2018 (4) TMI 1110 - HC - FEMA

Violation of the declared FDI Policy - Held that - Enforcement Directorate has taken action against the violators. The Enforcement Directorate has also filed a counter affidavit pointing out that it is inquiring into e-commerce entities which are guided by self gain or motive other than in public interest and that the Bangalore Zonal office of the answering respondent had initiated enquiries against ten (10) e-commerce entities and in 5 out of these 10 of those enquiries, investigations are reported to be underway. Charge-sheets have been prepared in 4 out of 5 cases in which investigation has been completed and the same are pending consideration. Besides that, enquiries were also initiated against Firstcry.com and Infibeam.com by the Mumbai and Ahmedabad offices respective of the answering respondent and the same are under progress. Therefore the respondents are conscious of their responsibilities and are taking action for violation of the applicable FDI Policy. The required action upon completion of the investigation would have to abide by the procedure prescribed by law.

Summary

Issues:
Violation of Foreign Exchange Management Act, 1999 (FEMA) and FDI Policies by companies in the E-Commerce Retail sector in India.

Analysis:
The writ petition filed complained of violations of FEMA and FDI Policies by companies in the E-Commerce Retail sector. The petition sought an inquiry into the affairs and transactions of FDI recipient companies, a direction to restrain violators from operating, initiation of legal action against violators, and submission of an Action Taken Report. During the proceedings, the Government of India clarified the FDI Policy, stating that it has put in place a robust policy framework on foreign investments. The FDI Policy is an ongoing process with changes made to ensure India remains an attractive investment destination. The Enforcement Directorate has taken action against violators of the declared FDI Policy, with investigations and charge-sheets prepared against certain e-commerce entities.

The counter affidavit filed indicated that the Enforcement Directorate is inquiring into e-commerce entities for violations of FDI Policy. The Bangalore Zonal office initiated inquiries against ten e-commerce entities, with investigations underway in five cases. Charge-sheets have been prepared in four cases, pending consideration. Additionally, inquiries were initiated against Firstcry.com and Infibeam.com by the Mumbai and Ahmedabad offices, respectively, with progress reported. The respondents are shown to be aware of their responsibilities and are actively taking action against violations of the applicable FDI Policy.

The judgment noted that the respondents are conscious of their responsibilities and are actively taking action against violations of the FDI Policy. It was emphasized that any required action following investigations must adhere to the legal procedure. As a result, no further orders were deemed necessary in the writ petition, which was disposed of accordingly. A related application was dismissed as it did not survive for adjudication.

This detailed analysis of the judgment highlights the issues surrounding violations of FEMA and FDI Policies by companies in the E-Commerce Retail sector in India, the actions taken by the Government and Enforcement Directorate, and the judicial disposition of the writ petition.