The Enforcement Directorate (ED) has initiated investigations into foreign currency transactions by two e-commerce majors, Flipkart and Amazon, under the Foreign Exchange Management Act (FEMA).
The two companies, along with the respondent (the Union of India), had been issued a notice by a Delhi High Court bench on July 30, 2018, on a PIL by Telecom Watchdog, an NGO, alleging violation of foreign direct investment (FDI) norms. Now the ED has filed its reply to the court, saying that they had registered the investigation against Amazon and Flipkart under FEMA and the probe was under progress.
The case is coming up for hearing on November 19.
As per the reply (seen by Newsclick), filed by MN Thyagaraj, Assistant Director, ED, the department has already registered and initiated investigation under the provisions of FEMA 1999 against the two respondent companies, to ascertain whether these firms have “been contravening any provisions of FEMA 1991 or contravening any Rule, Regulations, Notification, Direction or Order issued in exercise of the powers under FEMA 1999 or contravening any condition subject to which an authorisation issued by the Reserve Bank of India etc., for which the investigation under FEMA 1999 is under progress.”
The PIL had urged the government to investigate FDI violations by Amazon through companies such as Prione Business Services Pvt Ltd and Cloud Tail India Pvt Limited. and by Flipkart through Shreyash Retail Pvt Ltd, Tech-Connect Retail Pvt Ltd, Health & Happiness Pvt Ltd, Consulting Rooms Pvt Ltd, Savadika Retail Pvt Ltd.
Retailers Associations have been for long demanding a probe into alleged violation of FDI norms by e-commerce sites which, they accused of “engaging in direct business-to-consumer sales by selling their own brands instead of solely staying within the realm of business-to-business transactions, as allowed”, a Quint report SAID.
As per government rules, 100% FDI is allowed in B2B e-commerce, not in B2C.