ED Proposes Penalty, Admission of Mistake to Settle Flipkart FEMA Case

The Enforcement Directorate (ED) has proposed to e-commerce firm Flipkart an option to settle an ongoing case related to alleged violations of the Foreign Exchange Management Act (FEMA). As per the news reports, the agency has asked the Walmart-owned company to admit its mistake, pay a penalty, and dissolve the seller network linked to the violations.

Compounding Option and Regulatory Context

“ED has given the option of compounding to Flipkart. The company has been asked to accept the violation, pay the fine, and dismantle its associated seller network,” as per the PTI. 

Compounding under FEMA provides companies a route to voluntarily acknowledge contraventions and settle by paying a monetary penalty, thereby avoiding further litigation. According to officials, such measures also serve a diplomatic purpose: strengthening India’s negotiating position during ongoing bilateral trade talks with the United States, where both Flipkart and Amazon have significant interests.

Investigations into Flipkart and Amazon

Both Flipkart and Amazon India have been under ED scrutiny for alleged violations of FEMA and foreign direct investment (FDI) rules. The probe primarily focuses on allegations that the companies indirectly influenced pricing and offered deep discounts through preferred sellers, contrary to India’s e-commerce regulations.

The ED had issued a show-cause notice in July 2021 to Flipkart and its associated entities, questioning their compliance with FDI norms between 2009 and 2015, a period prior to Walmart’s acquisition of a majority stake in the company in 2018. Subsequent notices, including the most recent one in April 2025, have extended the investigation to Flipkart’s operations after 2016 as well.

Amazon India was also summoned by the agency to provide updates on its compliance and operational structure. A company spokesperson declined to comment, citing the ongoing nature of the inquiry.

Read More: ED Registers Fresh PMLA Case Against Anil Ambani, Reliance Communications!

Conclusion

The ED’s offer to Flipkart marks a potential turning point in a long-standing regulatory dispute involving India’s e-commerce giants. If Flipkart agrees to the compounding terms, it could bring an end to years of legal uncertainty, while also setting a precedent for future compliance under India’s evolving FDI and FEMA framework.

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