Delhi HC has refused to pass any interim order against 21 E-commerce companies, for a filing made by the suddenly appearing, All India Footwear Manufacturers and Retailers Association (AIFMRA) in July. The penultimate court has refused to pass the order, until all pending investigations are completed.
It has also asked the Enforcement Directorate (ED) to complete its investigation against 21 E-commerce companies in response to the AIFMRA petition.
These companies include prominent names such as Flipkart, Snapdeal, Myntra, Jabong, Yepme, Shopclues among other. Amazon India was not in the list, though Junglee, which is owned by Amazon has come under the scanner.
According to the petition, shoe retailers alleged that these e-commerce companies had violated FDI rules by selling to the consumers directly under the disguise of a complex and convoluted business structure.
These companies are evading the law by creating a complex and convoluted business structure by creating the facade of a ‘marketplace’ model.
the footwear retailers had said in the petition.
In the latest hearing, the investigating party, ED had told the court that they were already investigating 6 of these companies and the process was taking extra time. The names of the 6 companies already under investigation have not been disclosed, however, the court has ordered to investigate all 21 companies and also told to file a counter-affidavit detailing the steps already taken.
Flipkart declined to comment on the issue whereas a Snapdeal spokesperson said in an email response that Snapdeal only served as a technology platform to connect sellers and buyers.
It is not the first time that e-commerce has suffered the flak of offline retailers and come under the scrutiny of government. This is due to the fact that India does not allow FDI in B2C multi-brand retail, whether online or offline but allows 100% FDI in B2B business. And the whopping amount of funding e-commerce companies have raised, which is largely from foreign investors, is not a hidden fact anymore.
In May this year, Retailers Association of India representing over 1000 retailers had approached Delhi HC to seek a level playing field in terms of FDI and the court had asked the government to consider their case and take a decision within 4 months.
As the e-commerce business continues to grow at an exponential rate in the country (according to a report by A Bank of America Merrill Lynch, e-commerce market in India could touch $200 billion in gross merchandise value (GMV) by 2025), there have been growing voices of concern to properly define terms such as marketplace, B2C, and B2B, and to also come up with consistent laws for foreign investment in retail in India.
The commerce ministry is already under discussions with states, some of them who have already faced troubles with e-commerce companies over tax issues and due to undefined areas of laws regarding online business in the country.