NEW DELHI: The Enforcement Directorate (ED) has initiated proceedings against One97 Communications Ltd (OCL), the parent company of Paytm, along with its affiliated firms and key management personnel, for alleged violations of the Foreign Exchange Management Act (FEMA) amounting to Ra611 crore.
According to an ED statement released on Monday, OCL failed to comply with Reserve Bank of India (RBI) guidelines on two fronts – making foreign investments in its Singapore-based subsidiary without proper reporting and receiving foreign direct investment (FDI) from overseas investors without adhering to prescribed pricing norms.
“ED’s investigation reveals that Paytm’s parent company OCL made foreign investments in Singapore but did not report the creation of an overseas step-down subsidiary to RBI. Additionally, OCL received FDI from foreign investors without following RBI’s pricing guidelines,” the agency’s spokesperson stated.
Disclosure to BSE
The development follows OCL’s disclosure to the Bombay Stock Exchange (BSE) on Saturday about receiving a show cause notice from the ED regarding its acquisition of two subsidiaries – Little Internet Pvt Ltd (LIPL) and Nearbuy India Pvt Ltd (NIPL).
OCL, however, clarified that the alleged FEMA violations pertain to transactions between 2015 and 2019, before these entities became part of its business operations.
The ED flagged compliance deficiencies in both subsidiaries, stating that Nearbuy India received FDI but failed to report the transaction to RBI within the required timeframe, while Little Internet accepted investments without adhering to the central bank’s pricing norms.
Responding to the ED’s statement, Paytm posted on X, saying, “We are working to resolve the notice in accordance with applicable laws and regulatory processes. The alleged FEMA contraventions relate to transactions involving Little and Nearbuy before they became part of Paytm. Our services remain fully operational.”
Show cause notice
Meanwhile, sources in the ED confirmed that directors and key finance officials of OCL and its affiliates, who have been served show cause notices, are required to appear before investigating officers.
“During hearings, the directors and office bearers will present their case along with documentary evidence before the competent authority. Following a series of hearings, an adjudicating order will be issued, determining whether the violations warrant a monetary penalty,” an ED official explained.
If found guilty, the firm could face financial penalties, including a base fine and an additional daily charge of Rs5,000 for the duration of non-compliance.
The company has the option to either settle by paying the penalty or appeal before the Special Director (Appeals).
