Finally after months and months of probing into Flipkart’s case, Enforcement Directorate (ED) is ready to slap a show-cause notice of FEMA violation against Flipkart. A recent report by The Economic Times reveals that a source from ED explained that the e-commerce company had violated provisions of FEMA as WS Retail, the holding company had investments from companies overseas, and ED might showcause the company over INR 1000 crore (USD 164 million) as penalty.
Also Read: Is Flipkart really guilty?
It is a known fact that Flipkart has lead the ‘fund raising’ race among eCommerce companies in the country, with many foreign and Indian investors bringing the total raised funds to USD 1.8 billion. It started out as a retailer, dealing with products under the name WS Retail, but switched to a marketplace model in 2013 to steer around from FEMA violations, as FDI in eCommerce is not yet permitted.
The report includes quotes from top sources at ED saying that Sources in ED say that, “We are aware of the change in their business model. But we will charge Flipkart for violations till 2013.” The amount is yet not fixed and there is a chance for Flipkart to fight against this in front of the RBI.
Also Read: Flipkart now against FDI in Internet Retail
Its investors include Accel Partners, DST Global, Tiger Global Management, Morgan Stanley, Vulcan Capital among others. And is obviously not the only eCommerce company to have raised money from foreign investors. Myntra is also said to be under ED probe, but then again, now Myntra is also a part of Flipkart.
Does this mean that the Enforcement Directorate is focussed on targeting one company at a time only? Or is it catching the biggest fish in the sea?
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