FDI in Ecommerce: Delhi HC Initiates Investigation of 21 Ecommerce Portals For Violation of Laws

The confusion and opposition on the new age digital business is refusing to abate, as a fresh round of investigations has been started against those, who dared to sell via Internet.

And it seems that our judiciary is clueless on this whole mayhem, as they are passing the buck around Govt. departments as India’s digital entrepreneurs wait with baited breath, about the exact outcome.

In a recent twist to the whole story, Delhi High Court has asked the Directorate General of Economic Enforcement (ED) to probe 21 ecommerce portals, and find out whether they have violated any FDI rules or not.

Although ED is already probing some of these mentioned ecommerce portals, this fresh directive was issued after All India Footwear Manufacturers and Retailers Association (AIFMRA), a retail body of offline footwear traders, filed their compliant at Delhi HC, in the month of July. AIFMRA claimed that these 21 ecommerce portals are selling directly to the consumers, which is against the law of land, as they are funded by foreign investors.

As Delhi High Court didn’t have any answer to this complaint from AIFMRA, they asked ED to probe the issue. In their response, Central Govt. and ED has said, “.. that out of the 21 entities with respect to which averments have been made in the petition, six are being investigated against and a decision has also been taken to investigate other entities as well”,

Interestingly, while hearing upon this same case, Delhi HC had found prima facie evidence that some ecommerce portals have indeed violated the FDI rules, and had sought Govt.’s intervention in this regard. But no concrete action came out from this ‘observation’, and the case still drags on.

Ecommerce Trouble in India

Last year, ED had suddenly found strong evidence against Flipkart regarding FDI violation, and had slapped a fine of Rs 1400 crore. We had attempted to provide an explanation to digital entrepreneurs, as to why this fine was imposed. However, by October, 2014, ED realized their mistake, and gave a clean chit to Flipkart on this violation.

In Kerala, Flipkart, Jabong and some other ecommerce portals were already fined Rs 54 cr for violating tax norms in the state.

If that was not enough, then in May this year, Competition Commission of India (CCI) initiated fresh investigations against ecommerce portals for violating resale price regulations. And last month, Confederation of All India Traders (CAIT), which is an influential body of retail traders, complained about the loud and noisy festive season sale offers by ecommerce companies. They had said that as these are market places, how can they sell directly to consumers.

And in October, Indian Pharma industry declared as all out war against ecommerce, when they staged a 24 hours bandh against them.

Although Govt. has made some really awesome plans to tackle this confusion regarding digital trade, but still things are in a limbo. For example, establishing a framework which seamlessly integrates 9 different Govt. departments into one channel may greatly help the digital entrepreneurs and visionaries to do their business peacefully, and legally.

But alas, we need to wait for some more time to get full clarity and confidence regarding the online business.

We will keep you updated as more details come in..

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