RBI violates FEMA in Apothecon Pharmaceuticals case

RBI Headquarters, Mumbai | Photo credit: Reuters

The Reserve Bank of India (RBI) has issued a merger order in the case of Apothecon Pharmaceuticals Private Limited, which resulted in the closure of the investigation against the company by the Executive Directorate under the Foreign Exchange Management Act (FEMA).

A composite lump sum payment order of ₹40,52,622 was approved on July 6 after the ED issued a “no objection certificate (NOC)” probing several FEMA violations, the directorate said.

“In this regard, it may be noted that as part of the enforcement directorate’s policy, NOC is issued where the violation is countable, the prescribed conditions are met and there is no investigation or other legal impediment. This facilitates voluntary compliance, reduces avoidable litigation and eases business,” it said.

Because FEMA is primarily civil legislation, its Section 15 provides for the consolidation of Section 13 offenses to facilitate voluntary compliance, reduce litigation, and ensure expeditious disposition of cases.

The procedure for amalgamation is prescribed by the Foreign Exchange (Merger) Rules, 2024, notified under Section 46 as amended by Section 15 of FEMA, which lays down the manner of making applications, adjudication of cases and passing of orders for amalgamation.

Under the Rules, certain offenses cannot be compounded, including offenses related to a serious offense suspected of money laundering, terrorist financing or affecting the sovereignty and integrity of a nation.

“As per Rule 3 of the Foreign Exchange (Compounding Proceedings) Rules, 2024, the RBI is the competent authority for compounding eligible breaches under its jurisdiction. The RBI has also issued master guidelines for compounding breaches under FEMA, which prescribes a compounding matrix for determining the amount of the compounding amount based on factors such as the nature, gravity, duration and amount of the breach.

“When filing a compounding application, the applicant may argue that the violation was inadvertent, that corrective actions were taken, that robust compliance mechanisms were in place, and that reasonable safeguards were in place to prevent recurrence,” the agency said.

Once the RBI compounds the offences, the ED stops the proceedings and closes the investigation.

Published – 17 July 2026 10:20 AM IST