Home / Companies / News /  Flipkart co-founder Sachin Bansal challenges ED notice on FDI norm violation before Madras HC

Flipkart co-founder Sachin Bansal has moved Madras High Court to challenge a show cause notice by Enforcement Directorate (ED) over alleged violation of foreign investment laws amounting to 23,000 crore.

The petition by Bansal before the high court seeks to quash the notice as illegal and arbitrary, as far as he is concerned. The interim prayer is to stay its operation. The Flipkart co-founder argued that he does not have any association with the e-commerce giant following his exit from company in August 2018 after it was acquired by Wal-mart International Holdings.

The single-judge bench of Justice R Mahadevan, which heard Bansal's writ petition on Friday, rapped the authorities for the delay of 12 years in issuing the notice. The court adjourned the matter by three weeks, and has directed ED and its officials to file the counters.

In July this year, the financial probe agency had issued a show cause notice against the co-founders of Flipkart and others, asking why they shouldn't face a $1.35 billion penalty over alleged violation of Foreign Exchange Management Act (FEMA) between 2009 and 2015.

The notice was issued on the basis of a complaint filed by the Deputy Director of Enforcement in Bengaluru, for instituting adjudication proceedings under Section 16 of the FEMA norms. It was sent to Flipkart co-founders Sachin Bansal and Binny Bansal, Accel, Tiger Global, Accel nominee director Subrata Mitra, and Tiger Global nominee director Lee Fixel.

The complaint followed an investigation by the Directorate of Enforcement in New Delhi, which commenced in 2012. Bansal mentioned in his petition that he had cooperated in the investigation undertaken by the ED. Bansal said in his petition that given the lapse of time, he believed ED has decided to that no action is warranted in the matter. However, the notice was issued. 

FEMA does not prescribe a statutory period for authorities to file a complaint for initiating adjudication proceedings. But beyond a reasonable period of time any action by the authorities will be directed by the courts, the petition argued.

The chain of events has come to a head as Bansal is trying to secure a universal banking license for his Chaitanya India Fin Credit. While banking regulator Reserve Bank of India may choose to ignore the ED notice, it sure can complicate things.

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