The Enforcement Directorate (ED) will soon issue notices to American retail giant Wal-Mart as part of its probe against the company's investment in an Indian firm for alleged violations of forex laws.
"The agency has received a communication from the RBI to probe the investments in this regard. Notices for want of documents with regard to financial investments and remittances will be issued by the Bangalore office of the agency," a source privy to the development said.
The agency, which has registered a case under the Foreign Exchange Management Act ( FEMA), will also ask 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 source said.
The investments are being conducted to probe allegations that Wal-Mart 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 Rs 455.8 crore investment by Wal-Mart in Cedar Support Services Ltd, a subsidiary of Bharti Ventures, had come under attack from CPI Rajya Sabha member M P 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 Wal-Mart/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."