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Flipkart Co- Founder Sachin Bansal Moves Madras High Court Over Ed's Notice Of Rs. 10,600 Crores For Violation Of Fema

Flipkart Co- Founder Sachin Bansal Moves Madras High Court Over Ed's Notice Of Rs. 10,600 Crores For Violation Of Fema

The co-founder of Flipkart, Sachin Bansal recently approached the Madras High Court over the notice issued by the Enforcement Directorate against the violation of the laws under the Foreign Exchange Management Act, 1999.

BACKGROUND 

A show-cause notice was issued by the Enforcement Directorate on August 5, 2021, against Sachin Bansal and Binny Bansal the co-founders of the E-commerce giant Flipkart.

This step was taken by the Enforcement Directorate as from 2009 to 2014, the now Walmart owned Flipkart had not followed certain conditions as per the Foreign Direct Investment Policy of 2010 while issuing Flipkart Group Companies shares to foreign investors. 

The said notice was issued against the Co-Founder of Flipkart Sachin Bansal and nine other entities/individuals. 

THE ALLEGED VIOLATION 

It is alleged by the Enforcement Directorate that the E-commerce giant and nine others, one of which is based in Singapore, have violated the foreign exchange rules during the period of 2009 to 2014 due to which the anti- money laundering organization issued a show-cause notice against them under the Foreign Exchange Management Act,1999 amounting to INR 10,600 Crores.

Another contention for which the ED has issued the notice is “transfer and issue of security to the person outside India.” 

RESPONSE OF THE ACCUSED 

Sachin Bansal has approached the Madras High Court claiming that the investigation  due to which the notice has been issued dates back to 2012 -13, while the notice is issued after nine years even though they cooperated in the investigation completely.

Furthermore, in his petition, the co-founder of Flipkart, who is presently the managing director and chief executive officer of a fintech company Navi Technologies stated that he has no association with the company anymore. 

He claimed that he had cooperated with the ED at the time of investigation but later the agency  issued a notice that the co-founders were liable for violating the Foreign Direct Investment Policy which amounted to INR 23,000 Crores, however, this notice was later impugned. 

The petition also held that the Enforcement Directorate should work within a reasonable time period as they have been served with a notice after almost 9 years of investigation. 

RESPONSE OF FLIPKART 

The E-commerce giant which is presently owned by Walmart, led by Kalyan Krishnamurthy has stated that they would cooperate with the authority in the investigation. 

The company has also been under the probe of the Competition Commission of India as it is believed that they were involved in certain anti-competitive practices.   

PRESENT SCENARIO 

Justice R. Mahadevan, on Friday  3rd September 2021, inquired into the matter asking the Enforcement Directorate for an explanation regarding why they had failed to take any action against this violation for the last twelve years. 

Furthermore, the Hon’ble  Judge ordered the ED to justify the same within three weeks.

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