This Article is From May 10, 2013

Walmart probe: Enforcement Directorate seeks clarity on FDI retail rules

New Delhi:

The Enforcement Directorate, which is probing alleged violations of forex laws by retail giant Walmart in its investment in two Indian firms, has asked the Department of Industrial Policy and Promotion (DIPP) to clarify rules governing FDI in the multi-brand retail sector.

The Enforcement Directorate (ED) in its communication to th DIPP has sought clarifications on rules and regulations that monitor foreign direct investment (FDI) before and during 2010, official sources said.

The agency is probing alleged "contravention" of forex rules in this case under provisions of Foreign Exchange Management Act (FEMA) on directions of the Reserve Bank of India (RBI).

The ED has decided to approach the DIPP after it studied replies sent by the American retail giant and its Indian partners.

Sources said that any penal action under FEMA laws could be taken or dropped based on the "statutory policy" framed by the government.

"If required the agency and DIPP officials would sit across the table to take the probe forward," they said.

The Rs 455.8 crore investment by Wal-Mart in Cedar Support Services Ltd, a subsidiary of Bharti Ventures, came under attack from CPI Rajya Sabha member M P Achuthan, who wrote to Prime Minister Manmohan Singh earlier saying it was "illegal" and flouted FDI rules.

The ED, a central investigative agency mandated to probe violations under the FEMA and Prevention of Money Laundering Act (PMLA), was asked by the RBI to check the alleged violations made by the US-based retail giant.

The probe would also go into the receipt of FDI as to whether the same was in conformity with the provisions of Secion 6(3)(6) of FEMA read with the Foreign Exchange Management (transfer or Issue of security by a person resident outside India) Regulations, 2000.