FEMA Update No. 3

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The Update covers a recent decision of the FEMA Appellate Tribunal deciding that acquisition and holding of shares of a foreign entity (even when unpaid) constitutes holding of ‘foreign security’ in contravention of Section 4 of the Foreign Exchange Management Act, 1999, if without prior approval of RBI.

Accordingly, it was held that power of seizure under Section 37A of FEMA can be exercised to seize property of equivalent value in India. However, it may be noted that the Tribunal rejected the Enforcement Directorate’s argument that each transaction of acquisition/holding and transfer should be treated separately for the purpose of seizure.