No violation of FEMA rules by Walmart, says ED
18 Oct 2013
The Enforcement Directorate (ED) has found no contravention of foreign exchange rules by US retail giant Wal-Mart in its investments in India's Bharti Enterprises.
Less than a week after Wal-Mart pulled out of the partnership, citing among other things lack of clarity on India's foreign direct investment (FDI) rules (See: Walmart ends alliance with Bharti; to go slow with wholesale business ), ED officials told the media today that it has found no contravention of the Foreign Exchange Management Act (FEMA) or the FDI guidelines that existed at the time the partnership was formed.
"There is no concrete basis or the agency to take forward the probe unless there are new directions from the Reserve Bank of India,'' according to an ED official.
The ED probe was ordered after Rajya Sabha member M P Achuthan of the Communist Party of India wrote to Prime Minister Manmohan Singh alleging that a unit of Wal-Mart in 2010 bought $100 million worth of compulsorily convertible debentures in Cedar Support Services Ltd, the holding company through which Bharti controls EasyDay, a multi-brand retail chain (See: CBI found investment rules violations by Wal-Mart, says MP).
Following this, the Reserve Bank of India (RBI) in November last year asked the ED to probe the allegations.
Under the deal, the Wal-Mart investment in Bharti made in March 2010 was to be converted into 49 per cent equity by 30 September 2013, a deadline arrived at after several extensions. The controversy arose because FDI was not permitted in multi-brand retail in 2010.
The investment in the retail arm of Bharti by Walmart might be in line with the guidelines, but the central bank might still fine the two companies for not converting the $100-million debentures into equity within time, an official pointed out.
The ED was asked to investigate into the type of investment made by Wal-Mart - what was the end use and whether it was in line with the policy.
However, due to lack of clarity in FDI policy at the time, the ED has said there might not be a violation of FDI guidelines.
.webp)
