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ED slaps Rs 10,600-crore notice to Flipkart, its founder over alleged forex violations

The show cause notice was issued to 10 people including Flipkart founders Sachin Bansal & Binny Bansal. Flipkart said it's in compliance with Indian laws, including FDI regulations.

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New Delhi: The Enforcement Directorate (ED) has issued a show cause notice of about Rs 10,600 crore to e-commerce major Flipkart and its promoters for alleged violation of the foreign exchange law, official sources said on Thursday.

They said 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.

Sources said the notice was issued after completion of an investigation and the charges include violation of the foreign direct investment (FDI) rules and those that regulate multi-brand retail.

They said 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.

Proceedings under FEMA are civil in nature and the final penalty, post-adjudication, can be at least three times the amount contravened under the law.

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.

However, Sachin Bansal and Binny Bansal could not be contacted immediately.

The case of alleged FDI rules violation against Flipkart has been under the ED scanner since 2012, and the agency, as per official sources, has found alleged violations of FEMA under various counts including an instance of transfer and issue of security to a person/entity outside India.

Flipkart, which competes with companies, including Amazon and Reliance JioMart in the Indian e-commerce space, has seen significant growth over the past many years.

In 2018, US-based retail giant Walmart Inc had picked a 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.

‘In compliance with Indian laws’

Walmart-owned Flipkart Thursday said the company is in compliance with Indian laws, including FDI regulations, and will cooperate with the Enforcement Directorate on the notice sent to the e-commerce major.

When contacted, Flipkart said it is in compliance with Indian laws and regulations, including FDI regulations.

“We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” Flipkart added.

Comments could not be immediately elicited from the founders.

Last month, Flipkart Group had announced raising USD 3.6 billion (about Rs 26,805.6 crore) in funding led by GIC, Canada Pension Plan Investment Board (CPP Investments), SoftBank Vision Fund 2 and Walmart, valuing the e-commerce giant at USD 37.6 billion.

With this deal, SoftBank re-entered Flipkart’s cap table. SoftBank had sold its approximately 20 per cent share when Walmart bought a stake in Flipkart.

Flipkart, which competes with companies including Amazon and Reliance JioMart in the Indian e-commerce space, has seen significant growth over the past many years.


Also read: Zomato, Flipkart, Paytm — flush with unicorns, India’s tech moment arrives


 

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