The investigation into the $100-million investment made by US retail giant Walmart in the Bharti Group has gathered further momentum with the Department of Industrial Policy and Promotion (DIPP) asking the Ministry of Corporate Affairs (MCA) and the Reserve Bank of India (RBI) to examine the issue.
The DIPP, which was asked to probe the matter by the Prime Minister's Office, has sent an official note to the MCA and RBI recommending that "the issue may please be examined and action, as appropriate, taken as per provisions of the Foreign Exchange Management Act (FEMA)".
A copy of the letter sent by Rajya Sabha member M. P. Achuthan to the Prime Minister (PM) alleging that Walmart had clandestinely and illegally invested $100 million (Rs 456 crore) in the country's multi-brand retail sector as early as March 2010 - when foreign direct investment (FDI) in the sector was prohibited - has also been sent to the RBI and the MCA.
According to reliable sources, the MCA is now examining whether the investment, first made by Walmart in Cedar Services, a company set up by the Bharti Group, was passed on to Bharti Retail in violation of FDI regulations and FEMA.
Sources disclose that the MCA is closely examining the balance sheets of the companies to trace the course of the investment.
Under FEMA guidelines, the Bharti Group should have also informed RBI about the investment that it received from Walmart but this has apparently not been done.
Commerce minister Anand Sharma had stated in a written reply to a parliamentary question raised by Achuthan that the "Reserve Bank of India has reported that its database does not have any record of FDI in M/s Cedar Support Services Limited".
According to a senior official, "If any person contravenes any provision of FEMA, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such an amount is quantifiable."
Achuthan has alleged that the Bharti Group set up Cedar Support Services as a company ostensibly to provide services in real estate consultancy design, etc, which comes under the 'consultancy services sector', in which 100 per cent FDI is allowed under the automatic route.
Walmart invested $100 million in Cedar, which was a 'disguised investment' as the FDI was later transferred to Bharti Retail in 2010.
Achutan's letter to the PM also alleges that to make Cedar look like an operating company, entries were passed booking an income of Rs 8 lakh as revenue from "management fee" that too from Group companies.
He has alleged that "thus a facade was created to show Cedar as a company engaged in consultancy services". The MCA will now examine the details in its records to see whether this actually happened.
Achuthan in his letter has demanded strict action against both Walmart and Bharti. He has stated that in these circumstances, the government should undo the illegal investment immediately and initiate penal proceedings against Walmart and Bharti under FEMA.
Achuthan has further urged the Prime Minister "to ban Walmart permanently from India, including its joint venture for wholesale cash-andcarry operations with the Bharti Group.
It has been alleged that Walmart had clandestinely and illegally invested $100 million in India's multi-brand retail sector
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