The Enforcement Directorate on Monday said it has found foreign investors making investments in Paytm’s parent company, One97 Communications, and that the company has been taking money out of the country without reporting it to the RBI, in alleged violation of the Foreign Exchange Management Act (FEMA).
In a statement, the probe agency said its investigation against Paytm, its MD and related entities has also revealed that One97 Communications made investments in Singapore without reporting to RBI, violating FEMA rules.
“We are working towards resolving the matter in accordance with applicable laws and regulatory processes. We remain committed to strengthening processes in adherence and upholding the highest standards of compliance and governance,” a spokesperson for the company said.
The ED notice, dated Feb 27, cited alleged contraventions between 2015 and 2019 related to Paytm’s acquisition of two subsidiaries – Little Internet and Nearbuy India. The company disclosed the development in a regulatory filing on Saturday, stating that it is currently seeking legal advice and evaluating its options to address the allegations.
The probe against Paytm is being conducted at the ED headquarters with a special director rank officer designated to looking into the money trail and the credentials of foreign investors who had made investments in the digital financial platform.
“The ED has issued a show cause notice to Paytm’s flagship One97 Communications Ltd, its managing director and other Paytm subsidiary companies: Little Internet Pvt Ltd and Nearbuy India Pvt Ltd, for the contraventions of the provisions of FEMA to the tune of around Rs 611 crore. Investigation reveals that Paytm’s flagship company OCL had made foreign investment in Singapore and did not file necessary reporting to RBI for creation of overseas step down subsidiaries. Further, OCL had also received foreign direct investment (FDI) from overseas investors without following proper pricing guidelines stipulated by the RBI,” the agency said.
One97 Communications’ subsidiary in India, Little Internet Pvt Ltd, had also received FDI from overseas “without following the pricing guidelines stipulated by RBI”, while Nearbuy India Pvt Ltd, another subsidiary of OCL, did not report the FDI received by the company within the time frame prescribed by the RBI, the agency claimed.
Paytm came under the ED scanner a few years ago as part of a probe into the use of its digital payment gateway by some Chinese nationals involved in an alleged cryptocurrency scam to transfer money out of India.
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