatible with the pro-liberalisation policies of the Government of India. FEMA has brought a newmanagement regime of Foreign Exchange consistent with the emerging frame work of the World Trade Organisation(WTO). It is another matter that enactment of FEMA also brought with itPrevention of Money Laundering Act, 2002 which came into effect recently from 1 July, 2005 and the heat of which isyet to be felt as “Enforcement Directorate” would be invesitigating the cases under PMLA too.Unlike other laws where everything is permitted unless specifically prohibited, under FERA nothing was permitted unless specifically permitted
. Hence the tenor and tone of the Act was very drastic. It providedfor imprisonment of even a very minor offence. Under FERA, a person was presumed guilty unless he proved himself innocent whereas under other laws, a person is presumed innocent unless he is proven guilty
.
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Objectives and Extent of FEMA
The objective of the Act is to consolidate and amend the law relating to foreign exchange with theobjective of facilitatingexternal tradeand payments and for promoting the orderly development andmaintenance of foreign