The Enforcement Directorate (ED) has started investigating the allegation that e-commerce company Flipkart Online Services has violated foreign direct investment (FDI) regulations. A team of ED officials is understood to have visited the company’s office in Bangalore late last month.
Some reports claimed that the officials confiscated certain important documents and computer hard drives from the Flipkart office. This, however, could not be ascertained.
“We are in complete compliance with the laws of the land and we are working with authorities to address the same,” a Flipkart spokesperson said in an email response to a query sent by Business Standard.
Apart from Flipkart, the other e-tailers that have come under the scanner of ED are: Snapdeal, Jabong, Yebhi, Myntra and Fashionandyou. These e-tailers received funding from foreign investors even though FDI was banned in multi-brand retail, according to reports.
“The latest consolidated FDI policy, issued by the government of India on April 10, 2012, while laying down the policy with regard to trading activities under sub-clause 220.127.116.11.1, clearly provides that e-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform,” said Salman Waris, partner and head of Technology Practice, a Delhi-based law firm.
“Such companies would engage only in business to business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well,” he added.
Flipkart’s global investors include Accel Partners, Tiger Global, Naspers and Iconiq Capital. In August this year, the Bangalore-based company had raised $150 million in its fourth round of funding from MIH (part of Naspers Group) and ICONIQ Capital
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