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IAMAI to help ecommerce companies fight FDI violation allegations

The Internet And Mobile Association of India (IAMAI) has filed an impleadment application to the Delhi High Court on Monday to become a respondent to a petition filed against ecommerce firms for allegedly violating India’s foreign direct investment (FDI) laws.

An impleadment application allows a new entity to participate in an ongoing case if that entity is able to prove it will be affected by the outcome of the case. Justice Rajiv Sahai Endlaw, who is hearing the case, allowed IAMAI to file its responses and has set the next date of hearing to February 26, 2016. Ecommerce companies such as Snapdeal, Flipkart and e-Bay are a part of the IAMAI.

In the last hearing in November, Justice Endlaw had ordered India’s Enforcement Directorate to investigate 21 e-commerce companies after finding “prima facie” violations of India’s FDI laws. At that time, six companies were already under investigation.

AIFMRA petition: The All India Footwear Manufacturers and Retailers Association (AIFMRA) had filed a petition against 21 eCommerce companies in August this year alleging violation of India’s FDI policies. India does not allow FDI in business to consumer (B2C) eCommerce but allows 100% foreign investment in the business-to-business (B2B) segment.

Online retailers — many of which are heavily backed by overseas investors — have switched to a marketplace model, acting as a platform for buyers and sellers in an effort to workaround the regulations on FDI. The lawyers for AIFMRA argue that online retailers process payments, deliver the items, take returns, and make refunds — acting just like a traditional retailer — despite being a marketplace enabling transactions. Meanwhile, the Indian government also eased foreign direct investment rules in 15 sectors including banking, broadcasting, single brand retail and banking in November.

That some month, Nirmala Sitharaman, India’s commerce minister, said the government will soon come out with a definition of eCommerce, which will be helpful in resolving the disputes over controversial issues such as taxation and foreign investment. Earlier this month, the Reserve Bank of India said Alternate Investment Funds such as Venture Capital Funds will now be considered a domestic investments if the fund is managed or sponsored by an Indian resident.

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Image source: Tori Rector under CC BY SA 2.0

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