Foreign Exchange Management Act

With the liberalization and globalization, it was felt that the foreign exchange regulation act
1973 should be replaced by more business friendly act; therefore the FEMA of 1999 came into
existence.
The main objective of the act was to consolidate and amend the law relating to foreign
exchange, with the objective of facilitating external trade for promoting orderly development and
maintenance of foreign exchange market in India.

Definitions:

a) Authorized Person: Authorized person is any authorized dealer, money changer of sure
banking units.

b) Money Changer: To provide facilities for encashment of foreign currency from tourist etc,
reserve bank has granted limited permission to certain established firms, hotels and other
organizations, permitting them to deal in foreign currency notes and travelers cheque’s subject to
directions issued to them from time to time. These firms and organizations are called authorized
money changers.

c) Currency: It includes all currency notes, postal orders, money orders, cheques, drafts,
traveler’s cheques, letter of credit, bill of exchange, credit card and all other similar instruments
notified by reserve bank.

d) Foreign Exchange: It means foreign currency which includes Deposits, Credits, Balance
payable in any form of currency.
 Module 1

Definition of business law: Law may be defined as the rule of conduct, recognized and enforced
by the state to maintain peace and order in the society.
According to Salmond “Law is the body of principles recognized and applied by the state in the
administration of justice”

How law comes into existence?

Whenever government thinks that it is essential to regulate a particular area, then the matter
will be referred to the parliamentary committee who will make a detailed study on the matter and
submit the report to the parliament.
After the debate and approval in both the houses of the parliament. President of India will
finally approve it, at this point act comes into existence and the government through its various
departments will enforce it in the country

Plaintiff and Defendant are the two parties in a case; plaintiff is the person who initiates the case
and defendant is the one on whom the case is initiated.

Why the knowledge of law is important?

There is a well known maxim which says “Ignorantia juris non excusat” which means that
ignorance of law cannot be excused. Thus a person cannot escape liability on the grounds of
ignorance of law however this does not mean that every member in the society must learn every
branch of law. The requirement is that he must know something about the rules and regulations
by which he is governed and the general principles of the law.

Branches of Law:
1) Civil Law
2) Criminal Law
3) Constitutional Law
4) Industrial Law
5) International Law
6) Merchandise Law or Business Law

Business Law is the branch of law that governs and regulates the trade and commerce.
Scope of business law: With the increasing complexities of the modern world, the scope of
business law has enormously widened. It generally includes the laws relating to contract, sale of
goods act, partnership, company, negotiable instruments, insurance, insolvency, arbitration,
MRTP and Competition, Foreign exchange and management, Intellectual property and
environmental protection etc.

Source of business/merchentile law:

1) English Merchantile Law: The English merchentile law constitutes the foundation on which
the super structure of Indian merchentile law has been built. Our sale of goods act for instance
has been taken from English sale of goods act.
2) Precedence: The past judicial decisions of courts referred to as precedence are the important
source of law. They are generally followed by courts in deciding similar cases before them.
3) Statutory Law: Legislation or statutory is the most important source of law. Legislation is the
making of law and in India the central and the state legislatures possesses law making power and
have enacted number of laws which covers various aspects of business.
4) Customs and usages: The custom and usage of particular trade are important source of Indian
merchentile law. Custom in simple words means a usage or a common practice to many or a
particular place. In other words it is a long established practice considered as unwritten law.

Constitution is the fundamental law of the country which reflects the fundamental principles on
which the country is based. It lays down the framework and principle functions of various organs
of the government as well as the modalities of interaction between the government and its
citizens.
Almost all the democratic countries have written constitution which was enacted by constituent
assembly under the chairmanship of Dr B R Ambedkar.

Features of Indian Constitution:

1) Its the largest written constitution as it includes:
a) Incorporation of good provisions of the constitutions of other countries.
b) Absence of separate constitution for union and state government.
c) Incorporation of fundamental rights, duties and directive principles of state policy.
d) Provisions regarding problems of minorities, schedule casts and schedule tribes.
e) Provisions related to minorities.
f) Combination of rigidity and flexibility.
g) It provides parliamentary system of government.
h) It includes 6 fundamental rights.
i) It includes directive principles of state policy.
j) It includes fundamental duties.
k) It makes India a secular, socialist state.
l) It provides right of universal adult franchise.
m) Single Citizenship.
n) Independent Judiciary.
o) Provisions of Minorities.

The constitution is divided into 3 parts:

1) Pre Amble
2) Fundamental Rights.
3) Directive Principles of State Policy.

1) Pre Amble: It gives an introduction to the constitution. It outlines its aims and objectives. The
Pre Amble to the Indian constitution declares that “We the people of India having solemnly
resolve into Sovereign, Socialist, Secular, Democratic, Republic and to secure all citizens”

a) Justice: Social, Economic and Political

Liberty of thought, expression, belief, faith and worship.
Equality of status and opportunity.
Fraternity assuring the dignity of the individual and the unity of the nation.
b) Sovereign: India is independent both internally and externally and is not dependent on outside
authority.

c) Socialist: Ownership of means of production and distribution by the state.

d) Secularism: State is only concerned with relations between various citizens and not concerned
with the relationship between men with god.

e) Democratic: Government draws its authority from the people.

f) Republic: We have our own constitution and head of the state i.e. president is an elected
person and shall hold the office for a fixed period of time.

2) Fundamental Rights: The constitution of India provides certain rights to the citizens of India
known as fundamental rights. These rights are contained in part 3 of the constitution and are
concerned with the freedom of an individual and are important for the development of the human
personality and happiness.
There are 6 fundamental rights, these fundamental rights provides freedom which is absolute
but are justifiable. It means they are judicial and forcible. The fundamental rights are different
from the legal rights as the legal rights are protected and enforced by ordinary law whereas
fundamental laws are protected by the constitution.
The 6 fundamental rights are:
1) Right to Equality.
2) Right to freedom: 5 kinds of freedom are provided to the citizens:
a) Freedom of speech and expression.
b) Freedom of assembly.
c) Freedom of movement.
d) Freedom of profession.
e) Right against exploitation.
f) Right to freedom of religion.
g) Freedom of cultural and educational rights.
h) Right to constitutional remedies.

3) Directive Principles of State Policy: They are contained in the part 4 of the constitution and
they set certain rules to be taken up by the government in governance of the country.
They provide the social and economic basis to the democracy. While formulating any policy,
the government has to take into account these rules and they are non justifiable.

Directive principles of state policy are classified into 3 heads: