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.
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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.
It competes against other marketplaces such as Snapdeal, Amazon and eBay in India.