The Enforcement Directorate (ED) has begun scrutinising a set of voluminous documents recently sent to it by American retail giant Walmart as part of its reply on a probe against the company's investment in an Indian firm for alleged violations of forex laws.
The company has recently sent a detailed reply to the agency as part of communication to notices sent to it earlier under the Foreign Exchange Management Act (FEMA), official sources said.
"Walmart is cooperating with the government during this process. The central government has sought certain information and clarification which has been provided by us. We are in compliance with India’s FDI laws, and all procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India," a Walmart India spokesperson told PTI in a statement.
The company, in the reply, has detailed the RBI clearances and other transactions that it has conducted in the country, the sources said.
The ED is investigating the case on the basis of a communication sent to it by the RBI in this regard.
The agency is also expected to place these facts before the Madras High Court soemtime this month as part of its reply on a writ petition in relation to Walmart.
The agency, which has registered a case under FEMA, has also sought certain details from the Commerce and Industry Ministry to furnish it with clearances that were given to the company to route the investment in 2010 in a subsidiary of Bharti ventures via a Mauritian arm.
The investigations are being conducted to probe allegations that Walmart put money into the domestic multi-brand retail chain despite a ban on foreign direct investment in the sector.
Bharti Enterprises has, however, rejected the allegations that it had violated any rule in this regard. The company had said all the procedures were as per the "law of the land".
The Rs455.8 crore investment by Walmart in Cedar Support Services Ltd, a subsidiary of Bharti Ventures, had come under attack from CPI Rajya Sabha member MP Achuthan, who wrote to Prime Minister Manmohan Singh earlier, saying it was "illegal" and flouted FDI rules.
The ED, a central investigative agency mandated to probe violations under the FEMA and Prevention of Money Laundering Act (PMLA), was asked by the Reserve Bank of India to check the alleged violations made by the US-based retail giant in an official communication earlier this month.
In a letter dated October 30, the Department of Industrial Policy and Promotion (DIPP) had asked that RBI may take action as appropriate as per provisions of FEMA rules and regulations.
The DIPP deals with all the FDI related matters.
"...there is a need to examine/investigate as to whether illegal investments have been made by Walmart/CEDAR in FDI prohibited sectors. Accordingly, the matter is being referred to ED for further investigation and appropriate action, if necessary, in consultation with the government in accordance with the provisions of FEMA upon noticing violations if any," a source said.
In a letter to the Prime Minister, Achuthan, who is also a member of the Standing Committee of Parliament on IT, earlier this year had alleged that "the entire FDI has been diverted and illegally invested by Cedar in its 100 per cent subsidiary Bharti Retail Ltd, which is carrying out multi-brand retail operations."
Walmart had earlier said that it was also investigating allegations of corrupt practices against it in foreign markets, including India.