What is the difference between FEMA and FERA — and why does the old law still matter for collectors?
FERA 1973 (Foreign Exchange Regulation Act) was a criminal law — violations were criminal offences, the burden of proof was on the accused, and imprisonment was a penalty. FEMA 1999 replaced FERA and converted most violations to civil offences — burden of proof on the prosecution, penalties are monetary, and offences can be compounded (settled by paying a fine). This is a fundamental change in the nature of liability. FERA still matters because legacy cases from the FERA era still exist, some enforcement agencies cite FERA precedents, and the Prevention of Money Laundering Act 2002 fills the criminal gap FEMA left.
FERA 1973 — the criminal framework
The Foreign Exchange Regulation Act 1973 treated virtually all foreign exchange violations as criminal offences. A person accused of a FERA violation had to prove their innocence — the burden was reversed from the normal criminal presumption of innocence. The Enforcement Directorate (ED) had sweeping powers under FERA. Penalties included imprisonment. For a numismatic collector in the FERA era, taking notes out of India without permission was not merely a civil fine — it was a potential criminal offence with the accused carrying the burden of proving they did not violate the law.
FERA's burden reversal was deeply unpopular and was criticised by courts and legal commentators. The practical effect was that collectors and traders in foreign exchange — including numismatic dealers who operated internationally — faced a legal environment where any accusation created a presumption of guilt that had to be actively rebutted.
FEMA 1999 — the civil framework and why it is better
FEMA 1999, which replaced FERA with effect from 1 June 2000, converted the treatment of foreign exchange from a criminal matter to a civil regulatory matter. Under FEMA: violations are civil offences, not criminal; the burden of proof rests on the prosecution (Enforcement Directorate) to establish the violation; penalties are monetary (up to 3× the amount involved); violations can be 'compounded' — settled by paying a prescribed fine without trial; and imprisonment is not a penalty for civil FEMA violations.
| Dimension | FERA 1973 | FEMA 1999 |
| Nature of violation | Criminal offence | Civil regulatory offence |
| Burden of proof | On the ACCUSED (prove innocence) | On the PROSECUTION (prove violation) |
| Penalty | Imprisonment + fine | Civil monetary fine only |
| Imprisonment | Yes — for violations | No — for civil FEMA violations |
| Compounding | Not available | Available — pay fine, settle, no trial |
| Status | Repealed (June 2000) | Currently in force |
Why FERA still matters — legacy cases and PMLA
FERA was repealed in 2000 but its legacy remains relevant in two ways. First, FERA-era proceedings that were initiated before repeal continue — the ED and courts have handled FERA cases for years after FERA's repeal. Numismatic dealers who operated internationally in the 1980s and 1990s may still have FERA proceedings touching their activities. Second, the Prevention of Money Laundering Act 2002 (PMLA) — enacted after FEMA — restored criminal consequences for serious foreign exchange violations involving money laundering. A FEMA violation that is also a scheduled PMLA offence can trigger criminal PMLA proceedings even though the underlying FEMA violation is civil.
Laws & authorities referenced in this chapter
FERA 1973 (repealed) — criminal foreign exchange regulation; burden on accused
FEMA 1999 — §§1-47 (civil foreign exchange regulation; burden on prosecution; compounding)
FEMA 1999 — §13 (civil penalties), §16 (compounding of offences)
Prevention of Money Laundering Act 2002 — criminal consequences for serious violations; scheduled offences
FERA vs FEMA: FERA = criminal (burden on accused, imprisonment). FEMA = civil (burden on prosecution, monetary fine, compoundable). Repealed in 2000 — FEMA currently governs. FERA still matters: legacy proceedings; court precedents; PMLA fills criminal gap for serious violations. For collectors: FEMA's civil framework is vastly more proportionate than FERA's criminal framework — but compliance is still required. A civil FEMA violation that becomes a PMLA matter can still lead to criminal consequences.
This is educational content, not legal advice. For a specific situation, please consult a qualified legal professional. Excerpted from Currency, Coins & The Law by Mayank Agarwal, Part 12: FEMA & International — Cross-Border Collecting — Currency, Antiquities & Foreign Exchange.