Mumbai: The Enforcement Directorate (ED) is set to investigate Flipkart Online Services Pvt. Ltd and Bharti Walmart Pvt. Ltd for alleged violations of India’s foreign direct investment (FDI) rules, on a reference from the central bank.
“The Reserve Bank of India has informed that matters related to Bharti Wal-Mart/Cedar Support Services Ltd and M/s Flipkart Online Services Pvt. Ltd, respectively, have been referred to the Directorate of Enforcement for further investigation,” the government said in a statement on Monday.
The department of industrial policy and promotion had in October asked RBI to investigate if US retailer Wal-Mart Stores Inc. had allegedly violated Indian FDI norms by investing in a retail company of the Bharti Group.
Bharti Walmart is an equal joint venture between Bharti Enterprises and Wal-Mart Stores and operates wholesale stores in India under the Best Price Modern Wholesale brand. Cedar Support Services is a part of Bharti Retail.
“We are in compliance with India’s FDI laws. All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India,” a spokesperson for Bharti Walmart said on Tuesday. “The central government has sought certain information and clarification which has been provided by us.”
Wal-Mart Stores is conducting an internal probe into allegations that its executives bribed officials in Mexico, China and India to be able to open local stores faster. Bharti Walmart last week suspended some employees as part of the investigation, media reports have said.
In September, the government cleared a proposal to allow up to 51% FDI in supermarkets, allowing global retailers to set shop in the country. But it decided to not allow companies with FDI to sell their products through online in India, effectively shutting the door on Amazon.com Inc. and other foreign e-commerce firms and preventing foreign retailers entering India from selling online.
“Flipkart is in complete compliance with the laws of the land. We will also work with any authority to assure them of the same,” a Flipkart spokesperson said in an emailed response.
Flipkart is one of the most funded e-commerce retailers in the country and has raised more than $180 million from various global investors.