The Enforcement Directorate on Monday said it has issued a notice to Paytm’s parent company, its MD and linked entities for “contravention” of the Foreign Exchange Management Act (FEMA) involving Rs 611 crore.
According to Paytm’s annual report for the financial year 2024, the fintech major’s founder, Vijay Shekhar Sharma, is its chairman, managing director (MD) and chief executive officer.
The notice has been issued by a special director of the federal agency after the completion of an investigation and before the initiation of adjudication proceedings under the said law.
A Paytm spokesperson said the company was working to resolve the matter in accordance with applicable laws and regulatory processes.
The show cause notice has been issued to Paytm’s flagship company One 97 Communication limited (OCL), its managing director and other Paytm subsidiaries such as Little Internet Pvt Ltd and Nearbuy India Pvt Ltd for “contraventions” of the provisions of the FEMA to the tune of around Rs 611 crore, the ED said in a statement.
Investigations found that OCL made foreign investments in Singapore and “did not” file necessary reporting to the Reserve Bank of India (RBI) for the creation of an overseas step-down subsidiary, it said.
The company had “also received foreign direct investment (FDI) from overseas investors without following proper pricing guidelines stipulated by the RBI”, it alleged.
The ED said OCL’s subsidiary company in India — Little Internet Pvt Ltd– received FDI from overseas investors “without following” the pricing guidelines stipulated by the RBI. The other subsidiary — Nearbuy India Pvt Ltd — “did not” report the FDI received by the company within the time frame prescribed by the RBI, it said.
In a regulatory filing made on Saturday (March 1), Paytm said it received a notice from the ED for alleged violation of certain FEMA rules by the company and its two subsidiaries– Little Internet and Nearbuy — with respect to certain investment transactions.
Later, Paytm clarified that the alleged breach pertains to the period when the two companies were not its subsidiaries. It acquired the two companies in 2017.
According to the breakup shared by the company, OCL transactions amounting to over Rs 245 crore, LIPL’s about Rs 345 crore, and NIPL’s about Rs 21 crore have been listed in the alleged breach.
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