Wal-Mart U.S. invested a huge sum in multi-brand retail in 2010 violating the ban, says petition

The Enforcement Directorate has summoned Bharti Wal-Mart officials to investigate charges that Wal-Mart, U.S., had illegally made a huge investment in multi-brand retail in India during March-April 2010.

On Friday, the Directorate informed the Madras High Court that it had summoned the officials to record their statements. A petition filed in the public interest by the Federation of Tamil Nadu Traders’ Association came up before a Division Bench of Justices R. Banumathi and K.K. Sasidharan.

The petitioner alleged that certain companies had violated the Foreign Exchange Management Act (FEMA) and its regulations and made FDI three years ago. Wal-Mart, U.S., had invested Rs. 456 crore in multi-brand retail, violating the ban on FDI in the sector at that time. If left unchecked, foreign entities and multinational companies could make similar investments in sensitive sectors where FDI was banned. When the matter came up for further hearing, Additional Solicitor General P. Wilson filed an affidavit by the Deputy Director of the Enforcement Directorate, Rajeshwar Singh, who said the agency would take some more time to conclude its investigation as it was examining the documents received from the companies and government departments. A summons under FEMA was issued to officials of Bharti Wal-Mart Ltd. to record their statements and explanations.

The relevant material had been sought from Cedar Support Services Ltd., Bharti Wal-Mart Pvt. Ltd., Bharti Venture Ltd. and Bharti Retail Ltd. The Directorate was investigating the receipt of Rs. 455.80 crore in FDI by Cedar and Rs. 139.33 crore by Bharti Wal-Mart. It was probing whether the FDI conformed to Section 6 (3) (b) of FEMA, read with the Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000.

The Bench adjourned the matter by four weeks.