Which one of the following statements is correct with reference to FEMA in India?
A
The Foreign Exchange Regulation Act (FERA), was replaced by Foreign Exchange Management Act (FEMA) in the year 2001
B
FERA was given a sunset clause of one year till 31st May 2002 to enable Enforcement Directorate to complete the investigation of pending issues
C
Under FEMA, violation of foreign exchange rules has ceased to be a criminal offence
D
As per the new dispensation, Enforcement Directorate can arrest and prosecute the people for the violation of foreign exchange rules
Correct Answer: Option C
Explanation
1. The question asks for the correct statement regarding the Foreign Exchange Management Act (FEMA) in India.
2. Option (A) states FERA was replaced by FEMA in 2001. This is incorrect; FEMA replaced FERA with effect from June 1, 2000 (Act passed in 1999).
3. Option (B) mentions a sunset clause for FERA till May 31, 2002, for pending investigations. This sunset clause existed, allowing pending FERA cases to be adjudicated under FERA rules for a period.
4. Option (C) states that under FEMA, violation of foreign exchange rules ceased to be a criminal offence. This is correct; FEMA decriminalized violations, treating them primarily as civil offences punishable by penalties, unlike FERA which treated them as criminal offences.
5. Option (D) states the Enforcement Directorate can arrest and prosecute people. While the ED investigates FEMA violations, arrest powers are limited compared to FERA, and prosecution as a criminal offence is generally not the case under FEMA (it's civil).
6. Considering the key change brought by FEMA, statement (C) is the most accurate and significant correct statement. The official answer is (C).