Online services provider Flipkart also under scrutiny

The government on Wednesday told Parliament that investigation into alleged FEMA violations in the Bharti-Walmart joint venture had been referred to the Enforcement Directorate. Online services provider Flipkart is also under the ED scanner.

Minister of State for Commerce and Industry S. Jagathrakshakan informed the Rajya Sabha, in a written reply, that the Reserve Bank of India had not taken on record the documents filed for an investment of Rs. 455 crore by Walmart in the Bharti group firm Cedar Support Services and had referred the matter to the ED.

“The FC-GPR form filed for issuance of the Compulsorily Convertible Debentures [CCD] has not been taken on record by the RBI to ensure that the CCDs are FDI-compliant instruments and for the purpose certain information has been called for from the company.”

The Minister said an inward remittance of Rs. 455.80 crore was reportedly made by Walmart Mauritius Holdings Co Limited into Cedar Support Services on March 29, 2010.

However, the documents for issuance of the CCDs filed with the RBI were not taken on record by the central bank. The RBI referred the alleged violation of the Foreign Exchange Management Act to the ED for investigation in regard to both Bharti-Walmart and Flipkart Online Services.

Rules flouted

Flipkart allegedly flouted FDI rules which allow e-commerce companies with foreign investment to carry out only business-to-business (B2B) transactions, and not business-to-consumer (B2C) transactions by creating complex structures that may not be permissible.

Wal-Mart denial

Meanwhile, a Wal-Mart spokesperson denied as false the allegation that a routine U.S. lobbying disclosure form reflected improper conduct in India. This disclosure had nothing to do with political or governmental contacts with Indian government officials. “It shows that our business interest in India was discussed with U.S. government officials — along with 50 or more other topics during a three-month period,” the spokesman replied to The Hindu .

Under U.S. law, on a quarterly basis, all companies which meet certain time and expenses thresholds were required to disclose issues and expenditures spent in connection with contacts with the U.S. government, including staffing cost, association dues, and payments to consultants, Wal-Mart said.

‘Not a unique procedure’

“This is not unique to Walmart. All organisations which expend more than $11,500 annually on lobbying activities and employ at least one lobbyist must register and file the quarterly reports. In the third quarter of 2012, lobbyists and companies filed thousands of forms. According to a Washington D.C. publication, Roll Call , in the first quarter of this year, 143 organisations reported expenses of more than $1 million. Our Washington office naturally had discussions with the U.S. government officials about a range of trade and investment issues that impact our businesses in the U.S. and worldwide and disclosed this in accordance with the law,” the company said.

  • RBI has not taken on record documents filed for investment of Rs. 455 crore: Minister

  • Lobbying disclosure has nothing to do with contacts with Indian officials: Wal-Mart