NewDelhi: E-commerce major Flipkart has been served with a show-cause notice of about Rs 10,600 crore by the Enforcement Directorate (ED) in connection with a foreign exchange violation case. As per the officials, as quoted by news agency PTI, the notice under various sections of the Foreign Exchange Management Act (FEMA) was issued to 10 people last month that includes Flipkart, its founders Sachin Bansal and Binny Bansal, among others.
According to the PTI report, the notice was issued after completion of the investigation and the charges include violation of the foreign direct investment (FDI) rules and those that regulate multi-brand retail. The Walmart-owned company and its executives will now undergo adjudication that will be conducted by a Special Director-rank officer of the agency based in Chennai.
According to ED sources, in the notice, they have asked to explain why they should not face a penalty of USD 1.35 billion for alleged violation of foreign investment laws. The sourceS said that Flipkart and its other holding firms including one in Singapore violated Foreign Exchange Magamenet Act (FEMA) while attracting foreign investments between 2009 and 2015.
Meanwhile, reacting to the notice Flipkart said it was cooperating with the ED in this investigation. “Flipkart is in compliance with Indian laws and regulations, including FDI regulations. We will co-operate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” a spokesperson for the e-commerce major said.
The case of alleged FDI rules violation against Flipkart has been under the ED scanner since 2012 and the agency, according to official sources, has found alleged violations of the FEMA under various counts, including an instance of transfer and issue of security to a person or entity outside India. The ED investigation started after the RBI had raised the issue.
According to ED, the investigating agency has found that WS Retail, a firm incorporated in 2009 to transact with customers, was allegedly acting as a front for retail operations of Flipkart Online Services, incorporated in 2008.
In 2018, US-based retail giant Walmart Inc had picked 77 per cent stake in Flipkart for USD 16 billion. Its founders and many of its investors took either a partial or complete exit at that time.
Bureau Report
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