Under Foreign Exchange Management Act, 1999, NRI can not purchase Agriculture land in India. As per Law, you have to apply for compounding of contravention to RBI before RBI take any action. if RBI takes any action, penalty for contravention can be as high as 3 times of amount involved.

2) If an NRI purchases agricultural land, they can face legal action including penalties, confiscation of the property,

1. 
   An offence under Section 3 (b) and (c) is committed attracting penalty under Section up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.
2. 
   The offences can be compounded within one hundred and eighty days by DE.

   180 days limit is for procedure to be competed by DE. There is no such limitation for seeking compounding any time prior to commencing any penal proceedings under the  Act.

   Refer to Foreign Exchange (Compounding Proceedings) Rules, 2000 for clarification.

Your offence may be under section 8. You can refer section 13 in detail for the same

Under the Foreign Exchange Management Act (FEMA), 2000, NRIs are prohibited from directly purchasing agricultural land/

NRIs can invest in residential and commercial properties in India in partnership with residents. 

The Foreign Exchange Management Act (FEMA) governs property transactions for NRIs.

If an NRI purchases agricultural property in India with an Indian partner while concealing their NRI status, they could face severe penalties including confiscation of the property, legal fines, potential imprisonment under the Benami Transactions Act, and possible legal action against the Indian partner involved in the fraudulent transaction; essentially, the government could seize the land and impose significant financial repercussions due to the violation of the Foreign Exchange Management Act (FEMA) rules prohibiting NRIs from buying agricultural land directly. 

Suppressing NRI status to buy property can be considered a "benami" transaction, which is illegal and can lead to severe penalties including property seizure. 

If the authorities discover the fraudulent transaction, they can investigate and take legal action against both the NRI and the Indian partner involved. 

Your case involves violations under FEMA (Foreign Exchange Management Act, 1999) and FERRA (Foreign Exchange Regulation Act, 1973) concerning foreign investments in real estate. Here’s a breakdown of the legal implications:

1. Key FEMA Violations and Relevant Sections

a) Prohibited Transactions under FEMA

• 
  FEMA Section 3: Prohibits dealings in foreign exchange other than through authorised channels. Your NRI partner remitting funds into your firm’s and personal accounts for real estate transactions may violate this provision.
• 
  FEMA Section 6(3)(i): Prohibits NRIs from investing in agricultural land, plantation property, or farmhouses in India. Since your business involved buying and selling agricultural lands, this is a direct violation.
• 
  FEMA Section 13: Provides penalties for contraventions, which can include monetary fines up to three times the amount involved or even confiscation of assets.

b) Specific Rules under FEMA (Non-Debt Instruments) Rules, 2019

• 
  Rule 9(1): NRIs can invest in immovable property but not agricultural land, plantation property, or farmhouses. Your NRI partner’s investment in these properties is a violation.
• 
  Rule 9(2): Payments for NRI investments must be made through normal banking channels under RBI guidelines. If funds were transferred in personal accounts, it raises compliance issues.

2. Penalties and Risks

• 
  For You (Resident Indian Partner): Since you facilitated and executed transactions, you may be liable under FEMA Section 42, which imposes penalties even on persons indirectly involved.
• 
  For Your NRI Partner: He may face penalties under FEMA Sections 3 & 6, since NRIs cannot invest in agricultural land and should have used the proper investment channels (such as NRO/NRE accounts in compliance with FEMA).

Potential Penalties:

• 
  Monetary fine up to 300% of the amount involved under FEMA Section 13.
• 
  Confiscation of property purchased illegally.
• 
  Compounding of offences: If self-disclosed, RBI may allow regularisation with lower penalties.

3. How to Overcome the Issue?

1. 
   Voluntary Disclosure to RBI: Under FEMA Section 15, you can voluntarily disclose the transactions to seek compounding (regularisation) of the offence with reduced penalties.
2. 
   Legal Compliance Review: Engage a FEMA expert or lawyer to review your transactions and suggest a compliance plan.
3. 
   Divest from Agricultural Land: If any properties remain, they may need to be sold as per RBI directions.
4. 
   Ensure Proper Documentation: If your NRI partner exited in 2017, make sure there is a formal exit agreementconfirming that no FEMA violations were intentional.
5. 
   Seek RBI Permission if Required: In some cases, RBI may allow retrospective regularisation under its Compounding Scheme.

Since FEMA violations can lead to strict enforcement actions, it’s best to take proactive legal steps to mitigate risks. If you need help drafting a voluntary disclosure or understanding the exact penalties applicable, I can assist further.

Thanks and Regards,
Advocate Aman Verma
Legal Corridor

Engaging in a partnership with a Non-Resident Indian (NRI) for real estate activities involving agricultural land, plots, and flats requires strict adherence to the Foreign Exchange Management Act (FEMA) regulations. Here's an overview of potential violations and associated penalties:

1. Potential Violations Under FEMA:

• Prohibited Activities: NRIs are generally prohibited from investing in agricultural land, plantation activities, or real estate businesses in India. Real estate business under FEMA refers to dealing in land and immovable property with a view to earning profit, but it excludes activities like development of townships, construction of residential or commercial premises, roads, or bridges.

• Investment in Partnership Firms: While NRIs can invest in partnership firms on a non-repatriation basis, such investments must not be in prohibited sectors, including agricultural or real estate businesses.

2. Applicable Sections and Penalties:

• Section 13 of FEMA: Violations can attract penalties up to three times the sum involved. For ongoing contraventions, an additional penalty may be imposed for each day the violation continues.

• Criminal Proceedings: Severe violations, especially those involving significant sums, can lead to imprisonment for up to five years, along with fines.

3. Liability of Partners:

• Your Partner (NRI): By investing in prohibited sectors, your NRI partner may face penalties under FEMA, including fines and possible imprisonment, depending on the severity of the violation.

• Yourself: As a resident partner facilitating such investments, you are equally liable under FEMA provisions and may face similar penalties.

4. Steps to Mitigate Risks:

• Seek Legal Counsel: Consult with a legal expert specializing in FEMA regulations to assess the extent of non-compliance and explore remedial measures.

• Voluntary Disclosure: Consider approaching the Reserve Bank of India (RBI) or relevant authorities to disclose the contravention voluntarily, which might lead to leniency in penalties.

• Compliance Rectification: Align future business activities with FEMA guidelines to prevent further violations.

Given the complexities and potential repercussions, obtaining professional legal advice is crucial to navigate the situation effectively and mitigate potential penalties.