Under the FEMA compounding guidelines, the Enforcement Directorate granted Flipkart the option last week.
According to those familiar with the situation, the Enforcement Directorate (ED) has offered to close a FEMA violation case against the Walmart group company Flipkart provided it acknowledges its error and pays a fine.
The Enforcement Directorate granted Flipkart the choice last week in accordance with the Foreign Exchange Management Act’s (FEMA) compounding provisions.
“ED has offered Flipkart the opportunity to compound. ED has requested that Flipkart acknowledge its error, pay a fine, and shut down the connected seller network,” a source told PTI.
Flipkart did not respond to an email inquiry.
In order to assess the company’s situation, the ED had also called Amazon India.
A representative for Amazon India responded to a call by saying, “We do not comment on ongoing investigations.
In this case, an inquiry to ED was likewise unanswered. But according to ED sources, they have not offered Flipkart any offers about compounding.
The compounding option provided by the ED is intended to increase India’s bargaining position in the current bilateral trade negotiations with the United States, according to an executive of one of the e-commerce companies who spoke on condition of anonymity.
Without having to deal with drawn-out enforcement processes, firms may use the compounding rules to freely confess violations of the FEMA regulation and resolve the matter by paying a penalty for the violations.
The ED has been investigating Flipkart and Amazon India for allegedly violating FEMA regulations.
There have been claims that these businesses are using their platform to promote deals in an effort to increase sales.
In July 2021, the ED first sent a show-cause notice to Flipkart, associated companies, and individuals, asking them to explain why they should not face additional charges under India’s Foreign Direct Investment laws and regulations for alleged infractions from 2009 to 2015.
The notification referred to the years 2009–2015, prior to the US giant Walmart acquiring the bulk of Flipkart.
In 2018, Walmart purchased the majority of Flipkart.
Even after Walmart bought Flipkart, ED nevertheless gave notice to look into the company’s operations after 2016.
The corporation received its most recent notice in April of this year.
Flipkart is also under investigation by the Competition Commission of India for suspected breaches of competition laws by some of its Indian subsidiaries and other parties.
One of Flipkart’s subsidiaries obtained a non-confidential copy of the CCI DG’s Investigation Report in September 2024, which included allegations of specific breaches of competition law.