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Enforcement Directorate has issued a show-cause notice for Walmart-owned Flipkart on a penalty of $ 1.35 billion for violation of Foreign Investment laws. The Enforcement Directorate agency has been investigating e-commerce giants Flipkart and Amazon for years for allegedly bypassing foreign investment laws that strictly regulate multi-brand retail and restrict such companies to operating a marketplace for sellers.

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The Enforcement Directorate official, who declined to be named, said the case concerned an investigation into allegations that Flipkart attracted foreign investment and a related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law. One of the sources said Flipkart and others have around 90 days to respond to the notice. WS Retail ceased operations at the end of 2015, the person added.

 Flipkart’s spokesperson says the company is in compliance with all Indian Laws and regulations.

Tiger Global declined to comment. Binny Bansal and Sachin Bansal did not immediately respond to requests for comment. The Enforcement Directorate also did not respond outside regular business hours.

Walmart took a majority stake in Flipkart for $16 billion (roughly Rs. 1,18,720 crores) in 2018, its biggest deal ever. Sachin Bansal sold his stake to Walmart at the time, while Binny Bansal retained a small stake. Walmart did not respond to a request for comment. The notice is the latest regulatory headache for the online retailer, which is already facing tougher restrictions and antitrust investigations in India, and a growing number of complaints from smaller sellers.

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