Flipkart Co-Founder Sachin Bansal moves Madras High Court against ED notice alleging FDI violation

Sachin Bansal, one of the co-founders of e-commerce platform Flipkart, has moved the Madras High Court to quash a notice issued by the Enforcement Directorate (ED) in connection with allegations of FDI policy violations dating back to 2009-14 (Sachin Bansal v. The Directorate of Enforcement and ors).The matter was admitted on Friday by Justice R Mahadevan who called for the ED's response in three weeks' time. .The notice under challenge concerns adjudication proceedings instituted under Section 16 of the Foreign Exchange Management Act (FEMA), 1999 for alleged non-compliance with a condition prescribed in the Consolidated Foreign Direct Investment (FDI) Policy of 2010, the Court was told. .As per Bansal's petition, these allegations were made in relation to the issuance of shares of certain Flipkart group companies to foreign investors in 2009-14..Bansal registered grievance over the inordinate delay in issuing the ED notice, which is stated to have been received by him on August 5, 2021 despite the matter dating back to 2012-13. .Bansal highlighted that he ceased to have any association with Flipkart, and the Flipkart group of companies, following his unanticipated exit after the acquisition of Flipkart by Walmart International Holding, Inc. on August 17, 2018. Bansal submitted that he is currently serving as Managing Director and Chief Executive Officer of Navi Technologies Private Limited..It was further submitted that Bansal had extended his full cooperation when the ED had examined the matter from 2013-2015. The ED had commenced its examination around 2012, i.e. around nine years ago, the petitioner stated..Following a 2012 complaint, the first notice of inquiry was served on Flipkart in March 2013. Thereafter, Bansal and other employees of the entities concerned had been directed to participate in the inquiry. .Consequently, Bansal had participated in as many as 20-30 meetings with ED officials with a significant number of these meetings lasting at least 8-9 hours, Bansal told the Court. .All material information was made available to the ED promptly in the year 2013 itself, he contended."73 of the 85 documents/ statements relied upon in the (latest) Complaint were obtained by 2013 and the remaining documents were only in the nature of updated financial statements/ documents. The last document referred to in the Complaint was available with the Respondents on or before October, 2015," the plea said..Given substantial lapse of time, Bansal submitted that he was under the bonafide belief that after due study of the matter, the ED had concluded that no action was warranted in the matter.."After having extended cooperation to the Respondent No. 1, the Petitioner had a legitimate expectation that the Respondents would conclude the investigation and adjudication on charges within a reasonable period of time, as is also the expectation under law", the petition stated further. .He had also effected the bonafide transfers to third parties in the intervening period and completely exited from the Flipkart group in August 2018, it was pointed out.."However, to the utter shock and dismay of the Petitioner, on August 5, 2021, the Petitioner was served with the Impugned Notice claiming that the Petitioner (jointly with the Flipkart co-founder, Mr. Binny Bansal) were personally responsible for the alleged violation of the FDI Policy involving a staggering amount of approximately INR 23,000 Crore," stated the petition..In this backdrop, the ED's notice has been challenged by Bansal who has contended the following:.The exercise of power was after an unreasonable delay of twelve years and is in breach of the settled position of law. A regulatory authority cannot invoke jurisdiction beyond a reasonable period of time; The notice does not provide any justification, nor a single line of clarification, that explains the delay or why the adjudication proceedings has been initiated on the current date. It amounts to an arbitrary exercise of power and appears to be with unknown and extraneous motive; The delay in initiation of the adjudication proceedings has deprived Bansal of his rights to a fast track adjudication process statutorily mandated under FEMA and has rendered otiose the very purpose of constituting a specialized quasi-judicial forum under FEMA; The notice is in the nature of a “Damocles’ sword” hanging over the petitioner and cannot be countenanced since the Supreme Court has time and again held that it is the policy of law that there should not be endless uncertainty in human affairs; The unreasonable delay in initiating the adjudication proceedings coupled with Bansal's intervening exit from the Flipkart group in 2018 has significantly impaired the his ability to defend himself; Rekindling stale matters pursuant to the challenged notice will wrongfully and unfairly disturb settled rights and interests of the petitioner and the rights of other third parties pursuant to a bona fide transfer by the petitioner. It may also cause interference in the petitioner’s existing business; The adjudication proceedings have been initiated in blatant violation and disregard of the petitioner’s fundamental right to a speedy and fair trial guaranteed under Article 14 and Article 21 of the Constitution of India.