COURTKUTCHEHRY SPECIAL ON STARTUPS FEMA COMPLIANCE RULES
RBI Issues Compounding Order Against Nearbuy India for FEMA Violations
ED confirms closure of proceedings after company admits contraventions and pays penalty
Case highlights importance of timely FEMA compliance for startups and foreign-funded firms
By Our Legal Reporter
New Delhi: December 22, 2025:
The Reserve Bank of India (RBI) has issued a compounding order under Section 15 of the Foreign Exchange Management Act (FEMA), 1999 against Nearbuy India Pvt Ltd, a consumer services company. The order, passed on October 17, 2025, followed a “No Objection” from the Enforcement Directorate (ED), which had investigated the company for alleged FEMA violations.
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According to official statements, the violations included late reporting of foreign inward payments worth ₹35.82 crore and delayed filing of Form FCGPR for share issuances covering ₹73.01 crore.
What the Compounding Order Means
- Compounding under FEMA: A mechanism that allows companies to admit contraventions and pay penalties instead of facing prolonged litigation.
- Termination of Proceedings: Once RBI issues a compounding order, enforcement proceedings are closed.
- Penalty Paid: Nearbuy India reportedly paid a penalty of around ₹4.28 lakh to settle the case.
This process aligns with the government’s “Ease of Doing Business” policy, enabling companies to resolve compliance lapses without criminal prosecution.
Details of Violations
The ED investigation found:
- Late Reporting of Foreign Inward Payments: Under Para 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, Nearbuy delayed reporting inward remittances worth ₹35.82 crore.
- Delayed Filing of Form FCGPR: Under Para 9(1)(B), the company failed to file the required form after issuing shares worth ₹73.01 crore.
- Show Cause Notice: Issued on February 27, 2025, to the company and its directors.
- Complaint Filed: ED filed a complaint before the Adjudicating Authority on December 3, 2024.
After reviewing the case, RBI opted for compounding, closing the matter with a penalty.
Legal and Business Implications
For Companies
- Compliance Burden: Startups and foreign-funded firms must strictly adhere to FEMA timelines for reporting inward remittances and share issuances.
- Risk of Penalties: Delays can attract penalties, though compounding offers a way to settle.
- Reputation Management: Compounding avoids prolonged litigation and reputational damage.
For Regulators
- Ease of Doing Business: Compounding reflects a pragmatic approach, balancing enforcement with business facilitation.
- Transparency: Public disclosure of compounding orders ensures accountability.
Expert Opinions
- Legal Analysts: Stress that FEMA compliance is often overlooked by startups focused on growth. This case is a reminder that regulatory filings are critical.
- Financial Advisors: Note that compounding provides certainty and closure, allowing businesses to move forward.
- Policy Experts: Highlight that India’s compounding framework is designed to encourage voluntary compliance rather than punitive enforcement.
Wider Context
Nearbuy India’s case is part of a broader trend:
- Genpact India: Recently faced similar FEMA proceedings, later compounded by RBI.
- Other Startups: Several tech and consumer firms have been investigated for delayed filings.
- Government Policy: The Union government has repeatedly emphasised simplifying FEMA compliance to attract foreign investment.
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Conclusion
The RBI’s compounding order against Nearbuy India Pvt Ltd underscores the importance of timely FEMA compliance for companies dealing with foreign investments. While the penalty was modest, the case highlights that delays in reporting and filing can trigger enforcement action.
By opting for compounding, regulators have balanced enforcement with business facilitation, reinforcing India’s commitment to ease of doing business. For startups and corporates, the lesson is clear: compliance with FEMA timelines is non-negotiable.
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