Enforcement Directorate (ED) is likely to send a show-cause notice alleging violation of Rs 1,400 crore under Foreign Exchange Management Act (FEMA), reports The Economic Times. The agency has been looking into the activities of the e-commerce site since 2012 for possible violation of foreign investment rules. A source from the ministry told the publication that the directorate now has prima facie evidence that the company flouted the country's FDI rules. India does not allow FDI in multi-retail e-commerce when selling to customers. Flipkart had sold its front end retail operations WS Retail to a group of investors led by former OnMobile COO Rajiv Kuchhal in February 2013 and had adopted marketplace model in April 2013. Do read our white paper explaining the Structuring of Foreign Direct Investments In eCommerce in India. The ED probe is for the period before April 2013, when Flipkart shifted to the marketplace model. There were reports earlier that the directorate raided Flipkart's offices in late 2012, but that was denied by the company. ED has the power to impose a fine up to three times the actual investment allegedly made in violation of FDI laws for such violations, but its not clear how much the directorate plans to fine the company. However, it is worth noting that FDIs in India were affected the last time government agencies went in pursuit of companies, such as Vodafone and Nokia over tax issues. The verdicts have not been entirely in government's favour with those cases and it is not clear if…
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