Flipkart, founders, nine others slapped with Rs. 10,600-crore ED notice
Walmart-backed e-commerce platform Flipkart, its founders, and nine other entities including investor Tiger Global have been slapped with notices by the Indian government's Enforcement Directorate (ED) for the alleged violation of foreign exchange (forex) laws regarding investment. They have 90 days to respond with reasons why a fine of $1.35 billion (Rs. 10,600 crore) shouldn't be levied on them. Here are more details.
ED sources cited violation of FEMA rules for notice
NDTV reported that ED sources said Flipkart was in violation of FEMA (Foreign Exchange Management Act) rules since the e-commerce platform and its holding firms including one in Singapore had sought investment from foreign firms between 2009 and 2015. Tellingly, the government agency has been investigating Flipkart and Amazon Inc. for a while now for violating foreign investment laws that regulate multi-brand retail.
Flipkart allegedly attracted foreign investment, violated related laws
Explaining the reason for the notice, ED sources reportedly added that the case concerned an investigation into allegations that Flipkart attracted foreign investment and a related party called WS Retail then sold goods to customers on Flipkart. These actions are in violation of the law. Now the company and its founders have been issued a show-cause notice for the violation.
Flipkart intends to comply with ED investigation: Company spokesperson
A Flipkart spokesperson told Reuters, "The company is in compliance with Indian laws and regulations...We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice". WS Retail ceased operations at the end of 2015. Meanwhile, marquee investor Tiger Global refused to comment on the notice that it has received.
Last month, Flipkart raised $3.6 billion in funding round
Notably, Tiger Global has been an investor in Flipkart for approximately 10 years now. In 2018, Walmart bought out Flipkart co-founder Sachin Bansal's shareholding from the company. Unrelated co-founder Binny Bansal continues to hold a stake. Last month, the company raised $3.6 billion in a round led by SoftBank Vision Fund, CPP Investments, and Walmart. Flipkart is now valued at $37.6 billion.