Enforcement Directorate (ED) on Thursday issued show causes notices to Flipkart and its promoters over alleged foreign exchange (forex) violations. In the notice, Flipkart was asked to explain why they should not face a penalty of $1.35 billion for alleged violation of foreign investment laws, reported Reuters.
According to the report, ED has been investigating Flipkart and Amazon for years for allegedly bypassing foreign investment laws that strictly regulate multi-brand retail and restrict such companies to operating a marketplace for sellers.
Flipkart has been under ED’s scanner since 2012. Sources told Reuters that an investigation was initiated into allegations that Flipkart attracted foreign investment and a related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law.
The show-cause notice was sent to the e-commerce giant, its founders Sachin Bansal and Binny Bansal as well as current investor Tiger Global in July.
Flipkart’s spokesperson said that “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.”
In 2018, US-based retail giant Walmart bought a 77% stake in Flipkart for $16 billion. Last month, Flipkart had announced raising $3.6 billion, which was led by Softbank, Walmart, and Canada Pension Plan Investment Board.