The Reserve Bank of India (RBI) has issued a compounding order against Apothecon Pharmaceuticals Private Limited for violating the Foreign Exchange Management Act (FEMA). This action led to the closure of the Enforcement Directorate’s (ED) investigation with a one-time payment of Rs 40.52 lakh. The compounding order under Section 15 of FEMA was issued by RBI after receiving a “No Objection” certificate from the ED.
In this case, the ED initiated an investigation based on credible information regarding Apothecon Pharmaceuticals’ delayed reporting of foreign inward remittance and filing delays of required forms. The company was found to have issued shares in violation of FEMA norms, including issuing shares before remittance and beyond the stipulated time frame. Additionally, the company allotted shares without the government of India’s prior approval, contravening FEMA rules.
During the ED investigation, Apothecon Pharmaceuticals applied to RBI for compounding these violations under FEMA. With the ED’s no objection, RBI compounded the contraventions on July 6, 2026. The compounding process, governed by the Foreign Exchange (Compounding Proceedings) Rules, aims to promote voluntary compliance, reduce litigation, and ensure timely resolution of cases under FEMA.
FEMA allows for the compounding of contraventions to encourage compliance and expedite case resolutions. The compounding procedure, detailed in the Foreign Exchange (Compounding Proceedings) Rules, 2024, outlines the application process, case examination, and issuance of compounding orders. Certain contraventions, such as those related to serious offenses like money laundering or terror financing, are not eligible for compounding. RBI, as the competent authority, determines the compounding amount based on factors like the nature and gravity of the contravention.
