The Enforcement Directorate has issued notices to e-commerce platform Flipkart, its founders and nine others for allegedly violating foreign exchange laws, Reuters reported on Thursday.
The notices, reportedly issued in early July, asked Flipkart founders Sachin Bansal and Binny Bansal, as well as an investor, Tiger Global, to explain why they should not face a fine of Rs 10,600 crore, Reuters said.
The Enforcement Directorate alleged that Flipkart attracted foreign investments, after which a warehousing company named WS Retail sold products to buyers on its website. This is legally prohibited.
An official told NDTV that Flipkart has violated the Foreign Exchange Management Act while attracting foreign investments between 2009 and 2015. The company has been asked to respond to the notices in 90 days.
In a statement, Flipkart denied any illegality on its part. “Flipkart is in compliance with Indian laws and regulations, including foreign direct investment regulations,” the company said. “We will cooperate with the authorities as they look at this issue pertaining to the period 2009-15 as per their notice.”
The Enforcement Directorate has been investigating Flipkart and global e-commerce giant Amazon for years for allegedly bypassing foreign investment laws that regulate multi-brand retail, Reuters reported.
In August 2018, Walmart completed the acquisition of a majority 77% stake in Flipkart. The deal, valued at $16 billion, was the biggest of its kind globally. The Competition Commission of India had approved the deal despite protests from traders across the country, who feared that the deal would drive several small retailers out of business.
Last month, Flipkart had announced that it had raised $3.6 billion (about Rs 26,805.6 crore) in funding through investments by GIC, Canada Pension Plan Investment Board, SoftBank Vision Fund 2 and Walmart. With this, the valuation of the e-commerce giant increased to $37.6 billion.