Fair trade regulator CCI Friday said it has approved the deal.
In a statement, the Confederation of All India Traders (CAIT) alleged "it is a clear case of circumventing the FDI Policy in e-commerce" and exhorted Prabhu to "order a probe in the matter and till then the takeover should be stayed".
Amazon India declined to comment on the matter.
"It is highly regretted that CCI has approved the combination based on the competition aspect of the deal. However, we are surprised how can an illegal deal be approved only on competition aspect," CAIT claimed in the statement.
According to the Competition Commission of India (CCI), the deal involves acquisition of 99.99 per cent of the equity share capital of Aditya Birla Retail by Witzig, and 49 per cent stake buy in Witzig by Amazon's subsidiary Amazon NV Investment Holdings LLC.
This also marks the US-based e-commerce major Amazon's second investment in the Indian brick and mortar format, after it had picked up stake in the K Raheja group's retail arm Shopper Stop.
Witzig is a wholly owned subsidiary of Samara Alternative Investment Fund which is registered with the Securities and Exchange Board of India (Sebi) as category II Alternative fund.