ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Economic

[sling-shot]

ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Economic Times on Mobile

After over two years of probe Enforcement Directorate is ready to slap a showcause notice to Flipkart.

Top sources in the Directorate told ET Now that, " Our investigation is over and our Bangalore team has found evidence of FEMA violation against Flipkart." Adding that a showcause notice will be issued soon.

The source who refused to be identified explained that India's top e-commerce company had violated provisions of FEMA as WS Retail, the holding company had investments from companies overseas.

FDI norms in India do not allow FDI in e-commerce especially in business to consumer models. In 2013, a year after ED's probe began, Flipkart changed its business model allowing buyers and sellers to deal independently on their platform.

Sources in ED say that, "We are aware of the change in their business model. But we will charge Flipkart for violations till 2013." In fact, as per the FEMA norms, ED can slap a penalty upto three times of the contravention or foreign investment received in this case. ED is likely to showcause the e-tailer over Rs 1000cr as penalty.

"The case has been made out by our investigating team and now the Adjudicating Officer is analyzing the case to take a finally call on the penalty amount" explained a top source in the Directorate.

An Adjudicating Officer is a senior official in ED, generally belonging to the rank of a special director. The Adjudicating Officer analyses the investigation report to ensure the case stands the test of law. Officials in ED explain that once a showcause is issued the company is given the opportunity to contest before the Directorate.

In fact, the company could also compound the offences by appearing before the RBI and pleading guilty of the contravention. But in most cases of FEMA violations the matter ends up in long protracted litigation. "FEMA cases are civil cases to there is no question of criminal proceedings or attachments" explains an official in the Directorate.

But Flipkart is not the only e-tailer on ED's radar, the Directorate is also probing Myntra. But sources tell ET Now that this probe is only in its initial stages.

This probe came to light when in 2012 Anand Sharma the then commerce & industry ministry informed the Parliament about ED's scanner on Flipkart.

 

[Flash]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

There maybe politicians are behind this, as ED directly comes under Central govt.

 

[swatkats]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

Politicians behind this? LOL. Why would a politician have a problem with Flipkart?
In this Case, the Flipkart and couple of Ecommerce sites have violated the laws for bringing foreign funding.

 

[Vyom]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

Can someone explain in English the problem now FK is facing?
Since when getting foreign funding is illegal?!

 

[Anorion]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

FEMA is since 1991, we have Manmohan Singh to thank for that

 

[Desmond]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

FEMA is since 1991, we have Manmohan Singh to thank for that

AFAIK, direct foreign investment is heavily restricted in India.

 

[Anorion]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

yes it is, but many use proxies and back ends to route the expertise, if not the money
For example Croma is Woolworths re-branded and wholly owned by Tata's Infinity retail in India because of FDI norms

 

[tkin]

Re: ED finds FEMA violation against Flipkart, penalty likely to be around Rs 1,000 crore - The Econo

AFAIK, direct foreign investment is heavily restricted in India.

There's a Metro cash and carry near my house that says otherwise, its SUPPOSED to sell wholesale only to shop owners, however it turns out that using a very simple and ever expanding loophole retail users are buying stuff from there by the truckloads, in fact shop owners don't visit there a lot any more.

A few more examples like these are how ITC is selling copybooks which is supposed to be illegal afaik, in India no one needs to follow the laws as long as money reaches the right pockets.