New Delhi, October 12, 2025 — The Enforcement Directorate (ED) has reportedly offered Flipkart, India’s leading e-commerce marketplace, the option to settle a long-standing case of alleged violations under the Foreign Exchange Management Act (FEMA). The proposal allows the Walmart-owned company to admit its mistake, pay a monetary penalty, and dismantle its associated seller network, according to people familiar with the matter.
The offer has been made under the compounding provisions of FEMA, which enable companies to voluntarily acknowledge regulatory lapses and close cases by paying a financial penalty instead of facing prolonged enforcement action. The compounding mechanism, often used in foreign exchange and corporate compliance cases, encourages businesses to resolve disputes quickly while reinforcing regulatory accountability.
ED’s Offer and Industry Response
According to officials aware of the development, the ED communicated the proposal to Flipkart last week. “The Enforcement Directorate has offered Flipkart the option to compound the alleged violations. The company has been asked to accept the mistake, pay the prescribed penalty, and dismantle the seller network linked to these transactions,” an official source told PTI.
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While Flipkart has not issued any official statement or responded to media queries on the matter, the ED has also refrained from commenting publicly.
Meanwhile, Amazon India has also come under the ED’s scanner for possible FEMA violations. The agency reportedly summoned company executives to provide updates on compliance with India’s foreign investment rules. Responding to queries, an Amazon India spokesperson said, “We do not comment on ongoing investigations.”
An official associated with one of the e-commerce firms, requesting anonymity, suggested that the compounding option may have broader strategic implications. “Such measures strengthen India’s regulatory position during bilateral trade negotiations with the U.S. and highlight the country’s commitment to transparency and compliance in digital trade,” the person said.
Background of the Case
Flipkart and Amazon have been under ED investigation for several years for alleged violations of FEMA and Foreign Direct Investment (FDI) regulations. The probe focuses on whether the companies indirectly influenced prices, maintained control over third-party sellers, or structured transactions in ways that circumvent India’s e-commerce policies, which mandate that marketplaces operate as neutral platforms.
The ED first issued a show-cause notice to Flipkart, its associated entities, and key individuals in July 2021, covering activities between 2009 and 2015 — a period before Walmart acquired a majority stake in Flipkart in 2018. The notice questioned why proceedings should not be initiated under India’s foreign investment laws for alleged violations during that timeframe.
The agency later expanded its probe to include the company’s operations post-acquisition. The most recent notice was served in April 2025, examining the business structure and financial transactions carried out after 2016. The ED’s investigation is said to focus on the flow of foreign investment, ownership control, and the relationships between Flipkart and preferred sellers on its platform.
Parallel Action by the Competition Commission of India
Alongside the ED probe, the Competition Commission of India (CCI) is conducting an independent investigation into alleged competition law violations by Flipkart and some of its subsidiaries. In September 2024, the CCI’s Director General submitted a non-confidential version of the investigation report, which found possible instances of market dominance abuse, preferential treatment to certain sellers, and anti-competitive discounting practices.
The CCI inquiry stems from complaints by small traders and retail associations, who have accused major e-commerce platforms of distorting the marketplace through predatory pricing, exclusive brand partnerships, and algorithmic bias against independent sellers.
Legal and Regulatory Implications
Legal experts say the ED’s proposal to compound the FEMA case marks a balanced approach that combines enforcement with regulatory pragmatism. Compounding is viewed as a corrective mechanism rather than a punitive one, allowing companies to rectify procedural lapses while avoiding lengthy legal disputes.
“Compounding under FEMA is not a declaration of guilt but an admission of non-compliance, enabling businesses to regularize their position with regulators,” said a senior corporate law expert based in New Delhi. “For a global company like Flipkart, this is an opportunity to settle the matter efficiently and signal its intent to comply with Indian laws.”
The move also underscores India’s growing emphasis on corporate accountability and transparent foreign investment practices in the fast-evolving e-commerce sector. Analysts say it reflects the government’s effort to ensure that the country’s digital economy — now one of the largest in the world — operates on a foundation of compliance, fairness, and competitive integrity.
A Message to Global Corporations
If Flipkart accepts the ED’s offer, the case could become one of the most high-profile examples of FEMA settlement through compounding in India’s digital retail history. It would set an important precedent for other foreign-funded entities operating in the country and highlight the effectiveness of India’s regulatory frameworks in resolving complex corporate disputes.
The case also serves as a reminder to multinational companies that India, while open to foreign investment, expects strict adherence to domestic laws, marketplace neutrality, and financial transparency.
As the investigations continue, both Flipkart and Amazon India remain under regulatory observation — a reflection of India’s evolving approach to balancing ease of doing business with strong governance and rule-based oversight.
