RBI Accepts ₹40.5 Lakh Compounding from Apothecon Pharmaceuticals, ED Drops Investigation

The Reserve Bank of India (RBI) has issued a compounding order in the case of Apothecon Pharmaceuticals Private Limited, allowing the company to settle alleged contraventions under the Foreign Exchange Management Act (FEMA) by paying ₹40,52,622. Following the settlement, the Enforcement Directorate (ED) closed its investigation into the matter, citing a no-objection certificate (NOC) from the RBI.

Compounding under FEMA is a mechanism that permits the voluntary admission of contraventions and payment of a monetary penalty to avoid prolonged litigation. The process is governed by the Foreign Exchange (Compounding Proceedings) Rules, 2024, and applies to civil violations under Section 13 of FEMA. However, serious contraventions involving money laundering, terror financing, or threats to national sovereignty are not compoundable.

The ED explained that its policy is to issue an NOC when the contravention is eligible for compounding and all conditions are met, and no other legal impediment exists. “This facilitates voluntary compliance, reduces avoidable litigation and promotes ease of doing business,” the agency stated.

Under the rules, the RBI is the competent authority to compound contraventions within its jurisdiction. It uses a compounding matrix that considers factors like the nature, gravity, duration, and amount involved in the contravention. Applicants may present that the violation was inadvertent, corrective actions have been taken, and robust compliance mechanisms are now in place.

Once the RBI compounds the contraventions, the ED drops proceedings and closes the investigation. In this case, the order was passed on July 6 after the ED issued the NOC.