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Business Environment Chapter 18 MRTP Act, FERA & Fema 1
Business Environment Chapter 18 MRTP Act, FERA & Fema 1
Business Environment
This Act was enacted to prevent the concentration of economic power to common detriment, control of monopolies, and prohibition of monopolistic and restrictive trade practices (MRTP) and matters connected therewith.
Restrictive Trade Practices (RTPs) Section 2(O) defines restrictive trade practices (RTPs), which may be investigated by the MRTP Commission under Section 37 of the Act. RTPs include differential or discriminatory incentives based on quantities, stipulation in agreement as to the prices that should be charged on resale, territorial restrictions and restricting terms of guarantee, bumper prize contests wherein the prices of goods are increased to cover the cost of prizes, announcing loan facilities without a guarantor while charging guarantors commission, sale of goods for a particular price and issue of cash memos for a lesser sum, display of price lists indicating maximum recommended rates, and absence of indication that a lower price could be charged thus encouraging the consumer
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Business Environment
Money Changers
The Reserve Bank may, on an application made to it in this behalf, authorise any person to deal in foreign currency. An authorisation under this Section shall be in writing and
i. may authorise dealings in all foreign currencies or may be restricted to authorising dealings in specified foreign currencies only; ii. may authorise transactions of all descriptions in foreign currencies or may be restricted to authorising specified transactions only; iii. may be granted with respect to a particular place where alone the moneychanger shall carry on his business; iv. may be granted to be effective for a specified period, or within specifi ed amounts; v. may be granted subject to such conditions as may be specifi ed therein.
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Except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall in India, and no PRI other than an authorised dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorised dealer, any foreign exchange, provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a moneychanger. For the purposes of this subsection, a person, who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person.
Except with the previous general or special permission of the Reserve Bank, no person, whether an authorised dealer or a moneychanger or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank.
Business Environment
Restrictions on Payments a. make any payment to or for the credit of any PROI; b. receive, otherwise than through an authorised dealer, any payment by order or on behalf of any person who is a resident outside in India. For the purposes of this Clause, where any person in, or a resident in, India receives any payment by order or on behalf of any PROI through any other person (including an authorised dealer), without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorised dealer; c. draw, issue, or negotiate any bill of exchange or promissory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any PROI; d. make any payment to, or for the credit of, any person by order or on behalf of any PROI; e. place any sum to the credit of any PROI;
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From FERA to FEMA In the wake of an acute shortage of foreign exchange in the country, the Government of India enacted the Foreign Exchange Regulation Act (FERA) in 1973. Under this controversial piece of legislation, foreign exchange law violators (which sometimes included big names in the Indian industry) were treated as criminals and dealt with sternly. Realising that FERA was not in tune with the economic reforms initiated since 1991, the government replaced it with a new legislationForeign Exchange Management Act (FEMA), 1999, which came into eff ect from June 1, 2000. FERA remained a nightmare for 27 years for the Indian corporate world. FEMA set out its objectives as facilitating external trade and payment and promoting the orderly development and maintenance of foreign exchange market in India. Under FEMA, foreign exchange law violators are treated as civil off enders rather than as criminals as was the case under FERA. Contravention of the provisions of FEMA invites monetary penalties. Moreover, FEMA provides for a number of appellate authorities which Business Environment Chapter 18 MRTP Act, FERA &
FEMA
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Residential Status
One of the important changes in FEMA relates to the Residential Status of a Person.
The terms person and person resident in India (PRI) are defined under Sections 2(u) and 2(v) of FEMA, respectively.
Ironically, like FERA, FEMA, too, does not define the term Nonresident. Section 2(w) defines person resident outside India (PROI) as a person who is not a resident in India.
For all practical purposes, the term person resident outside India is synonymous with the term non-resident and these terms are used interchangeably in this book.) Let us look closely at these two important definitions under FEMA, which are as follows: Defi nition of Person Section 2(u): Th e term Person includes i. an individual, ii. a Hindu Undivided Family (HUF), iii. a company,
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Non-resident Indian (NRI) Section 2 of the FEMA deals with various definitions. It defi nes a PRI and a PROI. However, Notification No. 5/2000-RB (dealing with various kinds of bank accounts) defines the term Non-resident Indian (NRI) to mean a person resident outside India (PROI), who is either a citizen of India or is a Person of Indian Origin (PIO). The term PIO has been defined differently in different Notifications; and therefore, the term NRI, in turn, will have a different meaning. In short, one should bear in mind that the definitions of NRI and PIO are contextual. Person of Indian Origin (PIO) The term Person of Indian Origin (PIO) is defined differently in different Notifications and, therefore, the term NRI will have a different meaning depending upon the Notification one applies. Therefore, when applying provisions of FEMA, one must be careful about the reference and context of such application.
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