ED initiates probe against Amazon for possible FEMA violations
The Enforcement Directorate (ED) has initiated a probe against Amazon.com Inc to examine if it has violated any provisions of the Foreign Exchange Management Act (Fema) in a 2019 deal with the Future group. The development came on a day the online retail giant urged the Delhi high court to order the enforcement of the award given by Singapore’s Emergency Arbitrator (EA) that restrains the Future group from selling its retail assets to Reliance Retail.
On Thursday, a PTI report quoting official sources said that the ED had initiated a probe under various sections of Fema against Amazon after it received a communication from the commerce ministry seeking “necessary action” against e-commerce players pertaining to certain multi-brand retail businesses.
The ED step also came after an observation made by the Delhi high court last month when it was hearing the dispute between the Future group and Amazon.
However, an Amazon spokesperson said the company was “not aware of any new case by the ED against Amazon India”.
The high court had then said that the attempt made by the e-commerce giant to control Future Retail through a conflation of agreements with the unlisted unit of the Indian company would be considered as violative of Fema and foreign direct investment (FDI) rules.
In August 2019, Amazon had agreed to purchase 49 per cent of one of Future group’s unlisted firms Future Coupons Ltd, which owns 7.3 per cent equity in Future Retail through convertible warrants, with the right to buy into the latter after a period of three to 10 years.
While the ED could now seek details from Amazon and other stakeholders”, it started the probe on the basis of a recent communication sent to it by the Department for Promotion of Industry and Internal Trade (DPIIT) that functions under the commerce ministry.
The DPIIT had forwarded a representation made by the Confederation of All India Traders (CAIT) alleging that major e-commerce players like Flipkart and Amazon violated Fema and FDI rules.
In the high court on Thursday, Justice J. R. Midha said he would continue with the hearing on Friday.
During the hearing, senior advocate Gopal Subramanium, representing Amazon, said the EA passed a detailed interim order in October 25 2020 after hearing all the parties and had found that he has jurisdiction to adjudicate the issue.
He said the question of jurisdiction was raised before the EA and it was rejected on account of the group of companies approach. He claimed that no action has been taken by any of the respondents to reverse or modify the emergency award.