Flipkart, Bharti Walmart under ED scanner for violation of FDI norms

After US retail giant Wal-mart, the Enforcement Directorate has come after homegrown Flipkart for alleged violation of the existing FDI rules, Medianama reportedearlier today.

Flipkart is under the scanner for flouting FDI rules which allow e-commerce companies with foreign investment to carry out business-to-business transactions but not business to consumer transactions.

[caption id="attachment_537507" align="alignleft" width="380"] To date, Flipkart has raised $180 million dollars from Tiger Global and Accel Partners .Screengrab from site[/caption]

A Press Information Bureau release following a written reply in the Lok Sabha by Dr S Jagathrakshakan, Minister of Commerce and Industry stated:

In an earlier notification by the Ministry of Commerce and Industry, the government had decided not to allow online sales by companies which have foreign investors.

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To date, Flipkart has raised $180 million dollars from Tiger Global and Accel Partners, with the latest round of funding that came in February earlier this year where the existing investors pumped in $150 million.

Industry experts note that clarity on the issue is absolutely vital especially when the industry is growing exponentially. "Most companies are breaking the law in spirit. I hope that this probe brings come clarity on the issue and we get closure on this. The industry cannot grow when are there are so many grey areas," said K Vaitheeswaran founder and CEO of Indiaplaza.com, one of the early e-commerce ventures.

Disclosure: Firstpost is owned by Network18 that also owns Homeshop18 that competes with Flipkart