Enforcing the Order: Civil Imprisonment and the Unborn Section 14A

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Section 14 is how a FEMA penalty is enforced against a person who will not pay, and it is the only imprisonment the Act ordinarily contains. Precisely: section 14 provides for civil imprisonment where a person fails to pay a penalty within ninety days of service of the notice for payment; and section 14A, which would have given a power to recover arrears of penalty, was inserted by Act 28 of 2016 but has never been notified.

Why a civil statute needs an enforcement provision

Because a penalty that cannot be collected is not a sanction. FEMA gave up imprisonment for the contravention itself, which is what makes it a management statute; but if the only consequence of a contravention were a monetary demand which the person could simply ignore, the whole regime would be advisory.

The Act therefore borrows the civil law's answer to a judgment debtor who will not pay. Civil imprisonment is not punishment for the original wrong; it is coercion directed at a person who has the means and refuses. That distinction is what makes section 14 consistent with the civil character of the Act, and it is the point an examiner is testing when the question asks whether FEMA provides for imprisonment.

Facts. In Director of Enforcement v. MCTM Corporation (P) Ltd, (1996) 2 SCC 471, penalty proceedings were taken under sections 23(1)(a) and 10 of the Foreign Exchange Regulation Act 1947 for failure to repatriate foreign exchange, and the respondents contended that no penalty could be imposed without proof of mens rea, a guilty mind, as in a criminal prosecution.

Held. Adjudication of a penalty under the Act is for the breach of a civil obligation, mens rea is not an essential ingredient, and the delinquency itself is the blameworthy conduct which attracts the penalty.

Why it belongs in this chapter. It fixes what section 14 is enforcing. The sum owed is the consequence of a civil obligation broken, so the machinery that collects it is the civil law's machinery against a defaulting debtor, not a sentence for a crime. Read section 14 against that background and its two conditions, dishonest dealing with property or means coupled with refusal, are exactly the conditions on which the civil law has always allowed a debtor to be detained.

Section 14: civil imprisonment

Section 14(1) provides that, subject to the provisions of sub-section (2) of section 19, if any person fails to make full payment of the penalty imposed on him under section 13 within a period of ninety days from the date on which the notice for payment of such penalty is served on him, he shall be liable to civil imprisonment under this section.