BENGALURU: E-commerce biggies in India are facing the regulatory heat amidst huge jump in revenues, profits with Covid proving to be a boon. The Enforcement Directorate has served a show-cause notice to Walmart-owned Flipkart, its co-founders, Sachin Bansal and Binny Bansal, and an investor, Tiger Global, warning them of slapping with a $1.35-billion fine due to violations of the Foreign Direct Investment Act and Foreign Exchange Management rules.
The notice comes after the investigating agency initiated a probe into Amazon’s business model earlier this year for violation of the country’s foreign investment rules. A Flipkart spokesperson told this publication that the company is in compliance with Indian laws and regulations, including FDI regulations. “We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” the company spokesperson said.
Sources said that the ED notice pertains to a seller entity, WS Retail, which was owned by Sachin Bansal and Binny Bansal, incorporated in 2009 in Bengaluru . WS Retail was reportedly driving more than 60% of the sales on the platform, which was found in violation of the country’s 2016 FDI rules.
Even as Flipkart announced that it has severed all the ties with WS Retail, sellers have alleged that the e-tailer continues to work with the entity.
A cursory look on Flipkart platform revealed that WS retails has been delisted, however, the company has common board of directors with other sister firms who sell on Flipkart, Myntra marketplaces.
Traders’ bodies like Confederation of All India Traders (CAIT) and All India Online Vendors Association have accused Flipkart of re-branding some seller firms, where its former executives have been appointed as board of directors.
“Companies like WS retail on Flipkart, Cloudtail and Appario on Amazon are currently driving more than 80% of the sales. We have written to the law agencies as well as the union ministry. Although Sachin Bansal, Binny Bansal sold the shares of WS retail, Flipkart still has stakes in the firm which is in violation of the laws. We also demand a similar notice to be served to Amazon,” said Praveen Khandelwal, General Secretary, CAIT.